Get 2 months of free community web site hosting from Community123.com!
Saturday, August 24, 2019
Get 2 months of free community web site hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Developer refuses to pay HOA dues
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
EllenM3
(Hawaii)

Posts:9


11/09/2018 10:39 AM  
I live in a neighborhood where the infrastructure has not been completed to 19 lots. The HOA owns and maintains the roads and water lines to the developed lots, and it is the developer's responsibility to install infrastructure to the undeveloped 19 lots. None of the 19 lots can be sold until all infrastructure is complete. The question is -- the HOA feels that the developer should pay HOA fees for the roads and water because we use those fees to improve and maintain the roads that everyone (including the developer) drives on and to improve and maintain the water system for the developer's future use. He is contesting, saying that he shouldn't have to pay because the roads and water lines don't yet extend to his lots. Does anyone have experience with this sort of situation? Thanks!
SheliaH
(Indiana)

Posts:2623


11/09/2018 11:06 AM  
You really should ask an attorney about this since this sounds like a legal matter. Generally, the developer can do whatever to protect its interests until the community is turned over to the homeowners. Unfortunately, this could be a sign the developer is having money problems because those 19 lots haven't been sold yet and he can't underwrite all the costs of maintaining the undeveloped portion. That could be why he's trying to make the current homeowners pay for it now instead of taking that on when the houses are sold and you have more people to share paying assessments.

I moved into an established community and it seems to me this is a common theme with new communities - the developer overbuilds or underestimates the costs, the market changes and the developer can't go with the flow. Or they just want to shift as many costs as possible on the homeowners before cutting out. Or they just go bankrupt - my community had two developers and both went bankrupt before the community was completely built out (they left after it was 75% built and now we have 3 acres of undeveloped land)
GeorgeS21
(Florida)

Posts:1263


11/09/2018 11:16 AM  
Likely an attorney is the first step - but, you docs should note how many votes the developer gets per lot ...probably good to know who actually has control?
DouglasK1
(Florida)

Posts:1429


11/09/2018 12:14 PM  
Have you read your governing documents (CCRs, Deed Restrictions, Covenants, Bylaws, etc.) to see what they say regarding dues? Do they make an exception for undeveloped or developer owned lots? I assume the association has been turned over to the owners and is not still under developer control, correct?

If the association has been turned over, your docs don't make any relevant exceptions, and your state and local laws don't make any exceptions, you should be able to assess dues. As others have mentioned, if you are not sure about your docs and laws, getting an attorney's opinion would not hurt.

If the developer will not pay voluntarily, your options include: Recording a lien on the properties, suing for the dues, suing for foreclosure, and possibly others. In many states (not sure about HI), foreclosure wipes out HOA debt so that would allow you to start collecting from the new owner, but would not catch you up for past dues. An attorney's guidance regarding collection options wouldn't hurt here either. In some cases you can recover attorney costs, but you might need to pay up front and recover down the road.

Escaped former treasurer and director of a self managed association.
EllenM3
(Hawaii)

Posts:9


11/09/2018 1:10 PM  
Just to clarify -- this is a bit of a complicated situation in that the current developer is not the original developer. Streets, water, and all undeveloped lots were in foreclosure for about five years and this is the second developer since then. After coming out of foreclosure, the owners of the 35 developed lots formed an HOA with CC&Rs that apply to ALL 54 lots. Even those owned by the developer. Nothing in our CC&Rs says that the developer is exempt from paying HOA fees and certainly nothing in our newly formed Water District exempts the developer from paying water fees.

I don't think this is a legal issue. I was wondering if anyone else had ever experienced a developer refusing to pay HOA fees. Our situation is a little different in that the developer-owned lots cannot be sold until all infrastructure is put in by him, but the HOA does own the rights-of-way for streets and we own the existing water distribution system that he will be connecting to. Our position is that he will be using our HOA-maintained streets to access his part of the subdivision, so he should be paying his share of HOA fees. Regarding water, our position is that we are maintaining a water distribution system that he will be tying into and ensuring that the water meets all state criteria, so he should be paying his share to use this system.

thanks to everyone who has responded. Your ideas are helpful.
JohnC46
(South Carolina)

Posts:8561


11/09/2018 1:36 PM  
It is common that no dues are paid until a home is built and sold.
LetA
(Nevada)

Posts:739


11/09/2018 5:44 PM  
Ellen, everyone offers some great advice, you really should consult with a real estate attorney. I can tell you from experience that the HOA I moved into The initial developer went BK and the second developer stalled because of the 2008 depression. The second developer split the project with a third developer and the last house closed in April of 2013. I can tell you first hand that for a while we paid a higher assessment because all the lots were not developed. Once the last house closed then our assessments went down.

