Condo Association Management Blog

The economic market conditions have again caused this problem for association properties across the States. Owners, financial institutions, bond holders, governmental agencies - all are affected in trying to see a project through to completion.  
 
Immediately organize and contact your local governmental representatives for assistance. We have successfully used their power to grant building permits or force some solutions - if original bonds have not been released. Try to assess what was disclosed and addressed in the bankruptcy proceedings.  
 
Reserves - funds for reserves come from the purchasers/owners. The developer normally does not use any of their own funds for the condo's expenses such as a reserve fund. The only way reserves would have been actually funded would have been to raise assessments in lieu of selling the remaining units. The public offering statement included a draft budget which isn't changed during the early stages of the sales process. However the developer may have been responsible for assessments for the completed and unsold units. The inability to pay should have been listed as an obligation of the developer in his bankruptcy filing - and there most likely would not have been funds. As with other owners, bankruptcy wipes away unpaid assessments. 
 
Therefore likely senario is that there was not enough income to pay expenses - including the master insurance policy - without using funds otherwise budgeted for items such as reserves.  
 
The question of declarant obligations and rights will be dependent on: 
a) contract negotiations between the developer's mortgage holder and the purchaser 
b) what rights the new owner may want to maintain  
c) what obligations are left to complete  
d) what power the local government has to impact the sale of these units. 
There are other items too but these often are the most important. 
 
The current owners need to organize quickly, agree to retain counsel, select spokespersons to interact with the governmental entities, and ensure that such items as insurance are continued. This is a veritable challenge not to be undertaken without assistance. 
 
A local upscale condo with sales of less than 50% has had the remaining units sold to a party who has determined to rent out the unsold units. There is little the individual owners can do - and they can't sell units requiring financing on the open market. They are stuck!  
 
Run - do not walk - to experts who can assist you in evaluating your options. Seek experienced counsel by calling the local real estate board for referrals. Also contact Community Associations Institute local chapter 651-203-7250 for referrals.  
 
If I can be of further assistance, please request my contact information from this blog.  
 
 

You got some excellent advice above. 
 
We were in a similar situation on the buying side of the sale of remaining auctioned units in a TH community in VA about 14 years ago when the DOT COM business went bust in NoVA/DC. 
 
Remaining home owners organized swiftly and even tried to prevent the sale of many units! Since many of the homeowners were lawyers, they tried to sue the developer who made many promises, many who broke RE laws. So, their demands went unmet and they took out their frustrations on all who bought the remaining units at an ABSOLUTE auction. We bought ended up buying at 50 cents on the dollar. Original owners H-A-T-E-D us for buying the units at such a discount, as you can imagine. They booed all of us and even jeered for months if we were outside washing our cars. It was absolutely awful. 
 
At the end of the day, in this situation, the community would not have passed hands from the developer until 80% or so of the units sold. When they did at the absolute auction, the new management company hired by the bank had ordered a reserve study and once deficits were identified the newly appointed HOA Board did a one time special assessment to get things into alignment and bankroll the HOA. 
 
The haranguing from the original homeowners picking at all new homeowners lasted until we left and I kicked the dust off my feet from the dirt in that community. I hated living there and would think twice before ever living in a community where I bought at a bargain. (And I am doing that very thing now in this economy; we just don't live in the properties. I rent them out.) :D 
 
I would do my very best to not get into hiring a lawyer unless I had to do so. The costs escalate fast and there is usually no bite in the law to enforce consequences to those who offend the rules and laws in HOA's. 
 
I would get on the board of your HOA and try to keep everyone calm... and in the back of your mind pray that all properties sell ASAP so you can then sell your unit and get out. Period. 
 
Managing people is a learned skill and when it affects my pocket-book I can get a little excitable.  
 
I wish for you the very best.