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Bylaws and the developer HELP!

Started by SteveF2 • 23 replies • 2315 views

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SteveF2 (Florida)
Posts: 4
Posted:
Hi all,

We (our board) are not sure what to do and hope someone here can shed some light.

We recently took control of our FL HOA from the developer after 60% of the lots sold. The developer had incorporated, but never established by-laws. The developer and several others have not paid dues so we sent lien letters. We were advised by counsel that without bylaws we are not a legal entity and cannot file liens etc., until bylaws are passed. The developer owes a good bit and with all his votes has rejected adopting bylaws. We feel it was their obligation to adopt by-laws when incorporated, but that was years ago. So here we are without by-laws, a paper tiger that can't do much of anything and can't get the votes to adopt them.

Any help would be greatly appreciated.

Steve in Tarpine
DonnaS (Tennessee)
Posts: 5,671
Posted:

Steve,

For sure you will need to see if he registered your HOA as a Not for Profit Corp in Tallahassee. If he did, then go to your Clerk of Circuit Courts web site to see if there are papers filed in the residing County. When he registered your corp, he should have had the Bylaws and CCRs in hand. Have you asked him to know for sure that there are none?

You said that he has rejected adopting bylaws. Because you have had "turnover", there should have been the proper documents. Who the heck signed the turnover papers without all of the nescessary CC&Rs. You have 60 % of the lots sold and that surely is enough to support getting your association on the right track. He is at 40% so push hard to adopt the nescessary paperwork.. He is not in charge any longer. You are!
BrianB (California)
Posts: 2,820
Posted:
i am no expert, but it sounds like you are getting some bad advice:

either your developer filed the necessary papers to make an HOA, with deed restrictions, etc. that you are all part of, or he didn't. WHat papers did you get when you bought your home? You should have received title, by laws, and CC&R's.

What does your deed say? What does your title say? Have you researched at the county/state recorder for records of your HOA? Do HOA's have to file with other agencies?

If you are a legal HOA, then you should have legal by laws and CC&Rs (I can't imagine how you can be legal otherwise). If you aren't a legal HOA, then no one owes any dues anyway.
DonnaS (Tennessee)
Posts: 5,671
Posted:

Steve,
NO, you cannot file liens without having Incorporation papers and Bylaws. The Bylaws are what empower you to do the fileing. Do you have a budget? Are there Rules and Regs? Any ARC guidelines? It really sounds like you are not truely an association yet.
KirkW1 (Texas)
Posts: 1,665
Posted:
Quote:
...The developer had incorporated, but never established by-laws....

If you don't have by-laws, then you are not incorporated. I would start with a record search to ensure that you don't have them floating around somewhere. If you don't, then you need to incorporate. But that could be a whole new can of worms. Most of the time you get your ability to asses from the CC&Rs. And the association is incorporated either before or at the time of filing the CC&Rs since they are what give the ability to assess members and require membership.

If this hasn't been done properly, then you need to do it quickly before it is too late. Hopefully there is enough intent shown in what was filed to allow you to fix the situation without having to get people to agree to join.
GlenL (Ohio)
Posts: 5,491
Posted:
Steve although we're in Ohio both the Articles of Incorporation and the By-Laws are defined in the "Definitions" section of the Covenants and where to find them so you might also try looking there.

Articles of Incorporation. The Articles of Incorporation which create and govern the non-profit corporation constituting the Xxxxx Xxxxx Condominium Unit Owners’ Association and which are filed with the Secretary of the State of Ohio and attached hereto as Exhibit B and made a part hereof.

By-Laws. By-Laws of the Xxxxx Xxxxx Condominium Unit Owners’ Association providing for the administration, duties and management thereof and attached hereto as Exhibit “C” and made a part hereof.
Studies show that 5 out of 4 people have problems with fractions
SusanW1 (Michigan)
Posts: 5,202
Posted:
It sounds like the "dues" have already been established in the Artricles or the CCRs, so use that as the power to collect what is owed to you. The officers of the corporation can conduct business affairs until the Board is established.

How was your "Board" established - by appiontment? The bylaws "flesh out" the CCRs and Articles and define the power of the board and how it operates. You need to get bylaws ASAP so you can even conduct your own meetings. Your group needs to write their own and you would not necessarily have used the same bylaws as the developer did.
SteveF2 (Florida)
Posts: 4
Posted:
WOW!

What detailed insight so very quick, thanks to all very, very much.

Although the developer has verbally agreed to the turnover, there are no documents stating such. We have the articles of incorporation and the CC&R's, that's it. No common area deeds, no by-laws, no "official" document for turning over control. I'm off to the courthouse in the morning to research any and all doc's I can find.

