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Our Entire Subdivision In Foreclosure

Started by DennisW3 • 20 replies • 1853 views

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DennisW3 (Mississippi)
Posts: 7
Posted:

Yes. You read it right. The developer has stopped paying and I guess the bank is taking over. We heard about all of this in the newspaper on Friday. This is a small development with only about 80 lots, but it will be a nice subdivision when complete.

The problem is, there are only about 15 homes finished and the homeowners association has been managed by the developer until 51% of the lots have been sold. The development is a mess. Mud running down the streets. Piles of trash and construction debris around the neighborhood on vacant lots. The streets are paved with only a thin layer of asphalt, so potholes are forming.

We (as in current residents) have no idea what to do. Can we go ahead and form our own HOA? We want to protect our investments and try to clean up the neighborhood. So far everyone has been complaining about the looks of the development to the developer, who did nothing. Now he is out of the picture and we are worried that NOTHING will continue to happen and nobody will buy lots or build homes. We would like to be proactive and try to attract buyers ourselves if possible.

Right now, everyone who buys into the development signs an association agreement that requires $35 per month dues payable to the developer. The developer then takes care of all the common areas and cuts the grass, picks up trash etc. This goes on until 51% of the lots have been sold.

What should we do? Can we do anything? Everyone is worried about what will happen. Thanks for any advice from the experts out there.
JerrellC (Florida)
Posts: 83
Posted:
dennisW3 are the streets dedicated or are they private? If the strees are dedicated then they are public roads and maintainence and repair would be up to the city unless their is an agreement between the developer and the city requiring the developer to maintain them for a perion of years or until all homes are built. I've seen this in Florida between certain large developers. If the roads are private then the developer would be responsible until turnover. If the developer has gone bankrupt another developer would have to buy the remaining lots and finish the subdivision according to the origional plans. I've also seen this happen befor. I don't believe you as a homeowner should have any problem with your bank as long as you are current with you mortgage obligations and your dues to your HOA. JerrellC
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Dennis,
First, continue paying your assessments, I have no idea how someone decided that 15 lots at $35.00 per is going to generate enough money to provide for the needs of the community with roads, etc.
Right now, it is evident you have no choice as to what to do. Call a townhall meeting of your 15 owners and talk this out. Once you all decide what you are willing to invest, time, money, commitment, leadership, then see what you all decide. You may think about some professional advise but that has to be a group decision. The ball is in your court, and has been from the moment you all moved in. You have to find out what is going on, isn't it strange that the newdpapers know more than you do? You are in for a tough long battle as in all probability someone will step up to complete the complex, if right now, your living conditions are so deplorable, petition your local government for relief or support. I also would suggest that you all could benefir from some self help volunteers from the community to get the place cleaned up. I doubt any of you are willing to adandon your property and just walk away. Difficult, yes.....;impossible, no. You all are not alone, times are bad, they are getting better and your community will also, next year at this time with 15 owners pushing in the same direction, much can be done.
DennisW3 (Mississippi)
Posts: 7
Posted:

Thanks guys for the advice. I know you are right and Robert- what you said is exactly what SOME of the neighbors discussed Saturday. That is calling a town hall type meeting and trying to do something about the situation. I volunteered the use of my truck to drive around and pick up trash.

Does anyone know if we can take over the association early? Our restrictive covenants clearly stated that the developer was the "homeowners association" until 51% of the lots were sold. Thanks all!
GlenL (Ohio)
Posts: 5,491
Posted:
Dennis, I would suggest everyone pony up a little cash to hire an attorney who specializes in real estate to guide you and protect everyone’s interests. This scenario of the bank foreclosing and then probably reselling the subdivision to a new developer is not for the faint of heart or if you’ll forgive the expression a bunch of cheesed off homeowners to try to handle. Sometimes you just have to call in a professional.
Studies show that 5 out of 4 people have problems with fractions
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Dennis,
I suppose if you could talk the developer into changing his documents, you maybe could do it. But, for sure he is not going to do anything that would impact any legal difficulties he may have. I am sure if you all wanted to take up a collection and bail him out, he would like that (tongue in cheek)
Frankly, it looks to me this is going to be a grass roots movement to shine some light on your problems. I would have to go with what comes out of your meeting and see what that amounts to. For sure, this first meeting is not going to be about how to solve your problems. That will come at some point when you all take steps to get organized.
DennisW3 (Mississippi)
Posts: 7
Posted:
Quote:
Posted By GlenL on 03/22/2010 10:56 AM
Dennis, I would suggest everyone pony up a little cash to hire an attorney who specializes in real estate to guide you and protect everyone’s interests. This scenario of the bank foreclosing and then probably reselling the subdivision to a new developer is not for the faint of heart or if you’ll forgive the expression a bunch of cheesed off homeowners to try to handle. Sometimes you just have to call in a professional.

