No HOA Condo?

[davery5872]

I am thinking of making an offer on a short sale in a complex that has an HOA that is controlled by the developer. A developer bought the apartment complex 3 years ago and began renovating and selling as condos. The bottom fell out of the market before they sold half of the 432 units. They are now renting what they still own, more than half. I'm a little worried about not having a real HOA. I am requesting a copy of the by-laws. What should I be looking for? I'm wondering who is managing the condos in the complex. I also wonder if the developer can "re-convert" these to apartments. If that happens, what happens to the condo owners? Also, who would decide to increase the fees or make assessments? Any other things I should ask?

 

[dee_dub]

In addition to the bylaws, I'd want to know what is in the standard rental agreement and whether it is subject to change, and what control the HOA has over it. The rental agreement is what governs the tenants' behaviour, so it's just as important to you as the HOA. I'm guessing since this was done an an ad-hoc basis the tenants and owners will be mixed together. Make sure you're not paying for a disproportionate share of the common areas.

If you get re-converted, they'll have to buy you out. If they are to have the right to force a buyout, it will be in your sales contract or HOA bylaws, and the price may be specified. I'd be very curious about the balance of power between the HOA, tenants, and developer - will the developer have de facto control of the HOA through sheer ownership of so many units. You can bet the developer won't give up much control over the complex to the HOA. You should have a real estate lawyer to advise you on these issues. Fees will also be specified in the bylaws, but will be subject to change, and again the developer might have ultimate control over that.

 

[seniorjudge]

Q: Any other things I should ask?

A: Yes; you should ask a lawyer who is well-versed in this area of the law to represent you.

 

[Duranie]

I doubt they will get re-converted. Once each unit is owned then they cannot do that unless the homeowners agree. When you look at the bylaws, find out exactly what the rules are as far as renters and non occupied properites. If you plan on living in this condo then the n/o/o units may hurt your value. With no HOA fees who is responsible for upkeep of the property? Can they vote in an HOA at any time? Is there any insurance on the property now?

 

[davery5872]

There is an HOA Fee, in fact it was just raised 14%. I was a little hesitant about not having an independent, nonprofit HOA. But as I was thinking about it, it doesn't really matter. Since the developer, Prestige Builders, owns over half the units, they control the HOA, Vintage Grand Home Owners Association. I am also thinking this HOA has hired the developer as the maint. company, although I am not 100% on this. Is this a possible scenerio? The developer decides they want to reconvert the units to apartments. Since there is not clause in the by-laws concerning this, they raise the fees to a point the owners cannot pay. They have control of the HOA, they can do this. They place liens on unpaid fees and take over those units. Is that possible? I really like the complex and it's in a very good part of town. Not only is the complex governed by it's by-laws, there are two additional sets by-laws concerning this property. One for the larger area, Palmer Ranch, and one for the two complexes surrounding this lake, Crocker's Lake Property Association. We are wishing to buy this to use now and then retire there in ten years. I'm not to concerned about renters, they seem to keep the complex in very good condition.

 

[dee_dub]

A possible hurdle to the developer simply raising fees to force owners out is that, as the owner of x amount of units, they will be harmed to that proportional extent. Tis the sport to have the enginer hoist with his own petard.

You should consult a local real estate lawyer to determine whether it's legally possible.