We had a meeting tonight that was supposed to be a directors meeting, but the email notice said members meeting (the posting at the mailboxes said directors). No problem, we agreed to a members meeting when it was brought to our attention. The real problem (in my mind) is that when the lien issue came up they all voted to go ahead and file liens now with my one lone vote against (until such time as the bylaws are adopted). Everyone knows there are no by-laws and voted to file anyway. Any idea if there might be any board liability for filing without bylaws? If so, should I protect myself somehow or just let it slide? People tend to get upset when a lien is filed and I'm afraid a suit might be filed against the HOA and/or board members in response.

What I've gathered from the replies is that we actually need an "official" documented turnover of control as well as by-laws before we can do anything, is that correct? The developer is very small. As a matter of fact, I think this is his first and only development although he ownes a good deal of property around our county. This is a real rural old school county. Our HOA has no cash for a lawsuit. How can we get him to come through without a great deal of expense?

DianeW (Maryland)
Posts: 147
Posted:
I would like to add that our covenants provide for the filing of liens for unpaid dues/assessments and the Florida statutes give us the authority to file as well. We believe that because we do not have "formal" bylaws at this time (we are working on getting them) should not hinder our moving forward with the liens. I would also add that liens have been filed in the past. Apparently the developer has a long history of stalling over this and I have no idea how he was able to go this many years without them but he has and now we have to pick up the pieces and move forward. If the membership thought we had no authority to collect dues, heaven knows what turmoil could ensue. The developer owes us a substantial sum of money that we need to operate. The Florida statutes state that the developer turns over, at his expense and within 90 days, 1. all deeds to common property owned by the association, 2. the original of the association's declarations of covenants and restrictions, 3. a certified copy of the articles of incorporation of the association, 4. a copy of the bylaws, 5. the minute books, including all minutes and so on. The Association has been running things for years and has most of the paperwork with the exception of bylaws and deeds, I believe. I think we need a really sharp lawyer to help us wade through this mess but they cost a lot of money and we are a small community. Everyone is reluctant to pay for the lawyer if we can file the liens ourseles.
BruceF1 (Connecticut)
Posts: 2,535
Posted:
Quote:
Posted By KirkW1 on 07/10/2008 10:20 AM
...The developer had incorporated, but never established by-laws....


If you don't have by-laws, then you are not incorporated.

Not true. One doesn't necessarily imply the other. Being incorporated may REQUIRE that bylaws exist, but that doesn't mean they were ever written. So, it is possible to be incorporated without bylaws. It depends on what state law requires. Here, in Connecticut, bylaws do not have to be formally filed, so an entity can be incorporated without the existence of bylaws. Even though bylaws are required according to law, the state will never know of their non-existence unless someone files a complaint.
BruceF1 (Connecticut)
Posts: 2,535
Posted:
SteveF,

This sounds to me more like ignorance on the part of the developer than anything else. We sort of had a similar situation in our HOA some time back. Our developer meant well, but didn't really understand the legal issues concerning an HOA. He was busy building and selling houses and left that up to his attorney (who we kid about and say he actually retired fifteen years ago) and a management company (that eventually left town). Simply put, our developer got poor, or little advice.

So, when your developer said he was incorporated, what was he referring to? Did he incorporate the HOA or did he incorporate his construction company?

As far as the HOA goes, if he actually filed CCRs (a declaration) with the the state, then he is supposed to have bylaws because Florida state law concerning HOAs requires them. It's not his option. So, he can't object, even if he owns 100% of the property. Simple as that.

Furthermore, the bylaws have nothing to do with the ability to file liens. The bylaws govern procedural issues; they establish your board, determines it size and the manner of voting for board members. They describe your board's regular and special meetings and your homeowner annual and special meetings. They establish the quorum. They establish your association officers, their duties and how they are determined. The ability to file liens should be among the powers of the association enumerated in your CCRs. But, you should have bylaws. Otherwise, how did you elect your board? How did you choose your officers?

Florida state law, I believe, establishes the minimum requirements for what should be in the bylaws. You can also get a copy of Robert's Rules which desribes a generic set of bylaws and provides an example. You may also find books in the library on the subject. Make sure you include a section on amending the bylaws, though. You're in trouble if you leave that out. You can probably find some boiler plate bylaws somewhere that you can start with and modify to suit your case.

As to whether or not you can collect fees from the developer, that depends on your state law and what's in the CCRs. For example, our developer does not have to pay fees on undeveloped lots; only on completed and declared units, and the units aren't declared until they pass title.

