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Subject: Developer Run HOA getting sued just before Turnover
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GaryH8
(Florida)

Posts:3


01/12/2018 8:11 AM  
I am involved with an HOA in a very small community. Under 20 places. It hasn't been turned over yet but hopefully that occurs in the next month or so. The developer still controls the HOA but all lots have been sold.

One member feels they have been singled out and conspired against. Their lawyer went the mediate route but there was a problem with the delivery and acceptance of the certified letter and the 20 days have passed. Not sure who signed (not an employee or family member) for it but the letter sat over the holidays at the HOA office for > 20 days. Their lawyer is now proceeding with suing and sounds like they were never interested in mediating. Just a formality in the process apparently.

The HOA takes the stand that this member was not singled out. They were the only member who was pursued by the HOA as they were the only one building non-permitted structures. They build something without a county permit and without requesting authorization from the BOD/ARB, they get asked to take it down and they say they are getting singled out. Neighbors have built pools, small additions and also never applied for ARB approval but were never pursed by the HOA as they were clearly permitted within the Covenants. Earlier this year, this same member starting building another structure (their 3rd structure, 2nd that was against the Covenants) that clearly did not comply with the Covenants and were issued a Cease and Desist and remove letter from the HOA's lawyer. No county permit was applied for before building either and it was clearly required. Neighbors called the County. The county also gave him a number of violation notices regarding the structure and was never issued a permit. Approx. 1 month after starting to build this structure, the member convinced a single member of the BOD who lives in the small community to a sign a letter stating that his structure is permitted citing 2 reasons. 1/ that this type of structure was permitted and 2/ that he had a permit from the County. Yes, this basic type of structure is permitted in the community but he was clearly building it in a way that is 100% not permitted in the Covenants AND he was building it on an easement/common property and he did not have a county permit as they wouldn't let him build it on an easement either).

4 days after the HOA BOD realized that one of their directors individually signed an authorization letter confirming that he can build the structure, the HOA BOD in it's entirety wrote a letter with all of them signing it, rescinding any sort of authorization for his structure. They stated that the structure clearly did not meet the restrictions in the Covenants however, should the member submit new plans to the HOA BOD/ARB that met the restrictions and requirements in the Covenants and if he obtained a permit from the County, then they would provide approval for their structure assuming it met the criteria in the Covenants.

It seems clear to me that they will lose but the authorization letter that the single Director of the HOA wrote is certainly problematic, even though the Covenants clearly state the member must submit an application to the ARB which must contain a minimum of 3 people and the authorization was rescinded in a reasonable amount of time and no further work was done during that time. Either way, what I am curious about, is what is the potential financial impact on the HOA and/or the developer should the member win their case? How might this affect turnover? Only a very small amount of work was ever done on this structure (please don't ask what the structure is, I don't think it is relevant and may hurt privacy). Perhaps $2,000 worth of work. Total value of the project might be $6,000-10,000 at the maximum.

Any input would be appreciated. Cheers!
MelissaP1
(Alabama)

Posts:6904


01/12/2018 10:41 AM  
Sounds like the Developer's HOA board is getting sued. It's NOT owner owned yet. So the case is in the Developer's court. How can it effect turnover to the owners? Not sure if it does as the HOA is not owned by the owners.

As for the approval process, it seems 1 director would not have the power to sign off on anything on the behalf of the board. It usually takes a majority vote of the board to approve. It would then have to signed off by the President or in your case Developer. The whole process wasn't followed correctly. Does that make the Developer HOA responsible? That will have to be sorted through a court of law.

Former HOA President
GenoS
(Florida)

Posts:1761


01/13/2018 12:19 AM  
Posted By GaryH8 on 01/12/2018 8:11 AM
It seems clear to me that they will lose but the authorization letter that the single Director of the HOA wrote is certainly problematic, even though the Covenants clearly state the member must submit an application to the ARB which must contain a minimum of 3 people and the authorization was rescinded in a reasonable amount of time and no further work was done during that time.

The president of my HOA gave an owner here assurances that said owner's covenant violation was not a problem. He told the owner not to worry about it. Turns out the president did not have the authority to absolve the owner from his covenant violation.

The answers to most of your problems probably lie in your governing documents. A letter from a single director is not problematic, it is probably meaningless except for the trouble and confusion it causes. The board as a whole and the HOA as a whole are not bound by a rogue director's decision to act outside of the scope of his authority. Again, look to your govening documents for what an individual director may and may not do. Usually, an individual director can't do much of anything at all unless the rest of the board, by majority vote, agree with it.
TimB4
(Virginia)

Posts:15081


01/13/2018 11:36 AM  
Posted By GaryH8 on 01/12/2018 8:11 AM


4 days after the HOA BOD realized that one of their directors individually signed an authorization letter confirming that he can build the structure, the HOA BOD in it's entirety wrote a letter with all of them signing it, rescinding any sort of authorization for his structure.




If construction started based on the previous authorization, the individual would, in my opinion, have cause to recoup damages (the cost of construction, removal of same and return of the property to what it was (landscaping)). The reason would be that they acted in good faith. They sent a request and received an approval. It doesn't matter if the individual who approved the project was authorized or not. From the perception of the requester, that individual was acting as an agent for the Association.

Therefore, if the structure shouldn't have been approved, I believe that the Association should pay damages and, if desired, sue the individual who gave authorization as exceeding their authority in order to recoup the Association damages. Of course, being that the individual was a Director, they can argue for indemnification.

Basically, it's a lose - lose for the Association.

