What if the Developer doesn't disclose details about costs to Property Owners?

[jmacnd]

Jurisdiction

North Dakota

We live in a development about 7 miles north of Bismarck, North Dakota. They have covenants for the two phases of development, and they have established fees for common/green spaces within the development. They raised the rates 66.7% this year with no explanation after keeping them static for 13 years (their mistake, they should have had it go up with inflation estimates if they are drowning in costs, but I digress). People were taken aback about the increase and have gone to the group Facebook page demanding transparency about where the costs are going, as the quality of the common spaces aren't aligning with the costs. Emails have been sent to the developer along with phone calls... and have been met with no response.

The only response we have had was from a realtor who sold all of the properties on the development Facebook page, citing generic reasons for the increase. I'm not sure she's one of the developers out there... so we're confounded about why she's responding. I could be wrong on that though. Are there any ways to legally and professionally request transparency via some sort of financial report from the developer on all of the expenses for the trails and green spaces? We don't know where our money is going, and it's a concern. Feels like a one-sided deal! I am curious about what we can do to "encourage" transparency.

Covenants are here: Covenants | Come on Home to the Ranch

 

[zddoodah]

We live in a development about 7 miles north of Bismarck, North Dakota. They have covenants for the two phases of development, and they have established fees for common/green spaces within the development. They raised the rates 66.7% this year with no explanation after keeping them static for 13 years (their mistake, they should have had it go up with inflation estimates if they are drowning in costs, but I digress).

I think what you mean is the following: You live in a development that is subject to restrictive covenants, which provide for fees for maintenance of common areas, and the "maintenance committee" recently raised the fees. Is that right?

Are there any ways to legally and professionally request transparency via some sort of financial report from the developer on all of the expenses for the trails and green spaces?

I clicked the link and saw a $240 annual green space maintenance fee. If that's the old number, then we're talking about the difference between $20 and $33.33 per month. Not exactly significant.

 

[jmacnd]

I think what you mean is the following: You live in a development that is subject to restrictive covenants, which provide for fees for maintenance of common areas, and the "maintenance committee" recently raised the fees. Is that right?




I clicked the link and saw a $240 annual green space maintenance fee. If that's the old number, then we're talking about the difference between $20 and $33.33 per month. Not exactly significant.

You are correct. If you saw the condition of the green spaces, you would contest the $20/mo. That's beside the point though. My question is this... are we able to compel them to show us where our money is being spent when they aren't forthcoming?

 

[adjusterjack]

North Dakota treats HOAs as Nonprofit Corporations.

Here's a brief summary:

North Dakota HOA Laws & Regulations | Clark Simson Miller Accounting

CSM specializes in financial management and we can help your board of directors with paperworks following the rules & regulations in North Dakota.

clarksimsonmiller.com

And the statute:

https://ndlegis.gov/cencode/t10c33.pdf#nameddest=10-33-01

You may also find "rights" in your purchase contract and in the CC&Rs.

 

[welkin]

North Dakota treats HOAs as Nonprofit Corporations.

From the information thus posted, there is no HOA and there is no Nonprofit Corporation.

The covenant posted is between the developer and the property owner and there is nothing that speaks to a turnover to the property owners (unless in a separate document not posted). That leads me to believe that the developer has not turned the development (or any part of the development) over to the property owners and doesn't intend to despite the fact that phase 1 is complete.

The statute you posted Jack, does not apply. I doubt T4 Ranch Developers, Inc is a Nonprofit.

 

[zddoodah]

One additional thing I noticed is that, in paragraph 32, it says that the covenants are "for the benefit of any and all persons who now may own, or who may hereafter own, property in the . . . Subdivision, and such persons are specifically given the right to enforce these provisions. . . ." It doesn't say that the developer is an intended beneficiary or has standing to enforce.

 

[Foamback]

From the information thus posted, there is no HOA and there is no Nonprofit Corporation.

The covenant posted is between the developer and the property owner and there is nothing that speaks to a turnover to the property owners (unless in a separate document not posted). That leads me to believe that the developer has not turned the development (or any part of the development) over to the property owners and doesn't intend to despite the fact that phase 1 is complete.

Yup. If that is in fact the entire CC&R's, it seems woefully incomplete if it is meant to establish a HOA.

 

[welkin]

One additional thing I noticed is that, in paragraph 32, it says that the covenants are "for the benefit of any and all persons who now may own, or who may hereafter own, property in the . . . Subdivision, and such persons are specifically given the right to enforce these provisions. . . ." It doesn't say that the developer is an intended beneficiary or has standing to enforce.

Yes, I read that also. So, tell me who owns the common areas? My guess would be the developer with no statutes governing how fees are determined or the transparency of the process.

 

[Mark_A]

You should get a copy of the covenants and bylaws of the association. Usually, the bylaws will allow the property owners (including the unsold property still owned by the developer) to vote on who runs the organization. So the developer is usually in control until a majority of the lots have been sold. But often officers of the organization cannot be replaced (via election) until their term of office expires, usually 2 years from when they were appointed (self-appointed by developer). The bylaws or covenants may dictate what kind of financial reporting is required to property owners.

Virtually all developers initially underestimate the fees required to make it look more attractive for people to buy property there. If the developer still has lots to sell, then it is likely they are not raising the rates unless they really need to do that in order to cover their expenses.

 

[Zigner]

You should get a copy of the covenants and bylaws of the association.