I think what you need to do is a lot of reading of your CCRs and state laws to see what your rights are and determine where to go from here.
RogerB (Colorado)
Posts: 5,067
Posted:
Steve, determine if your HOA is incorporated by going to your Secretary of State web site and searching for the name of your HOA. If incorporated and you can not find any By-laws associated with the incorporation then review your state's Non Profit Act which should state the procedures to call meetings at which you can select a committee o write proposed By-laws. After this a second members meeting can be duly (the notice of meeting must specify business to be conducted)called to adopt the By-laws. Once the By-laws are adopted, at the same meeting, if duly called, you can elect Board members. The Board members can then meet and elect officers. Then the Board can issue delinquent assessment notices and status letters (including the amount of delinquent assessment owed) to title companies when properties are sold.
KirkW1 (Texas)
Posts: 1,665
Posted:
Quote:
Not true. One doesn't necessarily imply the other. Being incorporated may REQUIRE that bylaws exist, but that doesn't mean they were ever written. So, it is possible to be incorporated without bylaws. It depends on what state law requires. Here, in Connecticut, bylaws do not have to be formally filed, so an entity can be incorporated without the existence of bylaws. Even though bylaws are required according to law, the state will never know of their non-existence unless someone files a complaint.

Bruce,

One word applies here: FRAUD

And it should be dealt with accordingly. There is no excuse for defrauding any of the following:
1) The homeowners
2) The state
3) The bank

Protect yourself if there are no bylaws and report the fraud.
BruceF1 (Connecticut)
Posts: 2,535
Posted:
Kirk,

It may be fraud, true, but that doesn't mean it never happens. The point is, because a corporation exists, it doesn't necessarily follow that there are bylaws, only that they SHOULD exist, but that doesn't mean they do.
JohnK3 (Pennsylvania)
Posts: 967
Posted:
I agree, Bruce, as to your take on the legal point. Incorporation can exist without ByLaws, in that, the corporate license does not fail for lack thereof. Function is a separate issue.

As to fraud: by definition, fraud requires INTENTIONAL deception on the part of the alleged defrauding party for personal gain. Could that be the case here? Sure. But I'm not convinced (yet) based on info provided. Incompetance? Shoddy work? Inattention? Maybe.

In any event, through whatever channels, there should be ByLaws enacted to suss out the CCRs, then action taken re: enforcement.
BruceF1 (Connecticut)
Posts: 2,535
Posted:
John,

Yes, and as I said in my earlier post, the absence of bylaws seemed to me to be more due to ignorance on the part of the developer than to malicicous intent. Of course, who knows? We don't have all the facts. But, I like to give people the benefit of the doubt until I learn otherwise.
GlenL (Ohio)
Posts: 5,491
Posted:
Never attribute to malice what can be adequately explained by stupidity.
Studies show that 5 out of 4 people have problems with fractions
KirkW1 (Texas)
Posts: 1,665
Posted:
Quote:
Never attribute to malice what can be adequately explained by stupidity.

Generally I agree, but if he is this stupid then he still needs to be stopped. He either knows or should know better then to not have bylaws in place. The simple truth is that he should have filed the bylaws at the time he incorporated. In looking at my HOA's paperwork, the whole thing was done with a single filing.

I would do a couple things.

1) Check the actual filings of the covenants. The by-laws may be there.
2) Call the developer's office and ask. If he doesn't have them then tell him you expect him to foot the bill for the attorney to review and file them for the HOA.
3) If numbers 1 & 2 fail contact the attorney general's office for assistance.

BruceF1 (Connecticut)
Posts: 2,535
Posted:
I'm probably a little more sympathetic because I can relate to this case so well. I would say the thing to do is educate the developer.

In our own case, we also had a developer who was very uninformed about HOA legal requirements. He had built several large projects, but this was his first attempt at building an HOA type of community. Actually, he bought the project from someone else, and all of the documents had already been prepared. He simply handed everything to his lawyer to review and file. I mentioned this in another thread, but our bylaws had some silly provisions in them, such as a quroum requirement that essentially meant that anyone who showed up at a homeowners meeting constituted a quorum (it could even be one person). Clearly, our documents were boiler plate from "Documents-R-Us" or someplace. The CCRs even included a section on elevators, even though we are single family homes.

Now, the developer is young, and he is a fair-minded person and bends over backwards to try to make people happy. He's even done things at his own expense to try and satisfy people. Because he really tries to please everybody, he is very popular with the homeowners. But, it was also obvious that he had no experience with an HOA community or an adult community, and this lack of experience led to a lot of incorrect ideas and assumptions.

When we reached the point where we were allowed one homeowner on the then 3-member board, we elected a person who had been president of an HOA in another community. He set about trying to correct a lot of the things, but, as you can imagine, being the minority member on a 3-member developer-controlled board, it was not an easy battle.