You can do some legwork yourself by checking your local county court docket to see if he has any pending lawsuits against him or the company. find out what the main parcel number is and look it up on the county accessors and recorders office to see if there are any notes to the deeds or titles.
SteveM9
(Massachusetts)

Posts:3301


11/09/2018 7:10 PM  
The question still remains..... did the developer (1st, 2nd, whatever) legally turn over the HOA to the homeowners? If the answer is no, the developer is still in charge and makes his own rules.

As for the 35 lots simply forming their own HOA, sounds kinda fishy and not legal. Could end up in a legal nightmare in the future.
SteveM9
(Massachusetts)

Posts:3301


11/09/2018 7:18 PM  
Might even have a bigger issue. The 35 lots may be in the new "fake" Hoa with its new rules, dues, etc that everyone volunteered to join, and still have the developer HOA which people are legally required to pay its dues, rule, etc. Which will be turned over at a later date.
EllenM3
(Hawaii)

Posts:9


11/09/2018 8:17 PM  
No, all 54 lots are in the same HOA. While there were CC&Rs written by the original developer, these were revised when the then-developer turned over control of the entire subdivision to the property owners so that we could form a Homeowners Association. He and the property owners also worked together to purchase the roads (which were owned by a bank) which were then deeded to the Homeowners Association. When we wrote new CC&Rs with the then-developer as part of the committee, we wrote them to include all 54 lots, regardless of whether or not 19 of those lots were still owned by the developer. We did not form a "fake" HOA separate from the developer-owned lots. We worked with an attorney who reviewed all subdivision documents and the new CC&Rs, which were recorded with the County Clerk.

So according to the legally revised CC&Rs, all 54 lots are subject to pay HOA fees. Apparently, some CC&Rs in other communities are written to exclude the developer from paying HOA fees on lots still owned by him/her, probably because those original CC&Rs were written by the developer.
GeorgeS21
(Florida)

Posts:1263


11/10/2018 4:34 AM  
Ellen,

Does the developer get more votes per lot than the individual property owners?
MelissaP1
(Alabama)

Posts:8413


11/10/2018 6:55 AM  
Like someone said earlier. It may be the payments on those lots are not due till they are sold. If the developer still owns those lots then doesn't pay till he sells those said lots. If they are not going to sell due to the lack of infrastructure then it's on the developer to take on that responsibility. Which they are not going to till there is interest or lot are sold. Right now doesn't sound like they can unload those lots. Especially if they were foreclosed on. As many states have the right of redemption up to a year after foreclosure. Leaving the developer with 19 lots they basically can't touch till that year is out.

So as far as the HOA taking on responsibility of these 19 lots, that's kind of on them. You can't have "buyers regret" now and try to send someone a bill. The situation is and has been the developer owned those lots. The infrastructure not being there is on them. Being they are the developer, they typically don't pay dues till they are sold. So basically your HOA set itself up for it's own failure of collecting money on these lots.

The HOA shouldn't spend a dime on the infrastructure issues. You all do NOT own these lots. The HOA only collects the membership fees from those that do own the lots. Developer is exempt for now till those lots are sold. After that, it's the person who bought them that becomes your HOA member.

Former HOA President
EllenM3
(Hawaii)

Posts:9


11/10/2018 8:21 AM  
George, every lot gets one vote no matter who owns the lot. However, if the owner is in arrears on their dues, then they don't get to vote in an election.

Melissa, the HOA does not have the responsibility of putting in the infrastructure to the developer-owned lots. Our CC&Rs say that we will not maintain the roads until they are improved by the developer and approved by the County. The previous developer (who worked with us on writing the CC&Rs) bought the lots out of foreclosure. He just never got around to installing the infrastructure. So that's not an issue. So, what you are saying is that, even though our CC&Rs state that all lots must pay HOA fees, the developer is exempt until the lots are sold?

