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Subject: Delaware HOA not formed prior to sale of first property
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JeffreyC4
(Delaware)

Posts:8


09/28/2020 2:52 PM  
I want to buy a property in Sussex County Delaware. A review of the deed indicates an HOA is required. However an HOA was not formed in 2007 by the developer prior to the sale of the first property. To date (September 2020) no HOA exists and the original developer has failed and the business has been closed. How do I remove the HOA requirement with the deed.

Thank you for your time.

Jeff
TimB4
(Virginia)

Posts:17008


09/28/2020 4:33 PM  
Keep in mind that the deed restrictions (covenants) actually create the HOA.
The HOA simply isn't active.
Since the HOA would have been under developer control, technically whomever owns the remaining lots would also have the developer rights (may be the bank).


If you desire to actually remove the HOA, you will need to amend the deed restrictions (covenants).
The process on how to amend would be within that document.
Typically you need 2/3 or more to agree to amend deed restrictions.

If there aren't enough members to have a 2/3 majority of all lots within the development, you will also need to get the developer (or whoever owns the remaining lots) to agree with you as well.


First step would be to obtain an actual copy of the deed restrictions.
This would be done at the local property office or court house.
AugustinD


Posts:4160


09/28/2020 5:01 PM  
Posted By JeffreyC4 on 09/28/2020 2:52 PM
How do I remove the HOA requirement with the deed.
To clarify and hopefully reinforce what TimB4 posted:

-- The covenants create the HOA.

-- The covenants "run with the land" not the deed.

-- The covenants should be recorded at your county clerk's and so should be available on request or for a small copying charge.

-- The covenants should have a section pertaining to how to amend the covenants. Read this section and report back.
JeffreyC4
(Delaware)

Posts:8


09/28/2020 5:03 PM  
thank you very much for your comments. the declaration of condominium states a xxx condominium association llc. will be formed. it is my understanding that no assoc llc was formed in 2007. No fees were collected from owners of phase 1.

Delaware regs require the association to be formed as follows:

§ 81-301 Organization of unit owners’ association.

A unit owners’ association must be organized no later than the date the first unit in the common interest community is conveyed.

as mentioned the developer has failed. as part of the settlement dated 2017 between the mortgage holder and developer the property in phase 2 was deeded back to the lender. phase 1 was excluded from the settlement agreement

it seems to me the HOA requirement for phase 1 is in some sort of limbo.

this is the issue i'm addressing
AugustinD


Posts:4160


09/28/2020 5:20 PM  
Posted By JeffreyC4 on 09/28/2020 5:03 PM


Delaware regs require the association to be formed as follows:

§ 81-301 Organization of unit owners’ association.

A unit owners’ association must be organized no later than the date the first unit in the common interest community is conveyed.


What you quoted is from the Delaware Uniform Common Interest Owner Act. The latter is a Delaware statute (not a "reg"). You can get an idea of what might apply to this home by reading here:

https://law.justia.com/codes/delaware/2019/title-25/chapter-81/

I am looking at different parts of this statute. Because of the dates involved, it's not clear to me that the statute even applies to this home you are considering. if this statute does apply, consider this section on termination (80% vote required):
https://law.justia.com/codes/delaware/2019/title-25/chapter-81/subchapter-ii/section-81-218/

But your question is quite complicated. Beyond helping you a tiny bit to prepare for meeting with an attorney, I doubt folks here will be able to help.


JeffreyC4
(Delaware)

Posts:8


09/28/2020 5:30 PM  
thank you very much. the issue is complicated and i appreciate your help getting me prepared to speak with a lawyer.

as far as i can tell the signed 2007 poa concerning the hoa was not assigned by the failed contractor to the lender. as mentioned the phase 1 properties were excluded from the agreement between the lender and contractor

thanks again
JeffreyC4
(Delaware)

Posts:8


09/28/2020 5:35 PM  
i understand that an 80% vote is needed to make changes. as far as i know there are no association members to hold a vote
AugustinD


Posts:4160


09/28/2020 5:40 PM  
Posted By JeffreyC4 on 09/28/2020 5:35 PM
i understand that an 80% vote is needed to make changes.
This is only if the statute I cited above applies. As I tried to make clear, I am not sure it does.
JeffreyC4
(Delaware)

Posts:8


09/28/2020 5:55 PM  
thank you. there is a section in the declaration of condominium that addresses changes. these changes are voted on by members. i dont recall if it is 80%.
the point i was trying to make is there are no association members to hold a vote
AugustinD


Posts:4160


09/28/2020 6:57 PM  
Posted By JeffreyC4 on 09/28/2020 5:55 PM
the point i was trying to make is there are no association members to hold a vote
Without more information, I cannot tell whether there are "no association members" or not. For example, if someone owns the lots to which the covenants (that reference a HOA) apply, then there may be "association members." Someone surely owns the lots or land.