The problem with a 3-member board is there is no difference between a simple majority and a 2/3 super majority, so I lobbied heavily to change the board size to five members. Just prior to turnover, the board size was changed, and four homeowners were elected to the board. The developer, who, as I said, is popular with the homeowners, was relected. So, that's where we are today. A 5-member board with homeowner majority, and we are in the process of cleaning up our documents and organizing our community, establishing committees and appointing members to them and so forth.

It takes time and effort, but it can be done. Perhaps we were lucky because we have a developer who is interested and cooperative, even though he made a lot of mistakes and made many incorrect assumptions. The point to my story is not that every developer you find will be cooperative, but I am sure you will find many that do need to be educated about what an HOA is all about.

SteveF2 (Florida)
Posts: 4
Posted:
I'm sure there was no "ignorance", but rather an unwillingness to follow through on his obligations. He has a very long history of doing the wrong thing intetionally. He is very intelligent, attended law school, but never graduated.

When the sub division was approved by the County, sewer was to be installed by the developer as a condition of approval. Years past and he never installed it, so septic tanks were installed. Over and over for years when asked to comply by the county (they want sewer revenue), he would simply say he would "get around to it". Finally, the County Commissioners voted to halt any building permits and C/O's until the sewer was installed. He had a house ready for C/O and so he simply went and installed 2" low pressure sewer lines (real easy and cheap to install) rather than the 4"+ gravity system with lift stations, all to our objection. So now we have to istall a tank, pump, controller, etc. ($4000-$5000) PLUS pay sewer bills. It's the worst of both worlds, paying sewer and paying significant equipment aquisition/maintenance costs.

He also started a development right along the coast which had a great deal of wetlands. For several months dump truck after dump truck were seen entering the site. Someone called DEP and all hell broke loose. He had been filling in the wetlands in order to get more lots. It was a HUGE deal, all over the news and cost him the entire development.

I could go on and on.....

I'm glad to find out our president did contact an attorney that was advised NOT to file liens until our own house is in order.

I read the articles of incorporation closely and found this interesting:

Article Seven

The affairs of the Corporation shall be managed by a President, Vice-president, and Secretary-Treasurer, who shall be elected at the annual meeting as provided in the bylaws of the Corporation. Until such election is held, following persons shall serve as Corporate Officers:
President ~~~
Vice-president~~~
Secretarty-Treasurer~~~
The Officers shall also constitute the Board of Directors.

Sadly, two of the three have passed on. There are indeed NO bylaws, never ever done. Does Article Seven mean what I think it means?

HOA=Hell On All

KirkW1 (Texas)
Posts: 1,665
Posted:
If I were in your position, I would form a committee to draft some by-laws. Then go ahead and file them and turn your attention to the rest of your documents. The other thing I would do is to investigate every possible method of going after the developer. I would start with speaking to the State Attorney General's office about the fraud against the state. I would also look at filing a lawsuit to recover all the costs associated with making things right.

By the way, there is more then revenue to the sewer demand. The thing is too many septic tanks in a given area is believed to cause problems. And when you are near wetlands, or a large body of water the concern grows.
BruceF1 (Connecticut)
Posts: 2,535
Posted:
Quote:
Posted By KirkW1 on 07/12/2008 10:21 AM
If I were in your position, I would form a committee to draft some by-laws. Then go ahead and file them and turn your attention to the rest of your documents. The other thing I would do is to investigate every possible method of going after the developer. I would start with speaking to the State Attorney General's office about the fraud against the state. I would also look at filing a lawsuit to recover all the costs associated with making things right.

By the way, there is more then revenue to the sewer demand. The thing is too many septic tanks in a given area is believed to cause problems. And when you are near wetlands, or a large body of water the concern grows.

In fact, almost anything will grow when it's well fertilized!

:-)
JesseB (North Carolina)
Posts: 6
Posted:
Steve, the FIRST place you need to go is the secretary of states web -site if the corporation was formed thats where it would be then check with the county that tyou live in at the planning office there should be a plan associated with that development which in NC you must have the deed restrictions approved before your allowed to build also contact the state entity on storw water drainage and see who the permits name is in. your deed resrictions arcticles of incorporation should be on file at the county regiter of deeds also they should have been availible to at the time that all of you bought your house if the real estate agent was working for the developer and basically sold you a pig in a poke there could be all kinds of nasty suprises you sound like you need a reputable real estate attorney whatever the cost it will worth it in the long run and do not sign any thing until you do
SteveF2 (Florida)
Posts: 4
Posted:
Thanks again to all for great insight. We are looking for an attorney that specializes HOA and/or condominium associations, there is just too much at stake to wing it. I'll keep you posted....thanks again....Steve

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