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Subject: Bankrupt HOA question
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Author Messages
SteveR10
(Oregon)

Posts:1


05/18/2021 9:46 PM  
Hi,

I'm consulting an attorney and such but curious...

I live in Oregon if it matters.

6-7 years ago I bought a small detached condo that was part of a "bankrupt HOA" so no fees have been paid over the years, etc.

Now, a developer bought a handful of units a couple years ago and just now bought 2-3 other units he didn't own.

He's now trying to buy mine. He's threatening to setup an HOA, levy special assessments and dues, etc. if I don't sell to him.

When I look online, it appears since an HOA wasn't active when I bought, I wouldn't have to join his -- but not sure if that is true or not. There WAS an HOA involved when I bought but again, it wasn't actively running as it was bankrupt.

So that said, any rough ideas if I would have to join an HOA if he did create one? Seems I could reject joining since it wasn't established prior to me buying.

Thank you for insight!

Steve
EdwardD4
(California)

Posts:42


05/19/2021 1:45 AM  
Seems like he’s trying to monopolize the area. There should be CC&R’s, and I’m assuming they can be enforced regardless of being bankrupt, however it would appear to be quite a bit of work to get the HOA up and running again with board members and or a property management company. How many units are there? Being that he has already bought a few gives him more power in voting to enforce HOA dues.
TimB4
(Virginia)

Posts:17785


05/19/2021 3:12 AM  
HOAs are created/established by the deed restrictions not activity.


If there are deed restrictions (covenants) on your property and those covenants specify an HOA, you belong to one.
It simply isn't active, but could be and the individual could own the votes if he owns the properties.



CathyA3
(Ohio)

Posts:2475


05/19/2021 5:24 AM  
This one is tricky enough, and most of us are not lawyers, so it's good that you're consulting one.

For what it's worth, during the last housing downturn (2008-2012 approximately), investors began buying up distressed properties, especially condos. Eventually, if they held enough units to control the association (usually 67% - 75%), the voted to dissolve the COA and turn the properties into rentals. The remaining owners were given the opportunity to sell to this group. or to rent their unit from them. The catch was that the offer price was low, and subsequent offers to buy the units fell, so there was pressure to make a decision quick.

This was perfectly legal even though the condo owners who hadn't seen the writing on the wall and bailed early on ended up losing their units and probably lost money depending on how much they still owed on their mortgages.

I think in your case it's gong to depend on whether your HOA's governing documents (aka Covenants Conditions & Restrictions, aka deed restrictions) are still in effect. Bankruptcy probably did not dissolve them, so your lawyer will be looking at other things - for example, did the CC&Rs have an expiration date or other contingency attached to them, or did previous owners initiate any legal process to dissolve the HOA and not just declare bankruptcy.

Whether it will be in your best interests to bail now will depend on what the potential buyer(s) of your property intend to do with it, assuming your can get a straight answer.
JohnC46
(South Carolina)

Posts:11539


05/19/2021 11:47 AM  
Steve

Not to play lawyer but you say there was an HOA that people let go dormant. If so, I believe the HOA could be activated/renewed.
LetA
(Nevada)

Posts:1429


05/19/2021 4:53 PM  
Please Post any updates and outcomes from your attorney. What this investor is doing isn't illegal. Douchey yes. Looks like this investor is trying to gain 2/3rds control and convert these units onto apartments.
If you do sell don't let the bum lowball you.

Remember special assessments regardless need to be sensible. Sounds like what this guy is doing is strong-arming people to pinch them out of their units. I would be curious to know if the BK judge deactivated the HOA in the BK. I hope your attorney goes over your closing documents to see if you belong to an HOA. Stand strong and DLTBGYD

There's a guy in Vegas that bought a property, was paying dues until he looked over his deed and found out he did not belong to an HOA. The HOA built around his home.


CathyA3
(Ohio)

Posts:2475


05/20/2021 5:02 AM  
Posted By LetA on 05/19/2021 4:53 PM
Please Post any updates and outcomes from your attorney. What this investor is doing isn't illegal. Douchey yes. Looks like this investor is trying to gain 2/3rds control and convert these units onto apartments.
If you do sell don't let the bum lowball you.

... snip ...



This is probably what's going on, and if so the OP is not in the driver's seat (see my previous comments about what happened to owners who held on too long). Smart investors don't make money by overpaying for properties. If the OP decides to cut and run, he's more likely to get a better deal sooner rather than later.
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