Developer Not Paying HOA dues, but renting their units

Started by ThomasW8 • 1 replies • 1457 views

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ThomasW8 (North Carolina)
Posts: 1

Posted:

We have a 12 unit building in NC, of which the developer still controls 5 units. I understand the developer period and additional rights to develop, as well as control the HOA board until 75% sold. However, due to the bad economy the developer decided to take the units off the market in 2008. They decided to rent out the units and have had tenants in most of the units over the past year. Recently, while requesting an HOA meeting, I discovered that the developer is not paying dues for any of their 5 units, including the tenant occupied units. Our dues cover common elements such as water, gas, general upkeep, and taxes. I have addressed this with the developer, and his response is that they don't have to pay; as they are the declarent. And if someone made an offer to by a unit he would sell it, so according to him they are for sale.

So currently the 7 independent owners are paying the renters utilities while the developer keeps all rent proceeds to pay down their LLC construction loan. The developed also says that the HOA bylaws to not apply to him because he is still in the declarent period.

He seems to know that this is unethical but seems to think it is legal. Is this legal?

MaryA1 (Arizona)
Posts: 7,043

Posted:

Thomas,

I really hate to agree with the developer, but he is well w/i his rights IF the gov docs do NOT state he must pay assessments on undeveloped or unsold lots. The only way this would not apply would be if he, himself, owned those 5 units and not his LLC and it wouldn't make any difference if he was still in control or not. As long as he is in control, and the units are owned by his LLC and you gov doc do not state he must pay for unsold lots he has the law on his side. It may "seem" unethical or illegal, but it's not. Sorry!

Exactly what do your CCRs say about transition? Is it just when 75% of the lots are sold or are there other stipulations. Sometimes it's when a certain date is reached. With this economy, he could hold onto those 5 units for several more years. In the meantime is he putting $$$ into the operating fund to make up for shortfalls or is he just increasing assessments. What do your docs say about that? Some state the declarant must make up for shortfalls.

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