Developer and cuts to support their deficit

Started by KarenK7 • 8 replies • 1345 views

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KarenK7 (Florida)
Posts: 3

Posted:

Hi,

Our HOA is still in developer control and looks as if this will continue for some time. A board meeting has just taken place which was advertised, however at the meeting a decision was taken to cut some services due to the developers deficit being too high on a monthly basis. As a community we do not have anyone sitting on the BOD of the HOA and have been told that we cannot have any direct representation on the board but can attend the meeting without voting rights. We have now learned that our service cuts are far more severe than first thought and security will be non existent plus they are replacing the management company for the HOA with a much smaller company of ex developer employees who have set up in the area (or so we have been told). Does anyone have any idea what we can do about this situation as it looks like the developer will hang on in control for at least the next four years, look to pay nothing in on a monthly basis and cut services to support their obligations?

BradP (Kansas)
Posts: 2,640

Posted:

Karen:

Two things I would do first before you make any decisions...1) read your documents to see when it specifies a developer turnover, typically it is after a certain percent has sold or a specific date whichever is first. 2) read your documents to see what rights members have in a developer controlled community, each community is different some allow members to be board members and have votes, others do not. See exactly what the community should be able to do.

When that is all said and done then you can start to look at what options you have in my opinion.

DavidW5 (North Carolina)
Posts: 565

Posted:

Karen,

If the developer is cutting services or reducing amenities that were included in the sales promotion literature when you bought, or are being promoted to prospective buyers as inducements to buy, then I think you have several avenues to pursue.

Neither avenue that I am going to suggest involves action directly through the HOA. As far as the HOA goes, the developer holds all the cards.

First, if services or amenities are being cut, you should consider consulting an attorney to determine if this amounts to breach of contract. Whether or not it does, a letter from an attorney to the developer may have some good effect.

Second, you should contact both the local government departments responsible for approving the plans for the community and the local press. If the approved plans for the community included the amenities that have been cut, the developer will have a problem getting his performance bonds released. Also, nothing motivates a developer faster than the threat of bad press impacting sales.

Even the prospect that you, or even better, an organized group of current members, intend to pursue these actions may be enough to get the developer to reconsider.

PetunkaM (Florida)
Posts: 1,009

Posted:

Karen,

Unfortunately, Chapter 720 is not very friendly when it comes to this issue am sorry to say.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You may want to consider this....the future. That is to say the more amenities the current developer offers the more money it will cost the owner's when they take over. It's not as expensive for a developer to install a swimming pool, as much as it is for the HOA to maintain it over the long term. So some of these amenities that are being severed may in turn HELP when you are all responsible for paying for them. It doesn't mean you can't add them when the developer turns over the HOA to the owners. It just means the developer is taking measures to protect their investment. Which your development still is at this point for them.

So consider the future expense of some of the things offered now. If the developer can't afford them, then how will the owners continue it as well? Just another way of looking at things...

Former HOA President

DavidW5 (North Carolina)
Posts: 565

Posted:

Quote:

Posted By MelissaP1 on 11/03/2011 12:58 PM
You may want to consider this....the future. That is to say the more amenities the current developer offers the more money it will cost the owner's when they take over. It's not as expensive for a developer to install a swimming pool, as much as it is for the HOA to maintain it over the long term. So some of these amenities that are being severed may in turn HELP when you are all responsible for paying for them. It doesn't mean you can't add them when the developer turns over the HOA to the owners. It just means the developer is taking measures to protect their investment. Which your development still is at this point for them.

So consider the future expense of some of the things offered now. If the developer can't afford them, then how will the owners continue it as well? Just another way of looking at things...

Mellisa,

I think your reasoning is missing an important point: the community is not fully sold. When it is, and all owners are paying dues, the amenities should be affordable. Before then the developer needs to subsidize those amenities and, apparently, doesn't want to. Developers typically will also defer needed maintenance and repairs because that would increase the amount they would need to subsidize.

In our association the developer neglected a good deal to try to save money. We (the "powerless" homeowners) documented all of the defects, missing amenities, deferred maintenance, etc. and our first elected board eventually was able to negotiate an almost $300,000 settlement with the developer.

I don't see how it can be to the members' advantage to let the developer renege on his promised amenities.

BradP (Kansas)
Posts: 2,640

Posted:

taking away amenities reduces property values meaning those already there are getting ripped off...

KarenK7 (Florida)
Posts: 3

Posted:

Thanks everyone for your replies. It could be years before we get hold of the HOA and in the meantime the developer has another 100 or so plots to build and sell which are currently mothballed due to the economic climate. We have just paid an extra assessment to have fencing put back up as the 'neighbours' were using our pool and some caused damage. We have now been told that because of the extra security the fence will offer (the 'neighbours' trampled the original fencing down to get at our facilities when their water was cut off due to non payment by their HOA) we will not need the security patrols. Problem is, we have a lot of people on the sub division which need to be politely reminded about things such as dog fouling and parking cars all over the pavements and similar. We've also had quite a few break ins even before the fence was trampled down and the security put in place. It's lessened since we've had security in place but there is always that nagging doubt that if it goes, we will get burgled again. To top it off the developer has quite blatantly admitted that they intend to cut costs to cover their deficit payments on a monthly basis so this looks like just the tip of the iceberg. I have emailed to try to get some answers but the chair of the BOD just keeps ignoring me. Not sure what to do next as I have no idea of the next person up the chain in the developers company, so can't contact anyone else.

It doesn't look good, the law doesn't seem to be on our side and this developer can do whatever he wants to do by the seems of things.

PetunkaM (Florida)
Posts: 1,009

Posted:

'It doesn't look good, the law doesn't seem to be on our side and this developer can do whatever he wants to do by the seems of things.'

Yes,Karen, all you say is true.

‘in the meantime the developer has another 100 or so plots to build and sell which are currently mothballed due to the economic climate’

Please do double check out if the 100 undeveloped lots are really the part of the original development, i.e. Plat. If not there is a slim hope you could challenge him.

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