GlenL:
I think this is excellent advice and would probably work. When we have our "town hall meeting" I will bring this up. That way, all of the property owners will feel more comfortable with the situation, and we would only have to throw in maybe $100 each. I will see what the group thinks. Thanks.
MaryA1 (Arizona)
Posts: 7,043
Posted:
Dennis,

You asked: "Does anyone know if we can take over the association early?" Thoroughly read the provision which addresses turnover. Mine contains this last sentence: "Such earlier time as the Declarant shall designate in writing." But, even if this clause is not in your CCRs, the developer may agree to turn over at this especially knowing that all the property owners are in agreement of doing this. However if he were to do this you may want to also make sure there is a provision which states that the owner(s) of any undeveloped or unsold lots is liable for payment of assessments. Otherwise assessments will only be levied on the existing property owners which could be a hardship. Check with an attorney before entering into such an agreement with the developer.
JohnB26 (South Carolina)
Posts: 1,569
Posted:
ATTORNEY
Title Insurance .... bail out and RUN
Bankruptsy
RobertR1 (South Carolina)
Posts: 5,164
Posted:
John,
Your message to cryptic for me. What do you mean?
JohnB26 (South Carolina)
Posts: 1,569
Posted:
Quote:
Posted By RobertR1 on 03/22/2010 2:37 PM
John,
Your message to cryptic for me. What do you mean?

Attorney ...... get one
Title Insurance ...... if this clouds the title, one gets paid purchase price
Bankruptsy ....... if upside-down on mtge -> walk away .... even if not upside-down stop paying .. hide money, eventually walk away with bankroll

You asked ...................................................................
RobertR1 (South Carolina)
Posts: 5,164
Posted:
John,
Is this advise to everyone (15 owners) or just OP. I can certainly understand that this is a difficult situation but have a problem seeing (from what we know) that they are being threatened in any way. They are not getting there association business done, but that is nothing new especially under some developers. The common property is unknown by us and this could prove probamatic, but I suspect there is a lot these home owners can do to protect their property. I believe they have to speak as one voice and they certainly are tied together with common concerns. 15 dedicated people is a strong force. A lot of our HOAs and condos run for years on less numbers than that. And if this whole buisiness falls apart these 15 owners may find themselves in a spot to set up their own self run HOA. This bankruptsy business is unpredictable, but it appears the residence property the homeowners have is their deeded property.

I certainly agree a lawyer is an option but that can be decided by the group once they get organized. Get organized, form a structure with speakers and officers and a mission statement, plus a plan of action, consider the lawyer when you all decide you know enough to hire one to do a specific job. IMHO
JohnB26 (South Carolina)
Posts: 1,569
Posted:
Quote:
Posted By RobertR1 on 03/22/2010 7:40 PM
John,
Is this advise to everyone (15 owners) or just OP. I can certainly understand that this is a difficult situation but have a problem seeing (from what we know) that they are being threatened in any way. They are not getting there association business done, but that is nothing new especially under some developers. The common property is unknown by us and this could prove probamatic, but I suspect there is a lot these home owners can do to protect their property. I believe they have to speak as one voice and they certainly are tied together with common concerns. 15 dedicated people is a strong force. A lot of our HOAs and condos run for years on less numbers than that. And if this whole buisiness falls apart these 15 owners may find themselves in a spot to set up their own self run HOA. This bankruptsy business is unpredictable, but it appears the residence property the homeowners have is their deeded property.

I certainly agree a lawyer is an option but that can be decided by the group once they get organized. Get organized, form a structure with speakers and officers and a mission statement, plus a plan of action, consider the lawyer when you all decide you know enough to hire one to do a specific job. IMHO

I repeat point 1: "ATTORNEY....get one"
DeeS1 (Michigan)
Posts: 223
Posted:
Dennis:

Lived through a very similar situation which we are just starting to see the light at the end of the tunnel. Check your CCRs ... often they stipulate a percentage of the complete community OR a time period. Be careful trying to have the HOA take early ownership prior to complete infrastructure -- you don't want to pay for what isn't yet your responsibility. Have a talk with your local Planning Commission to find out what they know on the situation -- they are likely the ones that approved the site plan for your community and will be the ones responsible for enforcing it's completion of infrastructure --- take a deep breath ... it will be a long haul.