GaryH8
(Florida)

Posts:3


01/13/2018 12:00 PM  
Posted By TimB4 on 01/13/2018 11:36 AM
Posted By GaryH8 on 01/12/2018 8:11 AM


4 days after the HOA BOD realized that one of their directors individually signed an authorization letter confirming that he can build the structure, the HOA BOD in it's entirety wrote a letter with all of them signing it, rescinding any sort of authorization for his structure.




If construction started based on the previous authorization, the individual would, in my opinion, have cause to recoup damages (the cost of construction, removal of same and return of the property to what it was (landscaping)). The reason would be that they acted in good faith. They sent a request and received an approval. It doesn't matter if the individual who approved the project was authorized or not. From the perception of the requester, that individual was acting as an agent for the Association.

Therefore, if the structure shouldn't have been approved, I believe that the Association should pay damages and, if desired, sue the individual who gave authorization as exceeding their authority in order to recoup the Association damages. Of course, being that the individual was a Director, they can argue for indemnification.

Basically, it's a lose - lose for the Association.





Yes, I too agree with the conclusion from your scenario. This particular scenario was different.
1/ construction started and neighbors called the County 3 days later.
2/ A violation from the county was issued 2 days later.
3/ A cease and desist from the HOA was sent to the owner 10 days after construction started, and said that what they were building did not comply with the Covenants (and that he didn't even apply to the ARB to build anything), here are the sections of the Covenants that you are violation and to remove it or face penalties.
4/ 20 days after construction started (and after the Cease and Desist), the owner approached the County and applied for a permit. County said, 'You need HOA approval'. Later that night, the Owner and one other resident had one of the directors of the HOA who (sadly) wasn't familiar with the specifics in the Covenants, wrote an email to all residents saying he and this other resident were the ARB (they weren't the ARB) and that they approved his plans and the email also said he had received a permit from the County (he applied for a permit but didn't have approval).
5/ 4 days after that email from the HOA Director (and the other resident whom together said they were the ARB) a final letter was sent from all HOA Board Members saying that what the Board member wrote was inaccurate, that the structure didn't comply with the Covenants and that he was not authorized to build anything. However, if he did submit plans to the official Board/ARB and if his plans did comply with the Covenants, they could approve it.
6/ He never ended up sending anything to the HOA and the County continued to issue him violations and never ended up issuing him a permit.
7/ He removed the structure a month or so later and 9 months later he hired a lawyer and initiated mediation and to top it all off, the HOA did not act within the 20 day period as the office was vacant for the holidays. Someone signed for the mail but no one knows who signed for it. Certainly not any members of the HOA or staff or family members, etc. No idea. Just an illegible signature, no printed name.
8/ HOA expects a lawsuit imminently

Yes, lose lose for everyone

TimB4
(Virginia)

Posts:15081


01/13/2018 12:20 PM  
Posted By GaryH8 on 01/13/2018 12:00 PM

8/ HOA expects a lawsuit imminently




Time to contact an attorney (if you haven't already).
GenoS
(Florida)

Posts:1761


01/13/2018 6:41 PM  
Posted By TimB4 on 01/13/2018 11:36 AM
If construction started based on the previous authorization, the individual would, in my opinion, have cause to recoup damages (the cost of construction, removal of same and return of the property to what it was (landscaping)). The reason would be that they acted in good faith. They sent a request and received an approval. It doesn't matter if the individual who approved the project was authorized or not. From the perception of the requester, that individual was acting as an agent for the Association.

I think the question is if the homeowner had reason to rely on the approval. The homeowner has constructive notice that there are covenants and bylaws that strictly govern the relationship between the association and the homeowners. A homeowner is not entitled to rely on statements made by anybody that fly in the face of the governing documents. It's up to the homeowner recipient of any "approval" to satisfy himself that the approval is valid. I think the perception of the requester is irrelevant. "Micky Mouse came down the street and told me it was OK to paint my house neon green. Seemed legit to me!"
TimB4
(Virginia)

Posts:15081


01/14/2018 5:45 AM  
Posted By GenoS on 01/13/2018 6:41 PM

"Micky Mouse came down the street and told me it was OK to paint my house neon green. Seemed legit to me!"




But what if Micky Mouse was the a Director and Officer on your Board?

That is the problem.
GaryH8
(Florida)

Posts:3


01/14/2018 6:36 AM  
Posted By TimB4 on 01/14/2018 5:45 AM
Posted By GenoS on 01/13/2018 6:41 PM

"Micky Mouse came down the street and told me it was OK to paint my house neon green. Seemed legit to me!"




But what if Micky Mouse was the a Director and Officer on your Board?

That is the problem.




Mickey Mouse was in deed a Director and Officer on the Board. I agree that the approval is somewhat problematic but keep in mind...
1/ The structure was started 3 weeks before the member apparently asked for approval from either the HOA or the County (the BOD doesn't have
2/ The HOA sent the member a cease and desist and a copy of the Covenants stating he had to abide by the Covenants 10 days before the Approval letter was sent and the lone Director was part of the Cease and Desist.
3/ The Covenants clearly state that a minimum of 3 people must form the ARB (and no ARB was officially formed yet as no members had yet to apply for anything). The BOD of the HOA is the same as the Board of the developer as Turnover hasn't occurred yet) The 3 BOD members have always acted together for any Approvals and they act as the ARB but haven't technically made it official.
4/ 4 days after the lone director sent the approval letter (no further construction occurred in those 4 days) the BOD unanimously signed a letter that stated that they declined his request for a structure but would reconsider it if he submitted plans that conformed to the Covenants. According to the Covenants, he has 15 days to appeal that. He did nothing until 9 months later when he hired a lawyer.
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