I hsve contacted our Association Attorney to clarify for us as he is the one who helped us write the CC&Rs.
MelissaP1
(Alabama)

Posts:8413


11/10/2018 10:06 AM  
You all also have the issue that when you formed your HOA you had to split the dues equally amongst 75 lots. Which will be the ideal # once it is completed. However, you all only have 56 members and 19 unpaying lots. So guess what? Your individual dues are not going to be enough to cover expenses.

Don't want to hear this but your HOA seemed to have jumped to gun on this one. It's facing consequences for doing so. The cause of it's own fallacy is it's own fallacy. The HOA wasn't ready yet for the neighbors to own it. Unless there was a turn over not aware of to the owners. It seems the new developer inherited the HOA. So your HOA is doing them several favors here.

It's best to talk to a lawyer at this point. My opinion is that you and your neighbors by forming this HOA too early has put yourselves in this situation. The developer has 19 lots but no votes according to your HOA rules. However, if the developer still owns the HOA, then they have typically 2 times the voting power than members. There is usually two levels of voting in a HOA when it is first established. Vote A and Vote B. The first giving the developer more votes.

Your HOA is a good thing to have been formed. Just think it's just too early for it.

Former HOA President
RoyalP


Posts:0


11/10/2018 10:27 AM  
OMG

It appears Melissa is correct.

however

Let your attorney advise further.


@Melissa ->
SteveM9
(Massachusetts)

Posts:3301


11/10/2018 10:55 AM  
even though our CC&Rs state that all lots must pay HOA fees, the developer is exempt until the lots are sold?


Typically yes. Developer is exempt until lots are built on and sold. No developer would buy land, then pay dues on each lot during development, doesn't make sense.


I have contacted our Association Attorney to clarify for us as he is the one who helped us write the CC&Rs.


LOL. It might have been by your direction, but the lawyer caused this problem and now you think he will provide you a way to easily fix it? Lawyers love to do things that cause more and more billable hours. Just remember that.

Want to test your theory on how iron clad your new CCR's are and everything was done legally? Try to foreclose on one of the lots for non-payment of dues. It will go to court and you will either win or loose.
SteveM9
(Massachusetts)

Posts:3301


11/10/2018 10:57 AM  
My guess is....if you do nothing, the infrastructure will never be built. Houses will ever be built. If you have legally removed the "developer" status, no one is going to touch it.
SteveM9
(Massachusetts)

Posts:3301


11/10/2018 11:07 AM  
You stated your HOA bought the roads and current infrastructure from the bank. But you will not maintain the roads until they are improved by the developer and approved by the County.

How is someone else going to improve your roads, at their expense, but not own them? They wont.
EllenM3
(Hawaii)

Posts:9


11/10/2018 1:24 PM  
thanks for replying, Melissa, but your statements don't apply to us.

The history of our little 54-lot subdivision is convoluted and unfortunate. However, we are well on the way to making everything right. The original developer (lets call him Mr. Smith) went into foreclosure and the undeveloped lots in filings 3 and 4 and unsold lots in filings 1 and 2 (where the infrastructure was complete), as well as the roads and the private water system, were owned by the bank for many years. Then Mr. Jones bought all of this but never put in the infrastructure for filings 3 and 4. But Mr. Jones continued to sell the lots he owned in filings 1 and 2 and now all 35 lots are privately owned. Mr. Jones has now sold his 19 lots in filings 3 and 4 to Mr. Williams. Mr. Williams cannot sell any lots in filings 3 and 4 until he installs the infrastructure. The HOA dues that we collect from the 35 lots are sufficient to maintain our existing roads and we have formed our own water system that collects its own fees. We have a two-tier fee system with the lots in filings 3 and 4 paying less than the lots in filings 1 and 2. At such time that the lots in filings 3 and 4 are sold, then they will pay the same as the rest of the subdivision.

