HOA Dissolution -- Turnover?

Here is our scenerio in Plano, IL.

Its a community of single family homes. The new devlopment just stopped two years because of the economy. The builder, at the beginning of the year packed up the sales office, took down their signs and left.

Our community has 153 homes (of a planned 2007). At this point our HOA cannot operate/provide the services it's intented for based upon assessments from only 153 homes (which someone was told 63 are 3-months are more behind).

I was able to obtain the financial statement for March from our management company, and she told me that there are no other financial obgliations other than what's listed on the statement.

Our obligations our: Landcaping (common areas), snow removal, a clubhouse with a playground and pool.

There is not a mortgage on the clubhouse.

The builder wants to "voluntarily" start the turnover process and most residents here say no way. I on the other end and am thinking yes, and the only order of business for the new BOD should be dissolution.

Here is a quote from our management company:
"The real income comes close but doesn't always cover the monthly expenses. Many times even the things that HAVE to get paid go unpaid for months because there is just no money."

This association can not continue, in my opinion, and I really think three of us should get on the board and hire an attorney and start the dissolution. There is no mention of it in our by-laws, which I find suprising. I would much rather 3 home owners be involved then a builder who is screwing the city manys over and is trying to wash their hands of this. I'm not sure where it's best interestes would lie.

I'm sorry to make this so long, can anyone give any other pitfalls or ideas to this situation. I've spent the good part of two days researching it and feel this is the best proposal to our neighbors and community. I know we will need to consult with an attorney, which is why I think we should get our BOD in there right away.

I know common areas make dissolution really difficult, one resident says he used to be part of a management company and the city took over the common areas and charged the residents. I would think negoiations with the city would be improtant, as well as paying off all the creditors. Oh yeah, and our management company is still under contract through 2010.

Thanks,
Ken

Very well written, Thank you Michele. I do really apprecaite the input.

From posts on this site (I think your reply to my earlier post), I asked the management company about streets, lights, etc.. and those are managed by a neighborring city (probably something to do with special assessments). Our garbage is taken care by the city, there is a dumpster at the clubhouse that the association pays for.

We won't know if we can get out of the management contract until we can take a look at it, but I am extremely curious what $2,000/month is providing us from the management company. I would assume the accounting, we currently have no landscaping contract. They are paying the bills that they can I'm sure. if the management company was contracted to manage 2007 homes, and we only have 153, there is a problem there.

We now have two neighbors telling people not to goto the turnover meeting. I think it's a mistake. I just am too new to the subject to be persausive.

Ken

KennethN - Look to see if your annual budget is based upon full occupancy of 2007 homes. Consider renegotiating the management contract given that only 153 homes are completed. The entire budget should be reviewed. Absolutely begin talks with your town/borough because it's likely the builder/developer has a developer's agreement to perform with the town. 2007 homes is a big urban plan that your town/borough would need to create rateable. Who owns and pays for the roadways?

The "bank" owns the remaining lots?

AND it has 3 votes each? How is that possible?

Does it specify that in the governing docs? And if so, I'd really be interested in the wording.

Especially because if they have 3 votes per lot. . . and they own the remaining lots. . .is it also possible they have a monetary obligation themselves to the assessments?

No wonder they will stay out of it. I think they are hoping you guys don't notice that they may have to start paying on the lots once there is a turnover, which could also mean their votes drop to 1 each (though since they have so many it really wouldn't matter anyway).

Something doesn't smell right about that.

But I can't put my finger on it.

nevermind about that, the developer (to the extent in section 8.12) agrees to pay. 8.12 is exempt units and says "Each unit that has not been purchased from the developer"..

New twist.

Is the develepor responsible to pay assessments on the open lots? Sounds like that would depend on our Declaration. I think they wrote the by-laws to free themselves of such an obligation, but I talked to an attorney today that said he would be suprised (and it would be $500 for him to answer that, and give counsel on the takeover).

What I find funny is that last year the pool and everything was open because of a generous $43,000 donation from the builder. Couple that with the fact they are rushing this meeting even though the by-laws state 21 days, I'm starting to get concerned we are being taken for a ride.

It sounds worth the $500, if I can get a few neighbors to split it with.

Thanks for the reply.

Yeah, I have by-laws and now I've found our "Declaration". The By-laws didn't mention either. The declaration has one line, and says it can be terminated with 67% of the votes.

Whats confusing the out of me is that everything going forward will be based on 2700 votes. But only 153 have to pay assessments? For "this meeting" the developer will sign enough proxies without voting. But in the future we won't be able to get anything done.

So I'm really trying to focus on this issue, # of votes, vs # of assessments due. Does the developer have to pay assessments? Do they have to pay before turnover and not after turnover? Like I said earlier they effectively lose membership because Class B (developer) is converted to Class A on trunover and Class A is all owners but the developer. This is why I am condering the $500 for the attorney, but right now it would have to come out of pocket. The attorney asked what the budget was, I said 1.2 million and he laughed and said 1.2 million divided by 153, prepare for your assessments to go up. god, I hope he's joking

Physically there are about 120-150 lots open. The other 2300 or so was distant future, and is still farmland. The city has voiced it's concerns about these lots as well (water buildup and mosquitos specifically). The responsibility is supposedly falling onto the developer (or so the city thinks so, but is concerned about it).

1.2 million was to cover many common areas and many additional clubhouses and pools (I can't tell how many for sure).

I've read this thing a few times, and it says that the unsold lots should pay 60% of the other units, including assessments and capital contributions.

So I am starting to wonder about this generous $43,000 donation last year. If you take $32, and take 60% of that it's $19.20. I divided $43,000 by 19.2 and it comes out to 2411, just about the number of open lots.

So the verbage in the Declaration I'm worried about is that once there is turnover, Class B becomes Class A. And Class A specifically says everyone except the developer. Which could be the reasoning for the quick turnover.

It's amazing how conspiracy theorist that sounds. I would still really love to have an attorney read it, just have to come with the $500.

Ken

In our HOA's case, the management fees are based on Class A memberships. One year after turnover the Class B membership is converted to the same number of class A memberships with all obligations of such (including dues). The kicker of course is that the sheer number of lots would leave said owner as able to do any action.

At this point it is negotiating time. I would look for some amendments. Among them, that the vast majority of the lots be withdrawn from the declaration. Leave only the empty lots needed to keep the developed lots in the association. Then you need only look at the budget for the real items.

If you want to keep the clubhouse and pool then do so, otherwise either try and leave them with the developer to dispose of, or get him to put in enough to cover what needs to be done to convert that lot into a normal lot. In the end you look to have a much smaller HOA and leave the undeveloped land relatively unencumbered. (You may wish to ensure that it has some basic Covenants left to make sure the land stays single family detached homes.)