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Subject: Developer (Declarant) Compliance Refusal

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HowieI
(Tennessee)

Posts:9

08/05/2007 9:21 PM
We are in a 4 year old cluster home development in Tenessee where there are 41 sold units out of a planned 95 units. The developer has literally not complied with any of the by-laws and CC&R's and only two months ago, at the insistence of several homeowners, did he appoint a BOD which is required by the documents. Only since then, we have found that he has "loaned" money to the association (according to him) the past 2 years to pay for the common expenses - our association provides all exterior maintenance, homeowner's insurance, a pool, clubhouse, etc.- and as dues have been collected he has "repaid" those "loans" from association funds to his company. The 41 units cannot begin to support all the costs of the extensive common areas in a devlopment planned for 95 units. By-laws require a 2/3 vote to borrow money and we have never voted on anything. We hired an outside mgt company who has gotten what few financial documents as exist and we find we will be broke within 60 days. The CC&R's provide that the Class B member (developer/declarant) is responsible for shortfalls during the fiscal year. He refuses to pay and claims we must have a special assessment or change the fiscal year and immediately raise the monthly assessments (dues). He never collected a required 3 months dues for a capital reserve fund at any closing so there is no reserve fund due to his negligence - he says he just thought it was too much money for people to have to pay at closing. He, as Class B member, has veto powers over any BOD action, so the association, under the BOD cannot seek legal help. If I, or several of us as individuals, pay the expenses required for legal help, can we hope to recover our legal fees in the event our complaints go so far as a court proceeding? We're in a jam with a very hardheaded individual who is totally ignorant of, and unwilling to comply with, the CC&R's.

RobertR1
(South Carolina)

Posts:2485

08/06/2007 5:41 AM
Howie, It appears to me the whole process in your Community is badly in need of some owner participation. Everything you report is suspect. I believe you need some help from the county or state, or both. You could go this alone but a group would be more effective. A good starting point is to get an interested group together and get some organization and structure what and how these issues should be approached. A plan of attack, if you will. After you have formed a mission statement, then go together with one spokeman and demand (ask, but don't take no for an answer) the Board hear you out. Record if possible. Then after you get your concerns separated into single issues, work from there. As always, be sure what your documents say, research any City, county or state laws applicable. Make sure you Documents are complete and contain any state Laws. Lots of work to be done, but don't be pressured by the developer. If necessary hire a lawyer to get you started on the right road. Sounds like you are talking to the wrong person, if he don't take your concerns seriously (developer). He is not going to put you all in jail so don't approach all this out of some unfounded fear. The more homework you do, the braver you will become. Yes you can recover any legal expenses if the court rules in your favor I believe, but I would confirm that with legal advice to insure you arer correctly approaching the problem. In a nut shell right now, the developer wants you all to pay (give) him money, you don't want to do it. Prove your case.

BradP
(Kansas)

Posts:1742

08/06/2007 6:11 AM
Howie: Each association is different, look at your documents closely, with only 41 of 95 units sold the developer is firmly entrenched as still the majority. My association the developer had six votes for every lot they owned. Not sure if that is the case in yours but if it is or close to that then they clearly have over 2/3's of the vote of the whole association. We all know developers are in it to make money, they often set dues very low to attract buyers and will skimp corners if they can to make a profit.

RogerB
(Colorado)

Posts:3724

08/06/2007 8:02 AM
Posted By HowieI on 08/05/2007 9:21 PM The CC&R's provide that the Class B member (developer/declarant) is responsible for shortfalls during the fiscal year. He refuses to pay and claims we must have a special assessment or change the fiscal year and immediately raise the monthly assessments (dues). He never collected a required 3 months dues for a capital reserve fund at any closing so there is no reserve fund due to his negligence - he says he just thought it was too much money for people to have to pay at closing. He, as Class B member, has veto powers over any BOD action, so the association, under the BOD cannot seek legal help. First it is the Developer's appointed Board members, not the Developer, who are responsible for mismanagement of funds. If your statements are correct, and I would have an attorney verify this, then the money he loaned to cover the annual shortfall was not a loan and is not repaid. It is the Developer's responsibility according to your stated CC&Rs. If the Board did not collect a required 3 months assessments they can be held personally liable. The Developer has no veto power over the Board, but can influence (dictate) the vote of their appointees. The homeowners could collectively hire and pay an attorney. Unless there is a controlling state statute, there is no guarantee that if this went to court and the owners prevailed that your legal costs would be reimbursed. Hopefully, they would. Perhaps the next step would be for the collective owners group to study the controlling documents and then educate the Developer (some more) in an effort to get coorperation.

Roger Borcherding Official HOATalk.com Sponsor DARCO Property Management (Colorado) (303) 925-0150 *See legal notice below (end of page) or go to www.hoatalk.com/legal

HowieI
(Tennessee)

Posts:9

08/07/2007 11:35 AM
Thanks for the reply. Actually, contrary to CC&R's, there has never been an appointed BOD until 4 months ago when, at my insistence, the developer appointed one. Only then did we find out about the "loans" and the non collection of Capital Reserve, etc. There is no board to hold responsible, the developer has done it all.

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