HOA vs. Developer Responsibility

Started by BobB17 • 6 replies • 2274 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

BobB17 (Alabama)
Posts: 2

Posted:

Hi There,

I just received the accounting from the acting HOA board, which is currently run by an employee of our developer/ landowner. I'm a little concerned because most of the money was spent from the account but there is very little documentation to support some of these charges.

We're only a community of about 15 now, but the project is set to go to 400 homes. The developer thinks we should wait to establish our own HOA until more homes have been built and sold.

I have several questions:

1. While the neighborhood is still growing/ being marketed, who is responsible for paying landscaping/ ground keeping?
2. If this community is less than two years old, should we be paying repair fees (of undisclosed nature)? Shouldn't any problems occurring so early in the life of the neighborhood be a result of not being built right in the first place, i.e. the developers responsibility?
3. Is it right for our developer to take a Property Management Fee when we haven't elected to hire them in the first place?

Thank you.

TimB4 (Tennessee)
Posts: 21,046

Posted:

Bob,

Welcome to the forum.

Based on your posting, I am of the expectation that your development is still under control of the developer (aka declarant).

The Association is responsible for paying the bills of the association. These are typically outlined in your governing documents and/or State laws. The Board of Directors, who make the decisions for the Association, are the ones responsible to make sure the Association fulfills it's responsibilities. In order to do this, your governing documents and/or State laws give specific powers to the board.

Who sits on the Board of Directors is also controlled by your governing documents. Typically the documents are initially written in favor of the Declarant by giving homeowners 1 vote per lot but the declarant several votes per lot. This gives the Declarant control of the votes and they basically are allowed to chose who will serve on the Board.

That's the general background. For your specific questions:

1. Typically common area upkeep is an expense of the Association.

2. If the common area requires repairs, then the Association is responsible to make sure those repairs are done. If the repairs are covered under a warranty, then the warranty should be used (most warranties are only for 1 year). The only money an Association receives to make these repairs (or to pay bills) comes from it's members.

3. Right or Wrong isn't always associated with legal and illegal. An Association must do what is legal and not do what is illegal. Typically it is legal for a Board of Directors to hire a management company or property manager to help perform the day to day duties of the Association. If you are still under decalarant control, the Declarant decides who sits on the Board or (in some cases) serves as the board.

Hope this helps.

Tim

BradP (Kansas)
Posts: 2,640

Posted:

Bob...unfortunately when you are under developer control you don't have much say. Your documents should spell out when the transfer from the develop to the association should take place, typically it is after a percent of homes are sold or a specific date. Until then it is in your best interest to play nice in the sand with the developer to get along, you are more likely to get things done that way. But, with that said they don't have a free license to do whatever:

1. The association should pay all the bills and your annual assessments should cover that. The Developer should supplement if necessary.
2. Depending on what is in need of repair could signify issues or could be normal. Again those are your responsibility but being new I would ask if any warranties are in effect still.
3. the Developer runs the association so yes in my opinion they can hire themselves as property managers. Is it ethical, maybe, maybe not...

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By BradP on 01/30/2012 7:36 AM
Bob...unfortunately when you are under developer control you don't have much say. Your documents should spell out when the transfer from the develop to the association should take place, typically it is after a percent of homes are sold or a specific date. Until then it is in your best interest to play nice in the sand with the developer to get along, you are more likely to get things done that way. But, with that said they don't have a free license to do whatever:

1. The association should pay all the bills and your annual assessments should cover that. The Developer should supplement if necessary.
2. Depending on what is in need of repair could signify issues or could be normal. Again those are your responsibility but being new I would ask if any warranties are in effect still.
3. the Developer runs the association so yes in my opinion they can hire themselves as property managers. Is it ethical, maybe, maybe not...

I think Brad has about covered it well and to the point especially the part about make nice and play in the sand.

Your CC&R documents should have something about when the developer will turn control over to the homeowners. One state I know specifies when 51% of the units are sold. Our docs here say 100%.

DavidW5 (North Carolina)
Posts: 565

Posted:

To the extent that you can, document any questionable expenditure of association funds by the developer controlled board. Once the members assume control have a professional engineering study done to identify any construction defects.

Thru that process we were able to negotiate for the developer to provide a $284,000 financial settlement which is being used to correct the identified defects.

BobB17 (Alabama)
Posts: 2

Posted:

Hi Guys,

Thanks so much for the tips and advice. This is all very helpful information.

Any ideas about how to "nicely" ask for more documentation on the repairs?

BradP (Kansas)
Posts: 2,640

Posted:

Bob:

I think a letter simply asking for the documentation for your files is sufficient. Approach it from the angle that you want to have a complete file to go back on when the developer is no longer around.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here