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Subject: New Builder Ignoring Original Covenants
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AliciaE
(Georgia)

Posts:4


10/23/2012 6:05 PM  
I live in a partially developed subdivision in Atlanta, GA. There are 50 lots in the neighborhood but only 3 homes. The original builder filed the CCR's at the beginning of building in 2007 but did not incorporate the HOA before losing the property to the bank in 2010. Since that time, the three homeowner's have been "acting" as the HOA (e.g., paying out of our pocket to have the common areas maintained). A few months ago, we learned that a new builder was interested in purchasing the 47 vacant lots from the bank. This particular builder builds home in the high $100k - low $200k. Our homes are close to being custom and in a thriving economy would have sold for between $500k and $600k. In the current economy, the value of our homes has decreased to somewhere in the $300k range. The original covenants specifically say that no home can cost less than $300,000. When we learned of this new builder's interest in the lots, we (3 homeowners) formally incorporated the HOA and filed bylaws and articles of incorporation. Did we have the right to do this? Is there any recourse we have against this new builder who plans to build homes that will drive down our home values even further?
TimB4
(Virginia)

Posts:16706


10/23/2012 6:38 PM  
Alicia,

I am not an attorney and I do not work within the legal profession. I am offering advice or opinions based on the information contained in your posting and my personal experiences.

Posted By AliciaE on 10/23/2012 6:05 PM

. . .we (3 homeowners) formally incorporated the HOA and filed bylaws and articles of incorporation. Did we have the right to do this?




Yes and No.

Typically, in new developments control of the Association is in the hands of the developer or their successor/s until control is turned over to the membership. Since you did not petition a court for control of the Association, the control still resides with the declarant or their successor (i.e. the Bank and, once sold, to whom ever bought the property from the bank.

Since no-one challenged you on the incorporation, the Association is incorporated.


Posted By AliciaE on 10/23/2012 6:05 PM
Is there any recourse we have against this new builder who plans to build homes that will drive down our home values even further?




Since there no court order giving control to the membership, the new developer will likely have the authority (by inheriting the declarant rights) to change any of the documents filed.

Heck, to be honest, with only 3 lots sold, even if control was turned over to the membership, the new developer would still control the voting interest (as they own all the other lots) - so they would still be able to amend the documents any way they desired.

Honestly, I don't see any real option for you to prevent the new owner from building the homes they want. However, you could require him to formally amend the CC&Rs prior so the deed restrictions will be aligned to the new models offered. This may require legal action.

Again, because the new developer will control the votes, it won't change what they want to do, it will only require them to go through the proper procedure before doing it.


I know it's not what you wanted to hear.

Hope it helps,

Tim

AliciaE
(Georgia)

Posts:4


10/23/2012 6:43 PM  
Thanks. You confirmed what I was thinking. This really is an awful situation. We took a chance, and we got burned.
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Forums > Homeowner Association > HOA Discussions > New Builder Ignoring Original Covenants



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