Disregard

 

[Mark_A]

Disregard

Sorry, didn't notice the covenants link. Reading the covenants reveals that the developer has the right to create an association of homeowners upon completion of the subdivision for maintenance of the green spaces, and to quitclaim the green space lot(s) to the association. Until then, the developer has complete control, including assessments. If an association run by homeowners is created upon completion of the subdivision, there would normally be bylaws that govern how the association is run, how board members are chosen/elected, and whatever financial reporting requirements are required to be provided to the homeowners.

 

[welkin]

Reading the covenants reveals that the developer has the right to create an association of homeowners upon completion of the subdivision for maintenance of the green spaces, and to quitclaim the green space lot(s) to the association.

Where in the covenants do you find that right?

 

[Mark_A]

Where in the covenants do you find that right?

Item 6. Green Space Lots (they use the term property owners association).

Also see Item 32. Assignment by Developer - Developer may, at its own discretion, assign its oversight and approval duties under these Restrictive Covenants at any time, and any successor or subsequent assignee shall have the powers and duties of the Developer.

So it sounds like the developer will eventually set up an HOA (or property owners association) and turn things over to them for maintenance of green space, and enforcement of covenants, etc, and the HOA will be responsible for assessments to homeowners.

 

[welkin]

Item 6. Green Space Lots (they use the term property owners association).

Also see Item 32. Assignment by Developer - Developer may, at its own discretion, assign its oversight and approval duties under these Restrictive Covenants at any time, and any successor or subsequent assignee shall have the powers and duties of the Developer.

So it sounds like the developer will eventually set up an HOA (or property owners association) and turn things over to them for maintenance of green space, and enforcement of covenants, etc, and the HOA will be responsible for assessments to homeowners.

It does mention in that one sentence of the entire Covenants. But I wouldn't hold my breath about that happening anytime soon. Phase one of construction has already been completed. And I don't think the developer will give up the golden goose where he controls the maintenance costs without any oversite.

 

[Mark_A]

It does mention in that one sentence of the entire Covenants. But I wouldn't hold my breath about that happening anytime soon. Phase one of construction has already been completed. And I don't think the developer will give up the golden goose where he controls the maintenance costs without any oversite.

I wasn't suggesting that the developer would give up control until the development is completed, or nearly completed. The developer wants to make sure that the maintenance is done correctly so the development looks nice and well maintained and will help sell the remaining properties. But the homeowners generally have the same interests once they take over, as they want to maintain their property values. At the same time, the developer usually wants the fees to be reasonable, again to help sell the remaining properties.

I have served on HOA boards a couple of times, and been president of one HOA for a large townhome development where the monthly HOA fees were over $325. There is always a balance between making sure the development is maintained well, and keeping the fees affordable.

For developments like townhomes (where the HOA is responsible for maintaining the exterior of the homes), or ones with pools, tennis courts, etc, there are usually long term maintenance costs (like painting, roof replacements, tennis court or pool refinishing, etc) that the developer does not accurately account for in the original monthly fees, so the fees usually need to be increased once the homeowners take over (if the development has those kinds of common areas that need maintenance). If the monthly fees are not sufficient, then large special assessments may need to be imposed down the road, which will typically cause a lot of ill will among homeowners. But if this development only has some open space that needs maintenance, those kinds of big expenses may not apply.

 

[bhoag]

I think what you mean is the following: You live in a development that is subject to restrictive covenants, which provide for fees for maintenance of common areas, and the "maintenance committee" recently raised the fees. Is that right?




I clicked the link and saw a $240 annual green space maintenance fee. If that's the old number, then we're talking about the difference between $20 and $33.33 per month. Not exactly significant.

We also live in that development, and $400 annually to mow green space twice per year is outragous, and we have not been able to contact anyone as well with our concerns.

 

[bhoag]

We live in a development about 7 miles north of Bismarck, North Dakota. They have covenants for the two phases of development, and they have established fees for common/green spaces within the development. They raised the rates 66.7% this year with no explanation after keeping them static for 13 years (their mistake, they should have had it go up with inflation estimates if they are drowning in costs, but I digress). People were taken aback about the increase and have gone to the group Facebook page demanding transparency about where the costs are going, as the quality of the common spaces aren't aligning with the costs. Emails have been sent to the developer along with phone calls... and have been met with no response.

The only response we have had was from a realtor who sold all of the properties on the development Facebook page, citing generic reasons for the increase. I'm not sure she's one of the developers out there... so we're confounded about why she's responding. I could be wrong on that though. Are there any ways to legally and professionally request transparency via some sort of financial report from the developer on all of the expenses for the trails and green spaces? We don't know where our money is going, and it's a concern. Feels like a one-sided deal! I am curious about what we can do to "encourage" transparency.

Covenants are here: Covenants | Come on Home to the Ranch

We also live in that development, and $400 annually to mow green space twice per year is outragous, and we have not been able to contact anyone as well with our concerns.

 

[zddoodah]

We also live in that development, and $400 annually to mow green space twice per year is outragous, and we have not been able to contact anyone as well with our concerns.

OK, but choose your battles. If you have enough neighbors who feel the same way, perhaps you can all share the cost of an attorney to review the situation, advise you, and take appropriate action.

 

[Mark_A]

We also live in that development, and $400 annually to mow green space twice per year is outrageous, and we have not been able to contact anyone as well with our concerns.

$400 per homeowner? How much is that in total? Do they water the green space? Is there any other utilities like lighting? Do they pay taxes or liability insurance on the green space?

Could you post some photos of the green space?

I would ask the developer when (or if) they expect to turn that space over to the homeowners.