It would be odd for the bank to "take over" as they would not want to inherit the responsibility of infrastructure either -- neither does your HOA. Our community saw the bank petition for a court-appointed Receivership. We worked closely with our Township to get the garbage and debris cleaned up under local zoning ordinances.

Most developers have to post significant bonds or letters of credit toward completing infrastructure and sometimes landscaping. Talk to your city to see what's in place for your community. There is probably money for the roads etc somewhere -- just don't let that stuff expire -- make sure the city at least gets it used for your community or that it passes to a new developer.

Essentially, by working with our township, we got them to enforce some ordinances on the builder and then receivership, and they held all the property "hostage" by not releasing building permits of final CofOs on the spec houses until some agreed upon infrastructure was complete. Eventually, they allowed the receivership (who represents the banks interest mostly) to sell the property if the money was all put in escrow and the stuff finished.

It's not perfect, but we now have all the spec houses finished (3) and sold by the bank and the vacant lots (6) were sold to a new developer, the common area irrigation, top coat, passing lane, and common area landscaping were all completed by the receiver with escrow funds and bonds prior to the remainder of the escrows being released to the bank. We have new houses now being built by a new builder and being sold -- is was a long haul .... talk to the city, get council if possible.

FYI -- I can provide a county recording number to the escrow agreement if you are interested in reading it. I think they charge for the download, but it might give you some ideas.

Good Luck
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Dee,
A great story and I thank you for it and applaud your association. Those who post here regular tend to believe that there is still power in the people, it just seems the commitment is sometimes lacking. And it will be a shame if some reading your post toss it off as a "HoHum," so what? What you all did is just about impossible to measure. Again, thanks for the post and for what it's worth convey to your supporters they did yeoman work and they did it for someone else.
DennisW3 (Mississippi)
Posts: 7
Posted:
Dee:
That's great for you guys and you have provided some wonderful information in your post. I plan to print what you said and take it to our neighborhood meeting. I think you are right on the money with your advice. No, we DO NOT want to take over this thing. I truly believe another developer will swoop in and take this business opportunity. That would be the best thing to happen to this development since it started. The guy that went bankrupt was a small town funeral home operator! Yeah. I guess more used to dealing with lifeless people.

Anyway, you are right about the % of completed lots and you are right about the planning commission. Our contract states that the developer is the homeowner's association until 51% of the lots have been SOLD. Not houses built. So we have a long way to go.

As of today, we are trying to get a meeting together. I printed out several copies of the notice of foreclosure which was held on 5 March and took them around the neighborhood. We are planning on pitching in $50 or $100 each and hiring a real estate attorney to look at this for us. Just to make sure everyone stays on the up and up and that the bank knows there are people and faces behind this thing.

Yes, if you can provide more technical information about the planning commission and escrow I would like to have a look at that. Thanks so much. Everyone has been a big help. I went from knowing nothing to becoming an armed citizen. Look out!
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Dennis, Had enough opinions yet? Here is another.

When you have this meeting and get some structure and maybe a mission statement, etc. Give some strong thought to who you are going to hire as an attorney. I would be cautious you don't commit to anything long term. If you all can define specific questions you need to know before you start any court stuff, pay him to find definitive answers. This way you can evaluate how he responses, his office staff and stuff like that. Try to avoid hiring a lawyer you can't do business with, in the long term. If you get a good one and get to where you can take control, he could prove valuable to the association then as well.
DennisW3 (Mississippi)
Posts: 7
Posted:
RobertR1-
Yes yes keep the suggestions coming. We need all the information we can get. I am so glad I found this forum. I think you are providing good advice about the attorney and that is something I didn't think of. More than likely he / she will try to get into something long term, and we will watch out for that. I'll keep you updated on the developments. Thanks again!
DeeS1 (Michigan)
Posts: 223
Posted:
Well ... truth be told ... and the difficult part to accept in the process (at least ours) was that it is really a legal matter to be resolved between the City and the Receivership/Bank/Developer. We, the homeowners, DIDN'T DO that much except educate ourselves and constructively interject ourselves into every discussion we could. We stopped into the township offices or called regarding something at least every-other-week for a year. I can't express enough how important it was for us to maintain a good working relationship with the city. Remember, the city has a very vested interest in your community being completed as well ... tax base, permit fees (that they've already counted toward projected revenue) , bond expenditures ... they are on your side, but for different reasons.

