Condo Association Management Blog

Your state condominium act will give you your answer. Download it and find the applicable portion that relates to transfer from developer to council of unit owners.

Maybe an inexpensive consult with an attorney will tell you what your options are, but don't expect much if anything. I doubt the bank will front money that the bankrupt developer should have.  
 
 
 
As a Community Association Manager, I'm watching a similar scenario play out here in Florida.  
 
 
 
How many of the 8 units are sold or owner occupied ? You and your fellow homeowners getting control of the Association may be in your best interest so you can move forward.

Except that you have 8 units and we have more, we would have thought someone from our HOA wrote this letter. We just passed the 3 year date when turnover from the bank/declarant is supposed to occur We have the exact same problems. In addition to a siding recall, we have no insulation in many parts of the walls and the roof. Looking at the law will do little good if the bank controls the HOA lawyer and they do n want to follow the law. We asked the bank president/HOA board president to find out from the HOA lawyer if the common elements had to be turned over in good repair and if we need a reserve study now ( the law says it is needed every 3 years). We also asked if the bank needs to put in the working capital fund contribution for all unsold units. The board refused to give the HOA lawyer our questions to answer and then canceled the July board meeting. There is a turnover meeting set for September 21. Owners are relying on information given by the manager, who is not an attorney. to see that laws are followed during the turnover process.. A group of 8 already tried to sue the developer and was forced to quit because of mounting legal fees. Now no one will pay for any more lawyers. We have been told by our lawyer that the bank “ has deep pockets” so even if tried to do something on our own, it would do no good.

Even if the builder/declarant didn't go bellyup and it was time for him to transition to the homeowners, the assn might be in the same condition. Unless there are state laws requiring the builder/declarant to fund a reserve account there most likely wouldn't be one anyhow. So, the long and short of it is that the assn may not be in any better -- or worse -- condition than if the builder/declarant were getting reading to turn it over to the members. I would suggest finding a good HOA attorney to find out exactly what your options are. But, remember if a lawsuit is suggested the money will come from the owners of those 8 units. IMO, the money could be better spent by putting it into the assn's coffers. There are no guarantees that you would win a lawsuit, especially against a big bank. 
 
I don't know what state your in, but I wouldn't bank on any state laws addressing transition or even reserve accounts -- that is even if your state has any condo laws at all. Also, there are very few states that even have a state agency to oversee HOAs. All this means that if the bank isn't managing the assn properly there is nothing to do but take them to court and all on your own dime which can be extremely expensive. With only 8 homeowners to foot the bill it certainly isn't the way you want to go.

The first step the owners should undertake IMMEDIATELY is to contact the local housing office regarding building code violations. Our consulting service has successfully assisted some projects in obtaining coverage through the construction bonds initially required by the government. Such items as missing insulation mentioned in a response may be addressed by building inspection requirements. 
 
However, the local governmental agency may not have enforced any obligation of the developer on the bank. Reserve funding comes from the owners not the bank. If repairs are not major construction items that the building code addresses, the owners can begin to undertake resolving funding "going forward" and address the reserve funding at the same time. One item to be addressed soon should be a Reserve Study that will assist the owners in determining if repairs are minor or so sufficient as to warrant spending owner funds in any type of litigation.  
 
The initial inquiry appears to be best resolved by the owners taking an aggressive approach to learning the obligations of condo ownership and leadership. The Community Associations Institute offers courses and learning materials to assist.  
 
As to the responder with missing insulation, etc., that condo appears to have possible building code violations. Those owners should contact the local housing department and the building permit office to determine if bonds are still in place to ensure the necessary repairs for the condominium.  
 
Best wishes to both of your condos.

Contact your local TV station -see if they will run something on the local news.

Thanks to all for the responses. To answer some of the questions, we live in Illinois and 6 of the 8 are owner occupied. The other two are rented out by the bank. I was under the assumption that they would transition over to an association when all the units were filled but that doesn't seem to be the case. I think our best course of action is to try to get this transition to happen immediately to begin to fund our own reserve.

Colin, 
 
 
 
I agree! Take a good look at your CCRs. There should be an article that tells you when transition should occur. Usually it's when a % of the units have been sold. With 6 of the 8 units owner occupied, you may have met that %. The bank must abide by the CCRs the same as the builder/declarant would have to. Also look for an article in your CCRs which would tell you if the declarant must pay assessments on unsold units. Once the members do take over, the bank may be liable for assessments on the two units they are renting.

I WANT TO SAY THANK YOU TO ALL. I OWN 3 CONDOS ON THE GULF COAST. 
 
THIS WEB SITE AND WRITER COMMENTS  
 
IS GREAT FOR ALL CONDO OWNERS EDUCATION 
 
THANKS AGAIN CAROLYN