MI: Developer says he is the board/president and unilaterly makes changes.

Relevant Facts :

116 lots in neighborhood
45 lots currently built up
71 lots owned by developer
$240 / year association fees
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The original developer of the neighborhood told everyone there would be no association or fees until 75% of the neighborhood was completed. However they went bankrupt, the empty lots were sold for pennies to this new developer who is now claiming the Association is in effect, everyone owes him $240/year, and he is the board and president. He has already made numerous changes to our articles including exempting all developer owned lots from Association fees and landscape maintence requirements. In addition dramatically lowering the minimum home size. All of this was done by one person who considers himself the Developer/entire board/president.

He says he will not turn over the association until the sub is complete, and until then we can have a steering comittee (of which I am one of 3 members) to liase with him. So far this has not worked at all he continues to unlitaterly approve things to help him sell homes while dramatically hurting home values in the neighborhood.

Questions :

Can he really be the developer, board, and president ? This seems like a massive conflict of interest, as a developer he wants to sell houses and has no interest in preserving the neighborhood which are his responsibilities as board/president ?

Can he really exempt his own lots from having to pay association dues, shifting all of the costs onto the 40% of occupied homes ?

Any help or advice is appreciated !!! (As the title sugest, this is in Michigan).

Glen,

Thank you for your reply I appreciate the information ! A couple of follow up questions then :

- Can he really be the entire board by himself ? Even if they are just stooges doesn't have to appoint a full board ?
- How can I verify if he has filed everything with the county ?
- If we pass the 51% home ownership are we allowed to vote to change things or does he maintain control even without majority lots ?
- He has continued to have Realtors tell prospective buyers misinformation (that there is no HOA or dues until they have closed then
they get a bill, of course they get nothing in writing saying this but still very shady !!) there is nothing wrong with us talking
to buyers as they look at houses and making sure they are aware there is an HOA they will have fairly high dues, and no say in anything?

This is a horrible situation, we would never have bought in this subdivision under the current circumstances. When we bought in there were no HOA fees, the developer cut all his empty lots (new developer all his lots are 3 foot weeds and mosquito havens !!), he removed the all brick requirements, cut house size from 2100sq feet to 1400 (can you say wow ?), changed the requirement for black iron fences to any non wood fence, allowed vinyl sheds. Ugh .. my pretty neighborhood is gone.

Todd,
Put Mary's last paragraph is the "hold" basket to a little while. Tecnically correct I suppose but either way is not going to remedy the relationship between developer and Happy Home Owners (Or whatever).

Please read Marys post with a keen desire to ponder what she is saying, and do those little chores she suggests. As you go along you are going to find out you are outgunned against this developer. Why? You don't know enough yet, you are reacting on how it seems to you and not what really can be done, how you can do it, and who is going to do it.

You as a member of this developer appointed panel seems the right thing but is turning sour.. You don't represent the owners, they never elected you, you have no "vote" in management , it is the developers ball game. So you sit at the table and get frustrated because you are a "paper tiger" with a sense of what's right and find you are hapless. No hopeless. So what to do.
What you want to do. You want to get control of your well being. It will not happen over night and if you do nothing, at some point the owners of the association will control the association. The developer will move on as soon as economics dictate. Keep that in mind because in order to change your life you are going to need some help. But you could be deep pockets, get your company lawyer to point you to a good HOA lawyer and sue the developer,not saying you would win, but you can give him fits if you can outspend him. But probably you all are just a bunch of homeowners with some level of fairness and community concern and commitment, which ranges from some(maybe most) not caring a wit and some passionate because someone is jumping on their shoes. Get the picture yet. The owners have rights. They have the rights of all Americans to assemble peacefully, discuss what they want, they can set up private groups to protest against anything they please. The good groups will know at least as much as their adversary, they will know where to push and when to pull, they will know their adversaries weakness (Maybe financial, maybe legal, maybe just hard times, doesn't matter.
One final obervation. If you personally felt it necessary to treat someone unfairly, who would you rather pick for your victim, six people you could cut off from the herd and handle them as individual or 6 of them banded together with a cause and a purpose and have done their homework ? Think ten or twenty banded together with a purpose. The purpose of the group approach is not to show force, the purpose is to use the talents of as many people you can muster.....that is where the force lies. Listen to Mary, get all those records and anything else of interest at the county court house, like planning office, buildings and codes, inspections, use on line search for looking at your developer track record, including court records....all in public domain. Don't do anything dumb, don't allow mavericks gunning on the loose. NO PERSONAL agendas, everything at open meetings and everything recorded and if necessary, set up a web site, (careful you don't use developers name for your HOA), get out newletter and get out the people and run a tight agended meeting, organize. Then, always keep the door open for a compromise, you want to better your life, not attack someone elses. My opinion.........nothing more.

SusanW1,
Excellent observation Susan, and something folks should pay more attention to. This business of what was promised publicly by the developer can be important down the line. That is one reason records maintained by the Board should be comprehensive and include original brochures, newspaper clipping, all plans and building permits. Our association never did and had to scramble and root around for just the items you mentioned. Carried weight in court, or more correctly in our case served as evidence in a settlement.

By the way, I would like to add, it's possible the new developer is not telling realtors to refrain from informing about an HOA. We've found that realtors often do that on their own. Some inform, some don't.