I appreciate your starting to dig into the details and law here.
LetA
(Nevada)

Posts:1029


09/29/2020 6:14 AM  
Posted By TimB4 on 09/28/2020 4:33 PM
Keep in mind that the deed restrictions (covenants) actually create the HOA.
The HOA simply isn't active.
Since the HOA would have been under developer control, technically whomever owns the remaining lots would also have the developer rights (may be the bank).


If you desire to actually remove the HOA, you will need to amend the deed restrictions (covenants).
The process on how to amend would be within that document.
Typically you need 2/3 or more to agree to amend deed restrictions.

If there aren't enough members to have a 2/3 majority of all lots within the development, you will also need to get the developer (or whoever owns the remaining lots) to agree with you as well.


First step would be to obtain an actual copy of the deed restrictions.
This would be done at the local property office or court house.





Place the Victory Flamingos in the front yard. This guy fought the HOA and won.

https://independentamericancommunities.com/2020/04/13/payback-after-6-year-legal-battle-judge-orders-nonexistent-hoa-to-pay-homeowner-188k-in-legal-fees/
JeffreyC4
(Delaware)

Posts:8


09/29/2020 6:39 AM  
thank you AugustinD
GeorgeS21
(Florida)

Posts:3279


09/29/2020 7:18 AM  
How does a condo association work WITHOUT an association?

Who collects funds for common elements - assuming there are common elements?
AugustinD


Posts:4160


09/29/2020 8:17 AM  
Posted By JeffreyC4 on 09/28/2020 5:03 PM
the declaration of condominium states a xxx condominium association llc. will be formed. it is my understanding that no assoc llc was formed in 2007.


Posted By GeorgeS21 on 09/29/2020 7:18 AM
How does a condo association work WITHOUT an association? Who collects funds for common elements - assuming there are common elements?


Right-o. JeffreyC4, is this property in question some kind of apartment-like dwelling with shared walls, a shared roof and so on? If so, does this Declaration have a section that states the "association" (or similar) is responsible for, say, the roofs or some other major components? If there is legally no Homeowners'/Condo association, then when infrastructure starts breaking and multiple units are affected, without a contractual agreement on who is responsible to pay for what, then I think this community promises quite a bit of long, expensive litigation at worst and a lot of long, draining bickering at best.
JeffreyC4
(Delaware)

Posts:8


09/29/2020 8:34 AM  
thank you. phase 1 is complete and includes 4 town houses and 1 single family home with associated boat slips. phase 2 calls for construction of one new single family home and 4 additional town houses. for the past 13 years owners of the 4 town houses have maintained their own properties. the condo declaration states the % of common property to be allocated to each existing owner.
CathyA3
(Ohio)

Posts:1316


09/29/2020 9:47 AM  
Who owns the street(s) the homes are on? If the streets are private, then you'll need an HOA to maintain them.

Condos in general can't be removed from an association. Owners are "tenants in common" of the common elements, which means they own an undivided interest in the common elements of the entire property. The important word is "undivided". An owner can't just say "this is my piece" and go on his merry way, because that piece will belong to everyone in the association according to the percentages laid out in the covenants.

Detached homes on separate lots are a bit easier, but you'd still have the issue of private streets and any other commonly owned land.
AugustinD


Posts:4160


09/29/2020 9:51 AM  
Posted By JeffreyC4 on 09/29/2020 8:34 AM
thank you. phase 1 is complete and includes 4 town houses and 1 single family home with associated boat slips. phase 2 calls for construction of one new single family home and 4 additional town houses. for the past 13 years owners of the 4 town houses have maintained their own properties. the condo declaration states the % of common property to be allocated to each existing owner.
Let's get down to the nitty-gritty: Every Declaration I have seen requires that the association provide liability insurance for common areas, covering roofs, boat slips and all manner of infrastructure. The Declaration statute, if it applies, requires such insurance, no ifs, ands or buts. It sounds like this insurance does not exist. When some event occurs resulting in some kind of harm to property or a person, the litigation will last for years, likely starting with an argument that the owners were required to form an association. I think whether the law actually requires this will be just one of many arguments that sits in the court for a few years.

I wonder if these properties may even be lawfully sold without a full disclosure of the association's status. The Delaware statute speaks extensively to requirements prior to sale.

You might want to talk to a real estate agent for free about this property you are considering and get his or her thoughts.
AugustinD


Posts:4160


09/29/2020 9:52 AM  
Posted By AugustinD on 09/29/2020 9:51 AM
The Declaration statute, if it applies, requires such insurance
Post-o. I meant "The Delaware statute, if it applies... "
JeffreyC4
(Delaware)

Posts:8


09/29/2020 10:15 AM  
thank you for your comments. i will try and do some research and get back to you
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