Developer Condo Fees

Started by IvanN • 6 replies • 3458 views

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IvanN (Massachusetts)
Posts: 7

Posted:

Our condo in New Hampshire has 8 units, 3 have been sold. The Developer put provisions in the Condo Docs that he does not have to pay Condo fees on unsold units, he just has to make up any shortfall. He is living in one of the units, rents the other units on a weekly basis, rents out the boat dock spaces that belong to the unsold units during the summer. Uses one of the retail units as an office for his business. Has friends stay in the units.

I understand that he doesn't have to pay fees on unsold units, but he is making money on the units and right now the fees from the 3 sold units are covering most of the bills, so he is not having to put any money in. He is still in control of the association and has the most votes in the meetings. We thought we could wait him out, but it's been almost a year since the last unit was sold. Do we have any options?

AnnJ2 (Colorado)
Posts: 120

Posted:

This sort of situation is not unusal but look at the documents closely and how title is held for these units. Does it say unsold exactly? How does he hold title to these units? If it is in any name other than that which the lots were originally held then they are sold even if just sold from the development to him and he would owe dues. He is not contributing to reserves and the 3 owners are subsidizing the expenses for those units he is occupying one way or another, even if your dues currently cover your expenses. Any fully built and/or occupied unit is eating expenses for that individual unit in administrative costs alone not to mention in landscape maintenance or other routine maintenance and services.

We sometimes go back and approach the developer to not only pay any shortfalls but to pay all current expenses attributed to that unit he is gaining use or income from. it is not that difficult to figure out how much of the budget is attributable to individual units based on occupancy or completion alone.

MicheleD (Kentucky)
Posts: 4,491

Posted:

The developer has already invested an enormous amount of money into the development to begin with. He is the one who creates the infrastructure and pays for a variety of elements in that regard.

Not to mention the financial risk he assumed just starting the venture, to begin with.

Until the actual turnover, if your docs allow for him to not pay assessments, then what he does with his properties is his business.

Besides, he more than likely has majority votes and can codify everything he's doing, if he wants to.

Most likely.

What is your motive for pursuing this? If he is maintaining everything he's supposed to be maintaining, how are his actions harming you?

As a side note, I just read an article in my local paper this weekend that talked about how the recent economy and housing bust has affected local downtown condo development.

Many developers are offering one-year mortgage subsidy (as in paying all your mortgage payments for one year) in addition to RENTING OUT huge portions of the unsold units, as opposed to selling them.

If he's able to reduce some of his overhead by his weekly rentals, that keeps him in business. That's a good thing, in the long run.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Ivan,

Ann and Michele are right on the money! I would certainly take Ann's advice and look up the title on the 3 unsold lots. If they are not titled to his business (the one that developed the community) and are titled to him personally, then I would contact him for an explanation. On the other hand, if they are still owned by his corp then he is free to do with them as he wishes. If he can't get buyers but is able to get renters then at least he is getting some income to defray all the expenses associated with building the community. IMO, this shows good busines acumen.

IvanN (Massachusetts)
Posts: 7

Posted:

In the last year we have had the insurance lapse and the fire alarm monitoring disconnected because we did not have enough money to cover the payments and he did not pay them like he was surposed to, the rest of us had to pre-pay our fees just to get money in the account and pay the bills. Now he is talking about increasing the monthly fees and not renewing the flood insurance even though our mortgage companies say we need it, but he says we don't.

IvanN (Massachusetts)
Posts: 7

Posted:

MicheleD,

I understand that developers put a lot of money, time and effort into their projects. However, sometimes they are not honest and have problems in their business which affects their projects. I did not want to start a discussion about all the bad things someone has done, that's why I justed asked a question, but maybe a bit of background will help you understand the present situation.

The developer of our condos is the design guy and he had a partner who was the money guy, they had a falling out and the money guy left. we do not know what happened. Since the money guy left the developer had no money to pay any of the contractors and they ended up being 9 or 10 Mechanics liens on the property, as each unit closed partial releases where obtained in order to close.

The situation we have now is that all the warranties are useless, none of the contractors or subs will come to fix anything because they have not been paid in full. The sprinkler system in the units were leaking the orange oily liquid for two months before he found someone willing to come and fix them. we had a problem with our gas fireplace the installers did not come back to calibrate it after the gas line was installed because they were not paid. The developer decided to fix it himself, he took off the glass ran it without the glass, soot went all over the unit, on the walls, all the new furniture, in the ducts. Serv-pro charged $5000.00 to clean it up. We had to go through our homeowners insurance to get it paid for and we had to fight with him for the $500.00 deductible. The wrong screens were installed on the windows. The support bar on the screen did not line up with the windows, he said the vendor would come to swap them out and put in the correct ones. We come back one day and see that the screens no longer had the bar in the wrong place, but upon closer inspection we saw that all he did was cut the bar from the screen which obviously is needed to support the screen.

These are just some of the examples in answer to the question "how are his actions harming you?"

MaryA1 (Arizona)
Posts: 7,043

Posted:

Ivan,

Strike the "good business acumen"!!

Check your CCRs to determine when turnover should occur. If it too far away, perhaps the members can petition him to turnover now. It sounds to me like he may be having financial difficulties and the sooner the HOA is turned over to the members, the better it may be. Otherwise, there may not be much that can be done as long as he's in control.

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