Developer Violating Covenants

Started by JohnL18 • 18 replies • 1335 views

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JohnL18 (Georgia)
Posts: 6

Posted:

We are in a small (61)lot Georgia subdivision that is still under control of the developer. With no pool or tennis we have seen our annual dues double in two years. Although the developer releases only minimal financial information, we can now prove that he has not been collecting pro rata street light costs from builders who own unsold lots as required in the covenants. The developer has been very high handed and arrogant so the question now is how to proceed - hire an attorney even though the homeowners have no real organization, just appeal to the developer to come into compliance, seek criminal prosecution for theft by deception, seek help from Governor's Office of Consumer Protection, or other ??????

Any suggestion? or experience to help inform us?

KirkW1 (Texas)
Posts: 1,665

Posted:

I would start by having a meeting with two or three residents and the developer. Point out your concerns and see where the meeting goes. But you need to be ready to appeal to Governor's Office for Consumer Protection, and/or hire an attorney to deal with this.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Kirk and John,
I am no defender of developers that expect their hooked Homeowners to bil them out of financial trouble. And I don't have a good picture of the kind of money involved here. I like Kirk's idea of a sit down to clear the air and see if a mutual solution can be worked out. It obviously helps the association if the developer can build out his units. But, don't construe this as supporting arrogance, or nasty tatics by the developer. He can apparnently raise assessments, not uncommon, but he has to show justification for these increases, either please the owners there now with some incentives and get their support or face a legal battle he is not prepared to defend. Just be careful you all that are concerned, try and get all owners to join with you (much better) and do not get locked into a drawn out court case where the developer just stands aside and does nothing. A good fast acting lawyer is needed if you take that route, Also, don't threaten the developer in any way, just explain your concerns, ask for resolution, document everything and if that fails go to the courts. I would inform him your group will protect their investment under any set of circumstances.

MaryA1 (Arizona)
Posts: 7,043

Posted:

John,

You state there has been limited financial info given out by the developer. So, may I ask, what proof do you have of your accusations?

JohnL18 (Georgia)
Posts: 6

Posted:

Thank you all for your suggestions. As for the proof, the developer provided a high level financial statement showing total revenue and expenses for the period. The county tax assessor's web page provides closing dates for each lot and by calculating Initiation Fee and pro rata annual fees collected at closing together with accrued annual fees for homeowners, we can account for virtually all (+ or - < 1%) of the revenue reported for the HOA corporation. Thus, no revenue was collected from any other source, like the builders who own or owned unsold lots. Not having access to actual street light costs, we can only estimate the "missing" revenue based on projected annual costs listed in the financial statement - at a total cost of about $2,500 per year, about $3,000 is "missing" (or erroneously charged to those of us who have purchased homes).

Any actual experience with situations like this, especially litigation or prosecution experience, would be helpful.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

John,
I understand your impatience and your need for direct answers to your situation. I also understand free legal advice would be helpful. Can we provide what you are looking for is another matter. It is clear you are convinced your have this nailed down and are just waiting for enough weight to close his door and keep it shut, and that may be the answer, but it can't come from here, that I can see, IMO. I am sure there are posters here that have gone through much of your issues and with all kinds of results good and bad. If we were to weigh the collective information about what each of us have experienced and followed we would have to come down on the side of working this out remote from the courts. When you look at your place a year from now, this will be part of your past and the future will be your concern. You come across as a extremely knowledgeable individual that has spent some night oil getting to where you are. For what it is worth (nothing)and I happened to be there I would probably join your ranks in a minuite. But sitting where I am I can only say a year from now, you will be looking back at a lot of negoiation and compromise and hopefully the developer is out of the picture.
And that is probably more than you want to hear.

StaceyP1 (Tennessee)
Posts: 5

Posted:

John....is your hoa registered with the state as a non-profit corporation? If so, there are remedies under Georgia law to get detailed accounting records from the developer or property management co....not just an annual financial statement. However, your request must be made in writing, in good faith and must have a "purpose" for the request. Also, you will probably have to pay admin. and copy charges.

JohnL18 (Georgia)
Posts: 6

Posted:

Stacey,

Thank you very much. I just checked and found the appropriate OCGA language. Thanks again, John

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Stacy and John,
This is good info Stacey, got anything more specific as to refereces to particular Georgia Law. Hope this will turn out to be a help John.

JohnL18 (Georgia)
Posts: 6

Posted:

For others in Georgia who may be interested, the appropriate citation is O.C.G.A. Sections 14-3-1601 through 1604.

StaceyP1 (Tennessee)
Posts: 5

Posted:

The specifics as it relates to record inspection of a nonprofit corp. is located under Georgia Code, Title 14, Chapter 3, Article 16.

It's almost a carbon copy of my state's law so that's why it was fresh on my mind. (I may have to use it myself in the near future) The only barb in that particular law that the developer and/or property management company could challenge is whether or not John has a "purpose" for getting those records. That's alot of wiggle room as far as legal language is concerned. John, I would suggest you not disseminate that information to other homeowners if you get the records via that avenue.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Does anyone have any like information for SC and NC?

JohnL18 (Georgia)
Posts: 6

Posted:

Just a little update to let you know how a developer in Georgia can (and does) defeat the legislative intent to make records of nonprofit corporations available to members. The Georgia statute above provides for access to the records for "members". The developer stated in the Articles of Incorporation "The corporation will not have members." With no members, no problem, no access for anyone other than the officers - the developer.

Actually it is pretty disgusting. I have written to the Attorney General asking for whatever action may be needed to restore a reasonable degree of access to the records of nonprofit corporations for those who must pay for the operation of said nonprofit corporation(s). I'm not holding my breath.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Good idea about the breath holding JohnL.
I know exactly how you feel, and I wish it was different. However, I am the eternal optomist and I hope that the strong economics of all these people living in associations (more people live in associations than don't) will wake up the legislation. In the mean time I think the only thing we have going for us is the strong political voice some large associations are voicing. Del Webb comes to mind and no doubt the local pols will start looking at associations as votes as soon as the noise coming from within these enclaves start to reach the council chambers. Also I think AARP may be a forerunner if recognizing all the power behind those fences.

MicheleD (Kentucky)
Posts: 4,491

Posted:

I'm just incredibly curious. . . how can the developer collect assessments from MEMBERS, if there ARE no members?

From whom is supposedly collecting assessments and why would the non-member members have to pay, if they don't "belong" to an association?

(granted, I'm a little off-kilter today due to a flu illness, but still failing to see how he can get it both ways.)

JohnL18 (Georgia)
Posts: 6

Posted:

MicheleD - I don't get it either. As a property owner I am billed and have to pay the dues or face a lien. I pay the dues to an HOA corporation of which I am not a member. I don't have any vote or say in any of the HOA, Inc., activities or decisions, but I have to pay just like I would have to pay an independent contractor for services rendered - just in this case I don't get to decide what services, etc. Within a year or so we will hit the required 90% for takeover of the HOA and then we can bring an end to the lunacy.

KirkW1 (Texas)
Posts: 1,665

Posted:

You may want to have a good long look at your documents. Your developer may have played too smart for his own good and sunk his boat in the process. Every so often one does things without the advice of their lawyer. (Or go find a stupid person for a lawyer.)

Chances are membership is required in the covenants. But if the bylaws say there are no members, then he has setup a self-defeating measure. But this is the pervue of a lawyer. And the best thing to do is to pay the dues while this is investigated (and probably even litigated).

MicheleD (Kentucky)
Posts: 4,491

Posted:

An attorney is definitely needed because it wasn't the bylaws that stated "no members," it was the Articles of Incorporation.

I'm not sure of the nuances between those two documents.

Do the bylaws actually address membership? Ours more or less defines membership.

Very confusing.

John said: " The developer stated in the Articles of Incorporation "The corporation will not have members." With no members, no problem, no access for anyone other than the officers - the developer. "

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By JohnL18 on 07/28/2008 7:18 PM
MicheleD - I don't get it either. As a property owner I am billed and have to pay the dues or face a lien. I pay the dues to an HOA corporation of which I am not a member. I don't have any vote or say in any of the HOA, Inc., activities or decisions, but I have to pay just like I would have to pay an independent contractor for services rendered - just in this case I don't get to decide what services, etc. Within a year or so we will hit the required 90% for takeover of the HOA and then we can bring an end to the lunacy.

John,

In a previous post you said: "The developer stated in the Articles of Incorporation "The corporation will not have members." Do you know if the articles have been amended to state there WILL be members? Is membership addressed in the bylaws and CCRs? Does your deed indicate the presence of a mandatory HOA? All of this is very confusing. If the HOA has no members, who told you your were resp. for payment of assessments? It must be stated somewhere! I certainly would be contacting an attorney for answers to these questions. Perhaps you can get your neighbors together and make this a joint effort and minimize the cost. In the meantime thoroughly research all your gov. docs. for some answers. Also, check into the possibility of an amendment to the articles. Obtaining access to the records is not as important as obtaining answers to the question of membership.

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