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DanaH2 (Georgia)
Posts: 7
Posted:
Our builder (declarant)forclosed on the remaining 17 lots in our neighborhood. The lots went back to the bank(s) in July, 2008. He does not return any phone calls from homeowners. Our management company spent our dues before the year was over. They could not provide itemized record of what they spent it on. We had to pay out of pocket for lawn maintenence of common areas (including empty lots) for the past 6 months. They have kept our gates functioning but have not enforced any other covenants. We asked the builder to relinquish the HOA to us, the homeowners, but he was not willing.
Recently, the remaining lots were purchased from the bank by a large, well known builder who plans on building small starter homes (from $290K)in our beautiful Vintage Craftsman Style gated community of homes which we puchased from 500-600K. The forclosed builder (still the declarant) nor HOA managmement company informed the homeowners that the lots had been purchased and home plans approved. We found out through an online add promoting an "open house" in our neighborhood! We called a meeting with the representative of the new company and expressed our disgust at the level of home they plan on building in our neighborhood and the lack of communication we had received. They were very cordial and are trying to "spruce up" their homes to better blend in with ours but it's not nearly enough. We want to protect our investments but feel that we have no control. My questions are 1. can we sue the developer (declarant)to take over the HOA? 2. Can the builder still be the declarant and make decisions on our behalf when he owns NO property in our neighborhood? 3. Can we start our own seperate HOA? We want control of the architechture, more specifically the elevations of these new homes soon to be built. We are glad that a builder wants to finish our neighborhood but not with poor quality homes that will deface the value of our homes and quite frankly, look rediculous next to ours. We are so incredibly frustrated. Any suggestions would be so greatly appreciated.

Dana
Alpharetta, GA
GeorgerwilliamsW (Indiana)
Posts: 975
Posted:
This is where you need to engage a attorney with a specialty in Georgia real estate law to represent the interests of current homeowners. Expect to spend quite a bit of money in an effort to protect your interests.

Does foreclosure transfer declarant authority of the covenants to the lender and then to a new developer is the question that needs to be researched and possibly litigated.

Read your covenants. Whether or not the new developer can exercise control of the association depends on the specific language of the covenants. It is certainly possible that the original developer's interest in the covenants could be sold to a new developer as an asset.

In most developments, the declarant has the absolute authority to make any changes desired or needed to reflect market conditions. Also, the developer has the absolute right to transfer its development interest to another entity. Perhaps transferring that interest that was a condition of the initial loan agreement and foreclosure agreement with the initial declarant.

I would suspect that your desire for control over the architecture is not going to happen. There have been a number of cases adjudicated with similar circumstances, and the developer has prevailed. However, I am not aware that any of these related to lender foreclosure and the sale or transfer of development rights.

Of course, current homeowners could form a corporation to purchase the development rights from the current developer. Then, your desires could be realized.

I have been waiting for a variant on a situation like this to see what a bankruptcy court may decide. There is no easy precedent that pops up in a search. One of the unknowns in the current economic environment is the status of declarant control of an association in bankruptcy of the declarant. If declarant control is considered an asset or a contract by the federal bankruptcy court, then all bets are off regarding standards and architectural controls on uncompleted units. If the federal bankruptcy court determines that the covenants are a contract between the homeowners and the declarant, then the court has the authority to invalidate the contract or to make changes in it to favor creditors.

Also potentially at issue is the standing of current owners in the bankruptcy.

It is a fact of life that we enjoy the benefits of covenant communities when times are good, and we face all the downsides of covenant communities when times are not so good. Sometimes we think that it is just a one-way street to blissful living, as long as traffic is not coming in the opposite direction. And sometimes the oncoming vehicle crosses over that center double line leading to a head on crash.

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