Maintenance Fees on Unsold Lots

Maureen,

If it isn't stated that he is resp. for assessments on unsold lots then that means he isn't. If he were I would think it would be addressed in the same section that talks about the resp. of members to pay assessments. However, since you are still under declarant control, he should be making up any shortfalls in the operating fund. It's called "doing business"! If it were me, I would be checking with the State department that oversees construction of undeveloped land to make certain this is true. In AZ it's the Real Estate Department.

By no means should monies be taken out of the reserve fund and transferred into the operating fund, unless those monies are being used for reserve fund expenditures.

Actually, it all depends on how your Declaration is written. If the wording is something like "assessments will be levied on all lots" or on all"units", then, unless there is an exception built in for the developer he would owe just as everyone else. Common misunderstanding amongst developers - unless they are specifically exempted or excluded, they pay.

My CCR's state under Assessments and Enforcement...

All Common Expense assessments made in order to meet the requirements of the Associations annual budget shall be deemed
to be adopted and assessed on a monthly basis. Special assessments shall be due and payable in one or more monthly payments
in advance, onthe first day of each month as determined by the Executive Board.

(doesn't say anything specifically about the developer)

Our management company wants to use reserve funds to pay bills, ie snow removal. The management company was selected by our board president who is also the builder and declarant. We are under declarant control. He has asked me and our other board member our opinion, however, he can make the final decision. We live here, he doesn't.

He is the builder and the declarant and has two family members (out of 5) on the board. W Myself and my neighbor who are also on the board (elected by the residents) are in the minority. The developer is another company so I don't get how he is not in control and the builder is???

Our declarant is definitely not looking out for the best interest of the development. He owns and rents 35% of the development which with the new Fannie Mae/mortgage rules makes it more difficult for buyers to get mortages.

Anyway, I see your point that since we are still under declarant control he should be responsible for this shortage. It is not clear in our CCRs that he is responsible to pay maintenance on unsold lots. Unsold lots is not mentioned at all in the CCRs.If he did have that responsibility this development would have been sold faster since it's only 40 homes and it started in 2005 (before the housing crash).

Our development just had an increase January 2009.

We just went through this last year. We have three builders that own lots in our neighborhood, the Association has been turned over completely for two years. We changed management companies after the turn over and they dropped the ball (working on replacing them). We had to dig all of this information out for ourselves.
I can tell you our experience: The builder's responsibility will not, necessariliy, be in your recorded documents. Developers and builders sign agreements that owners will never see & the board will not know about if you are still under developer control (or after). I had a builder hand over his agreement after we questioned his lot payments. I was informed by our attorney that the agreement was only good for the first year, other words he had one year from the dated agreement to build and sell the lot before dues were owed. Because he did not complete the build out and sell the lot he owes the assessment. Now, one of the three builders owns 120 lots and had not paid in 2 years. We, the Board, made a deal with him and he did pay the assessments owed without late fees and he has to keep the lots maintained. We had our attorney to help us draw up the agreement and we kept the details sealed. We did not want this deal to be negotiated by him next year or by other builders. Now, for the other two builders in here, they only own 15 lots between them. They pulled their agreements out, to say they didn't have to pay...well...yes they did! It had been over their year and they owed two years of assessments plus late fees. We collected all of it. We could have placed liens, but liens would have cost us money. We worked out payment plans and default penalties.
As far as using Reserve Money... Don't do it!!! The Board can only be held liable for very few things (things that your D & O. insurance doesn't cover) and mismanagement of funds is one. The Reserve should only be used for those items. Have you had a formal reserve study done? One that was not handed over by the developer. I suggest every community have one done by the Board who replaces the Developer. They are expensive, but WELL worth it.
If your Developer and Builder are the same, do you have any owners who are on the Board yet? If so/ if not, I would ask to see the minutes from their meetings and the financials. Our Developer left us with a 2 million dollar bill, saying the association owed them that to build and establish the ammenities (plus pay bills that the assessments didn't cover, much like your case). Once turned over we found our own attorney (highly suggest replacing the firm who handled the association while the developer was there & get them on retainer, will save lots of money) he told us not to pay it. We had our new Reserve Study (the one we paid for) and it showed our Developer did not deposit enough into the reserve accounts.
So, don't trust what they say they are doing. You will never really know until they have turned over the association to the owners and you get your own Management Company in and your own attorney, PLUS stay on top of them.
I hope this information helps. It is tough when the association is still in the declarent's hands.

thanks for all your advice. Myself and one other resident are on the board. There are 3 other members (builder and his family). We are always outvoted.

Should we be asking the builder/developer for this agreement?? What exactly would we be asking for?? Myself and the other board member who lives in our development is new at this. We are definitely going through a learning curve!!! This website helps alot but I am making an appt. with an attorney just to know what are rights are and to get a better understanding of HOA law (which as you know if very complicated).

Maureen,

The agreement that Janice spoke of may just be a Georgia thing! But, if you are on friendly terms with the declarant you may want to feel him out. If you know what State department oversees development of subdivided lots (in AZ its the R.E. Dept) you might want to ask if that Dept has rules the developer must abide by. If there are, then you can go to that Dept and make inquiries. I've found that it's always best to have some info about the topic b/4 discussing it. In other words, know how the systems works b/4 confronting the declarant with the fact that he might be doing something wrong.

We are not on friendly terms with the developer/builder or the management company. The owners feel like
they have been "duped" by all of them. They trust myself and the other board member (since we both live here and
invested in the development). We are looking out for the best interests of the development because of that. The builder/
developer are not. They wouldn't care if they built and rented the remaining 14 homes just to make income.

I had more time to read through the CCRs & bylaws and came up with the following...

under Association Budget it states the following....

Declarant will pay Common Expense assessments for each Unit owned by Declarant. Are unsold lots considered a Unit? I live in PA

In our HOA, the lot would not be considered a "unit."

Our declarant/developer was not required to pay for unsold, empty lots. Once he constructed a unit on it, however, he was, but only after turnover of control of the HOA to residents.

Prior to that point, he was exempt from all assessments, whether the lot was built out or not.

Maureen,

I would say a "unit" refers to a completed home. The CCRs usually have a "definitions" article where, hopefully, you can look it up. The definitions article in my CCRs contains the def. of both "dwelling unit" and "lot".

I agree.

That means you have to read the definition of "Unit" that is described in the "Plat and Plans," which is apparently attached to your CC&Rs as Exhibit D.

Whatever definition for "unit" is in that instrument is what the CC&Rs is using as the definition in it.

Unfortunately I don't have any of the exhibits attached to my CCRs and I have the copy that I was given at my closing.

We have quarterly owners meetings so I asked the group to bring a copy of the Exhibits to the meeting. I guess I can ask
the Management Company to send me an updated copy.

I'm going to have to disagree with Mary that it is the developers place to make up the shortfall as a cost of doing business. If the HOA is not bringing in enough revenue to pay the bills then the assessments are too low. Developers often keep the assessments artificially low in order to sell the units faster then depart leaving the HOA holding the bag. Nor should the reserves be raided to fund the shortfall.