Developer Bankrupt But We Have Homes There

fishorski

My company has built six homes in a development and we own more lots there. The developer is filing bankruptcy and is, therefore, not taking care of the common areas of the development.

With all the financial problems going on, I thought maybe someone else has already dealt with this problem and can suggest what we should do.

There are a lot of other homes in the development besides the six that we have built but we don't legally own any of the common areas. We want to make our customers happy and still hope to build homes on the other lots we own.

Any suggestions?

MGSProperties

Ouch , tough spot. Can you collect some monthly fees from HO in order to maintain the common area's?

__________________

fishorski

The HO's are still paying HOA dues to the developer, even though he isn't doing anything with the funds to keep the place up.

Double-A

Band together with the other builders in your boat and start sharing the pain and expense. If you are seen to step up and help the folks that have bought there, then your client's will seem be most assured by your actions and less worried by the developers.

I would suggest you all band together and talk with an attorney and have him write up a little something that explains what the process is the developer is going through and what the likely outcomes are.

If you can hand something that says, "Even though the developer has seen hard times, there is too much invested here for everyone to walk away. Things in the short term might seem confused, but in no time at all, this will all be settled and the bank/creditors will step in to protect their interests. In the meantime, the builders and Realtors (ya, get them to help as well. If they want a 6-20K payday from selling a house there, they can pay to cut the grass too) of (development name here) have pulled together to tend to the maintenance in the mean time." to a potential client and make them feel that this is something that just sometimes happens, but isn't a concern, they will buy. Otherwise, they're going to look elsewhere.

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

fishorski

Thanks for the suggestion. Unfortunately, the only other builder in the development has pulled out. That was a great suggestion, though. To me, the best way to make it through this down turn in the industry is for builders and developers and realtors and sub-contractor to band together wherever possible.

Terry Green

Find out what bank the developer was using to fund the project it is now their develoment they are the newowners thats the way it works in maryland

Kgmz

Who owns the majority of the lots in this development?

The developer or other people (builders and homeowners).

If you and others combined have the majority, you all can take over the HOA and have him pay his share of the HOA fees. Then you can get the things done that need to be done. And as advised before talk to a attorney. And if the bank now holds the deed to the lots that developer owned, then they will have to pay their share of the HOA fees.

And remember the majority rules. So hopefully you and the others hold the majority.

Chris Johnson

If a developer goes belly up and owes HOA fees on lots/units...it's gone, the bank when they take over do not have to pay the delinquent amount.

If the developer is running the HOA (Which I don't know how that happened) the fees paid by the current tenants is placed in an operating account and a reserve account, these are seperate from his day to day business account. Should the developer have used these funds for the HOA in his business he is liable for fraud.

Once the first unit sold and closed escrow a president should have been elected amongst the homeowners, the developer generally holds a majority of the seats on the board until the last lot is sold. The president can oversee what the developer is doing and advise the HOA and it's members of accounts and development.

Something sounds fishy in this ordeal, as a builder in the development it is not your problem, however the homeowners is another story and they will need to have their management company (if they have one other then the developer) review and advise, if not the homeowners need to band together and hire a lawyer.

The developer will also have security posted with the municipality in which they are building, once in bankruptcy the HOA should petition the city/county whoever to complete the common areas as approved by the planning department and have it paid for by the security being held.

__________________
Chris

JustaFramer

What the hell is with the sit in/ love in. Residential is a cutthroat game and not for the light at heart.

I just talked to a guy that is selling 32 lots. He listed the lots at 230k a year ago will take 180 for the lots now for singles or 150k for a four lot minimum package.

I just talked to him briefly but the wheels were spinning wonce I got that info. After I look at them I may just try to needle them to 130k.