I did my due dilligence, the problem here is all of us who bought into the development did so when there as $0 fees, brick requirements etc.

Completely out of our control that the developer sold out to a scum bag who has reversed everything. I am pretty astonished that there are 0 protections for home owners, that you can buy a $300,000 home with certain guarantees in writing (all brick homes, 2200 sq feet, no fences, no sheds etc etc) and in the blink of an eye it all changes against all of the homeowners will and nothing we can do about it.

And I was elected to the steering committe by the owners not the developer, not that it matters.

I really do feel your pain. Our development originally had an all-brick, or something like 75% brick exterior requirement. Somewhere along the lines it changed and now we have quite a few vinyl siding homes, no brick whatsoever. Plus, we have two homes that are manufactured housing! My husband almost had a cardiac when he saw the flatbeds delivering them. I wish I could give you a helpful answer, but we didn't have one back then and I haven't found one that would work since then, either.

But I do have to ask this question: Did you seriously expect to never pay any fees? At some point you had to know that fees would be required, did you not?

Todd, there was a HOA near me that just went through the same thing except they still had the same builder. The builder went to the Zoning Board and requested to build smaller homes with no brick etc. To say that the current owners who had to comply with the more stringent requirements were apoplectic is an understatement and they stormed the Z.B. in mass. While the Z.B. did get the builder to sit down with the H/O's they did have to grant the changes because the builder was still following the proper Township guidelines.

Uh .. no , it's not.

Spoken like a true employee of a manf housing company though !

Todd: Also from MI, with a similar situation. If you are in Oakland county, all the recorded documents can be accessed online, so you can view your master deed, etc. for the community.

Pay close attention to what MicheleD was saying about the "Developer" versus a "Builder." They are different things with different implications for your community. Our "Developer" went bankrupt and was put in Receivership at the request of the bank (although I assume homeowners could petition the courts too). Our vacant lots were sold by the receivership to a new "builder" but he did not inherent the developer rights or responsibilities. We were able to charge him dues on his vacant lots just the same as if he were a homeowner and snag the capital contribution fees from him as well. HE DID not get the developer rights outlined in our Master Deed/bylaws etc., they passed to the Association.

In our area, it seems most purchasers are happy to assume the "builder" roles after bankruptcy, but more seem reluctant to take the "developer" role because it comes with the added responsibility of site plan completion -- this means you should find out from your municipality what was approved for a master landscape plan and site plan ... are your roads top coated, detention basins/ponds passed inspection, etc.

Once your community reaches a certain percent built (I think its 85% in Oakland County), the municipality can enforce weed mitigation/blight conditions on the builder ... that helped us out a lot.

The new builder is making much smaller homes for us too ... but as a community with an HOA, we could pass some restrictions on our governing docs, but, overall, we are much happier to see the homes going in and contributing to our reserve fund etc. This is again why you need to know for sure if this new guy is a builder or developer ... depending on your docs, you're community may get default control if he's only a builder and you could make such restrictions -- enforcement is a different game all together.

How do I find out if he took on the Developer roles or not ? This would be the only possible loophole for us.

ToddR3

Having been through a similar situation with the original developer which was finally settled after litigation with the developer, I opine that the owners of the non-developer-owned lots are likely to have to file a lawsuit against the new developer to restore what you believe you bought. But first, assemble all of the applicable documents.

Start with the applicable law under which the development was created. It could be just a land division under the Land Division Act, a land division as a Planned Unit Development, or a Site Condominium. That information should be on file with the register or deeds in your county. You may have to find the version of the act(s) that applied at the time the development was created. The most extensive and protective law in Michigan is the Condominium Act.

You will also need the Covenants, Conditions and Restrictions (CCRs) for the development. To create the CCRs, the original developer had to own all of the land to impose the CCRs on all of the lots (property units). There could be a master deed and bylaws if organized as a site condo. A search of the registry of deeds using the legal description for the development should surface all of the relevant documents. You might also identify all of the documents with a search of the legal description for your property.

The CCRs or equivalent should have created the owners association, and the membership including membership classes if any. Make sure the association and classes been created in the CCRs. The articles of incorporation should be available at the Michigan Department of Energy, Labor & Economic Growth (DELEG). As a nonprofit corporation, it is governed by the Michigan Nonprofit Corporation Act. Also the initial bylaws should be available but may or may not be recorded. Specifically look at the protections for individual owners/members in these documents including the requirements for amendment. Even if the developer has the amendment authority, applicable case law places limits on the range of permissible amendments. This case law essentially prevents a "bait and switch" representation/change for the development.

The original developer may have also registered the development under the Michigan Land Sales Act which requires that property reports be given with signed receipts at the time of purchase. You will have to determine to what extent the representations in the property reports run with the land.

The CCRs and bylaws should define the permissible uses of association funds including the obligations of the association to the owners/members. One or both should define the authority for setting the dues, assessments and fees. Under developer control, the fiduciary duty of the board (developer-controlled) is the higher trustee level of duty — a higher level of due diligence. Specifically, the developer is likely prohibited from using any association funds for developer purposes, and may have to document that no funds were so used.

Also determine the name of the attorney and law firm that drafted the original documents. Do some research on the reputation of the firm.

In my view, the longer your problem proceeds, the harder it will be to correct.

This is an old post from 2010. Be careful on reading the dates of posts when posting. Laws change every year and it's best to make new topic if possible if the topic is too old.