At the point that private owners owned more than 50% of the lots in the subdivision, we approached Mr. Jones with the idea of forming an HOA. This was of great benefit to us, as Mr. Jones felt that he did not have to be fiscally accountable to the property owners and would raise dues at his whim. He also took really poor care of the roads and water system. The property owners bought the roads and the water system from the bank so that we could properly maintain them. So, the homeowners of the 35 lots in filings 1 and 2 worked with Mr. Jones to form a homeowners association and CC&Rs were written with the help of an attorney. The attorney helped us with wording so that the CC&Rs apply to all 54 lots and also so that the HOA would not accept the new infrastructure until completed and inspected by the County. At the time of adoption of the new CC&Rs, all 54 properties had equal votes - one for each lot.

Mr. Williams, the new owner, has already acknowledged that he is responsible for installing the new roads and other infrastructure. In fact, the excavators are out there already. So that's not an issue for the HOA to worry about.
SteveM9
(Massachusetts)

Posts:3301


11/10/2018 7:06 PM  
Mr. Jones has now sold his 19 lots in filings 3 and 4 to Mr. Williams. Mr. Williams cannot sell any lots in filings 3 and 4 until he installs the infrastructure.


Cannot sell lots? Heh. Ponder the thought of him selling the lots individually to 19 different people. Or he goes bankrupt and the bank auctions them off 1 by 1. Could happen......
EllenM3
(Hawaii)

Posts:9


11/10/2018 7:13 PM  
The "cannot sell lots" is a requirement of our ruling jurisdiction (County government). They placed this restriction on the original Developer, Mr. Smith, because he wanted to start selling lots in filings 1 and 2 before the infrastructure had been completed for filings 3 and 4. The County's approval of the subdivision plat specifically states that no lots can be sold in filings 3 and 4 until all infrastructure has been built and approved. In fact, in order for Mr. Williams to buy the 19 lots from Mr. Jones, he had to go to the County and put up escrow money for the infrastructure. So this is not a requirement of the HOA. Mr. Williams cannot sell them individually nor could a bank should he go bankrupt. No-one can.
SueW6
(Michigan)

Posts:531


11/12/2018 3:11 PM  
Our subdivision assessed ALL properties, no matter who owns them, or when, or their condition.

"Improved lots (with homes and water hook-up) or unimproved lots(not developed)" were the categories.

Your aim is to get revenue from these unimproved lots. They still reap the benefit of improved roads and any amenities - plus these are selling points.

Focus on the real issue: getting operating revenue from undeveloped lots.



EllenM3
(Hawaii)

Posts:9


11/12/2018 7:58 PM  
Thank you, Sue. We have the same categories, and our intentions for collecting on the unimproved lots are similar to yours. We are maintaining the water system in good condition so that Mr. Williams will have good water to his lots, and we are maintaining the entry roads that go to his part of the subdivision.
JanetB2
(Colorado)

Posts:4168


11/13/2018 9:23 PM  
Posted By EllenM3 on 11/10/2018 1:24 PM

At the point that private owners owned more than 50% of the lots in the subdivision, we approached Mr. Jones with the idea of forming an HOA. This was of great benefit to us, as Mr. Jones felt that he did not have to be fiscally accountable to the property owners and would raise dues at his whim. He also took really poor care of the roads and water system. The property owners bought the roads and the water system from the bank so that we could properly maintain them. So, the homeowners of the 35 lots in filings 1 and 2 worked with Mr. Jones to form a homeowners association and CC&Rs were written with the help of an attorney. The attorney helped us with wording so that the CC&Rs apply to all 54 lots and also so that the HOA would not accept the new infrastructure until completed and inspected by the County. At the time of adoption of the new CC&Rs, all 54 properties had equal votes - one for each lot.

The Bold item above is where I would contend that the second developer (Mr. Williams as you have noted) has a stand. Until such time as he completes the other roads and infrastructure (which is completed, inspected, AND accepted) potentially “technically” he is not part of the HOA because of not yet being accepted. I would recommend being careful how far you push this issue because potentially a Court might contend the HOA now owns the roads and water system via your implementing the HOA and therefore responsible for paying to put in the not yet constructed infrastructure if Mr. Williams ends up paying assessments for said infrastructure not yet in place.

Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > Developer refuses to pay HOA dues



Get 2 months of free community web site hosting from Community123.com!



News Articles Provided by: Community Associations Network
News, articles and blogs about condos/HOA's

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice:  (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.

Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement