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Subject: Builder/developer obligation to pay HOA fee
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Author Messages
DianeR6
(Pennsylvania)

Posts:7


09/03/2020 7:42 AM  
At what point in construction of units, is the builder responsible to pay monthly HOA fee. We live in PA.
DianeR6
(Pennsylvania)

Posts:7


09/03/2020 7:56 AM  
I should have stated that there are only 8 units in our community.
DouglasK1
(Florida)

Posts:1529


09/03/2020 8:05 AM  
Hopefully this will be detailed in your governing documents (CCRs, Covenants, Bylaws, etc.) Have you read them to see what they say?

Escaped former treasurer and director of a self managed association.
GeorgeS21
(Florida)

Posts:3105


09/03/2020 8:06 AM  
What do your governing documents say?
DianeR6
(Pennsylvania)

Posts:7


09/03/2020 8:35 AM  
The by-laws are not clear regarding this. The first developer built 4 units (townhomes) then sold the property, due to financial reasons, to another developer/builder. When the next 4 units were built, it took almost one year for the first home to be sold. In the interim, 4 of us were paying $200.00 monthly fees for grass cutting, snow plowing, property insurance, electricity, etc. with no income from the builder. As you can imagine, there is no reserve and now several old dead trees are a safety concern, and $8,000 has been paid from the HOA account to remove them.
Our by-laws state that each unit owner agrees to pay to the association all assessments including , but not limited to: 1). Regular Assesments for General Common Expenses to be made annually due and payable on a monthly basis based upon the budget of the association. Isn’t the builder the unit owner until the unit is sold?
AugustinD


Posts:3889


09/03/2020 8:50 AM  
Posted By DianeR6 on 09/03/2020 8:35 AM

Our by-laws state that each unit owner agrees to pay to the association all assessments including , but not limited to: 1). Regular Assesments for General Common Expenses to be made annually due and payable on a monthly basis based upon the budget of the association. Isn’t the builder the unit owner until the unit is sold?
If this is all the by-laws say on the subject, then for now, I agree that the owner of these four lots/units should be paying right along side the owners of the other four lots/units.

Do read the By-laws carefully. Often times there is an exception, such as the developer pays no dues or reduced dues until a home is actually built on the lot.

If you feel confident that the Bylaws require the builder/developer be paying assessments, then start by sending a letter to the builder/developer/board stating you believe the Bylaws require the builder/developer to pay dues on his/her four lots. Ask that they start doing so. Report back with their response.
MelissaP1
(Alabama)

Posts:9530


09/03/2020 4:26 PM  
Many times if the property hasn't been developed/built on no assessments are made. The HOA sounds still developer controlled/owned. So don't think they contribute dues to the HOA but act as the "stewards" of that money. The developer/builder are the corporation at this point. So their relationship to the HOA is different than an owner. They take in the money to help offset some of their expenses of the HOA.

Former HOA President
JohnC46
(South Carolina)

Posts:9870


09/03/2020 4:57 PM  
Diane

I assume, from what you said, what happened is the new builder became the Declarant. If so, it is always argumentative (legal matter) when a Declarant begins paying dues (assessments) on lots/units. Rarely do they have to pay if undeveloped.

If the new builder did not become the Declarant, as in just an owner of multi lots/units, I believe a case could be made that they should pay dues (assessments) as does any owner.

Might be time to hire an attorney to review the docs.
DianeR6
(Pennsylvania)

Posts:7


09/03/2020 5:34 PM  
The new developer has not been a good Stewart of the HOA funds as evidenced by the fact that when they sold the first unit of the 4 they built, they waived the by-in fee of $500. and the new resident did not pay her HOA fees for an entire year ! There were no fines applied to the monthly fees when she finally submitted a check for. $2200. After they sold the second unit ( which was #6 of the 8 in the community) it gave us the right to form our own board. It was when we took over the bank account of the HOA that we saw these atrocities. The amount of money passed on to us was $680. This gives the appearance of poor management of an HOA and we are not happy !
MelissaP1
(Alabama)

Posts:9530


09/03/2020 10:40 PM  
What does fines and not paying dues have in common? They are not the same thing. The HOA could have charged late fees for not paying. Plus the HOA can lien or foreclose for unpaid dues. They can not lien/foreclose for fines. Fines are punitive charges.

So the HOA wasn't not doing anything wrong by not fining for unpaid dues. It is also best to establish a rule about payment or non-payment. For us it was 6 months behind we liened. 1 year behind we CONSIDERED foreclosure. This will of course vary for each HOA and their payment schedules. Once established rule of what consitutes long term non-payment, then your HOA will be able to lien/foreclose to collect.

Former HOA President
DianeR6
(Pennsylvania)

Posts:7


09/04/2020 5:54 AM  
Thank you for your advice. Our by-laws state that a fee of no greater than 12% can be applied to monthly HOA due if paid later than 30 days. We will now have an amendment to include imposing a lien after 6 months and foreclosure after 12 months.
So back to my original question - when is the builder Obligated to pay the monthly HOA fee? He has one more townhouse to sell and we are considering
Litigation. We don’t have any reserve for this so we would have to pay out of pocket.
MelissaP1
(Alabama)

Posts:9530


09/04/2020 6:24 AM  
Why are you suing? With what funds cause you don't own the HOA's funds yet. The Developer does. So this makes no sense. Suing your HOA is suing yourself and your neighbors. Plus what damages? Developer may not have to pay the dues.

Let me be clearer. CONSIDER a Foreclosure at 1 year. Do NOT do a Foreclosure at 1 year. BIG difference. A foreclosure is a "stop the bleeding" step. There is no money to be made at all. Your just taking your chances of getting rid of a non-paying member to replace them with a paying one. Which depending on your state, can take a year after foreclosure. Right of redemption laws exist.

Plus you never foreclose on a home that bank is already foreclosing on. I believe active military members are exempt from foreclosure actions. Foreclosure step isn't right for every situation. A lien can stay on for a longer time than a year. I recommend CONSIDER foreclosure to accommodate various scenerious. Plus people have the understanding that foreclosure is a possibility in a certain time limit.

BTW: A foreclosure stops as soon as back dues are paid.

Your developer may not be subject to paying the dues and still own the corporation. So they are not really "stock holder" but owner of the company.

Former HOA President
DianeR6
(Pennsylvania)

Posts:7


09/04/2020 6:56 AM  
We have a Resolution from 7/6/20 stating that the former board (builder) is no longer in control of the HOA and the community elected 3 homeowners to be the president, secretary and treasurer. The builder handed over the bank account for the HOA. The builder still owns one unit. Since the account had less than $700 in it, and there are no invoices for many services paid for and his answers are vague, we are considering an audit of the association’s financial situation while he was the declarant for the past 3 years.
AugustinD


Posts:3889


09/04/2020 7:15 AM  
DianeR6, please respond to the questions below. If you do not respond to questions from people here, then it is impossible to help you.

Posted By DianeR6 on 09/04/2020 5:54 AM
So back to my original question - when is the builder Obligated to pay the monthly HOA fee?
Do you see the answers above to this?
Posted By DianeR6 on 09/04/2020 5:54 AM
He has one more townhouse to sell and we are considering Litigation.


-- How much money do you estimate the owners of these units owe?

-- Are you aware that the Pennsylvania statutes for Planned Communities like yours require HOAs established after about Aug 1, 2018 to have Bylaws providing for alternative dispute resolution prior to filing a lawsuit in court? Do your Bylaws have such a section?

-- The cost of hiring an attorney to send a series of demand letters will likely run about $3000. The attorney will have to review your HOAs Bylaws, Declaration et cetera, and this is a large part of the expense. If your HOA files suit, figure that this will cost about $5000 for the initial filing.

-- One alternative is to hire an attorney specialized in collections. But again, it's not clear if this would be worth it for the amount owed.

-- The board should start becoming familiar with the applicable HOA statutes in Pennsylvani. See Chapters 51, 52, 53 and 54 here:
https://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=68



AugustinD


Posts:3889


09/04/2020 7:17 AM  
Posted By DianeR6 on 09/04/2020 6:56 AM
[snip for brevity] we are considering an audit of the association’s financial situation while he was the declarant for the past 3 years.
An audit will cost on the order of $10,000. There are lesser forms of CPA books review that may be sufficient but still cost several thousand dollars. Again, is the amount the owner of these units owes worth it?
AugustinD


Posts:3889


09/04/2020 7:36 AM  
-- My mistake. DianeR6 indicated the monthly dues are $200. I am estimating the amount owed is around $200/unit/month * 4 units * 12 months/year * 2 years = about $20,000.

-- DianeR6, can the Board prove that this $20,000 give or take was never paid? You indicate that receipts are mostly or entirely not available and that recordkeeping was poor.

-- DianeR6, has the board considered placing liens on the units the board claims owe money? This should be discussed in your Bylaws or Declaration. This is the least costly way to get money owed. Granted payment may not occur until the unit is sold and the seller has to clear all liens on the unit. Also, again, if your Board does not have proof that the owner of these units failed to pay, then placing a lien might be against the law.

-- DianeR6, is this community a condominium (and so subject to the Pennsylvania Condo statute)? If so, ignore my other post referring to the Pennsylvania Planned Community statute.
AugustinD


Posts:3889


09/04/2020 7:39 AM  
Posted By DianeR6 on 09/04/2020 5:54 AM
We will now have an amendment to include imposing a lien after 6 months and foreclosure after 12 months.
Did your HOA have the required votes (as given in the Bylaws or Declaration) to pass such an amendment? If half the units were/are owned by someone who owes money, I can see them not supporting such an amendment.

A board is not allowed to just make up rules and regulations and amend at will. A board's actions must be based in specific support from the Bylaws and/or Declaration.
DianeR6
(Pennsylvania)

Posts:7


09/04/2020 7:40 AM  
Thank you all for the invaluable information. Right now, we have an offer from the builder ( about 25% of what we asked for) but we have a community meeting scheduled for 9/15/20 and the builder said he would like to have this settled before the meeting. I will keep you updated.
AugustinD


Posts:3889


09/04/2020 7:51 AM  
Posted By DianeR6 on 09/04/2020 6:56 AM
We have a Resolution from 7/6/20 stating that the former board (builder) is no longer in control of the HOA and the community elected 3 homeowners to be the president, secretary and treasurer.
Do you understand that officer positions (president, secretary and treasurer) are distinct from board director positions? Do you understand that elections are for electing directors, not officers? Officers are appointed by a vote of the directors. Some HOAs/Condos' governing documents do not require the officers to be owners within the HOA/condo.

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