We were as amicable toward the receivership as possible and provided suggestions when asked on what the homeowners would find agreeable during the legal negotiations (i.e., we wouldn't pitch a fit "if", etc). The process was very slow and I'm sure yours will be too. I wish we had consulted an attorney to understand our specific rights better, but we muddled through without (if I had to do again, I would hire one). All we really would have needed was someone to answer our questions legally ... we would not have needed actual active representation.

FYI -- You might be able to petition the court to have the HOA put in Receivership to look after the community interests ...I don't know who would end up paying that expense ... perhaps it would be part of the developer's Bankruptcy requirements if he is in control and filing ...might be worth looking into. Also, our CCRs required the developer to pay a portion of shared expenses for the community (which he never paid). We were able to collect that sum from the Receivership after many painful requests and supporting documentation ... it amounted to several thousand dollars.

I'll dig up the liber numbers of the recorded agreements and get that up tomorrow (unless that violates some sort of posting rule) -- no access tonight.
KarenT (Washington)
Posts: 250
Posted:
Quote:
Posted By DennisW3 on 03/21/2010 8:46 PM

Yes. You read it right. The developer has stopped paying and I guess the bank is taking over. We heard about all of this in the newspaper on Friday. This is a small development with only about 80 lots, but it will be a nice subdivision when complete.

The problem is, there are only about 15 homes finished and the homeowners association has been managed by the developer until 51% of the lots have been sold. The development is a mess. Mud running down the streets. Piles of trash and construction debris around the neighborhood on vacant lots. The streets are paved with only a thin layer of asphalt, so potholes are forming.

We (as in current residents) have no idea what to do. Can we go ahead and form our own HOA? We want to protect our investments and try to clean up the neighborhood. So far everyone has been complaining about the looks of the development to the developer, who did nothing. Now he is out of the picture and we are worried that NOTHING will continue to happen and nobody will buy lots or build homes. We would like to be proactive and try to attract buyers ourselves if possible.

Right now, everyone who buys into the development signs an association agreement that requires $35 per month dues payable to the developer. The developer then takes care of all the common areas and cuts the grass, picks up trash etc. This goes on until 51% of the lots have been sold.

What should we do? Can we do anything? Everyone is worried about what will happen. Thanks for any advice from the experts out there.

Our subidivsion was not completed by our developer either. First he filed bankruptcy, then he passed away and the 4 unfihised homes, road and common areas were forclosed on by his lender. The few homeowners that were in our subdivision got together and we formed our association, contacted the developers lender regarding the foreclosures. Fortunately for us, another developer came in and finished the subdivision and the 4 houses were finished and eventually sold. It was not a fun process.

Get an attorney!!!
JohnB26 (South Carolina)
Posts: 1,569
Posted:
Quote:
Posted By KarenT on 03/24/2010 9:34 AM
Posted By DennisW3 on 03/21/2010 8:46 PM

Yes. You read it right. The developer has stopped paying and I guess the bank is taking over. We heard about all of this in the newspaper on Friday. This is a small development with only about 80 lots, but it will be a nice subdivision when complete.

The problem is, there are only about 15 homes finished and the homeowners association has been managed by the developer until 51% of the lots have been sold. The development is a mess. Mud running down the streets. Piles of trash and construction debris around the neighborhood on vacant lots. The streets are paved with only a thin layer of asphalt, so potholes are forming.

We (as in current residents) have no idea what to do. Can we go ahead and form our own HOA? We want to protect our investments and try to clean up the neighborhood. So far everyone has been complaining about the looks of the development to the developer, who did nothing. Now he is out of the picture and we are worried that NOTHING will continue to happen and nobody will buy lots or build homes. We would like to be proactive and try to attract buyers ourselves if possible.

Right now, everyone who buys into the development signs an association agreement that requires $35 per month dues payable to the developer. The developer then takes care of all the common areas and cuts the grass, picks up trash etc. This goes on until 51% of the lots have been sold.

What should we do? Can we do anything? Everyone is worried about what will happen. Thanks for any advice from the experts out there.


Our subidivsion was not completed by our developer either. First he filed bankruptcy, then he passed away and the 4 unfihised homes, road and common areas were forclosed on by his lender. The few homeowners that were in our subdivision got together and we formed our association, contacted the developers lender regarding the foreclosures. Fortunately for us, another developer came in and finished the subdivision and the 4 houses were finished and eventually sold. It was not a fun process.

Get an attorney!!!

DOH

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