Unaccountable developers create big problems for condo, homeowner associations

By Deborah Goonan, Independent American Communities


Let’s talk about one of the most glaring unintended consequences of enabling real estate developers to control residential communities large and small: no accountability to housing consumers.

Allow me to explain.

Prior to the 1980s and 1990s, a buyer could purchase a new home from a builder without being forced to “agree” to membership in a mandatory, covenant burdened, deed restricted, association-governed community.

Each new home, even if located in a subdivision, was privately owned and governed by local jurisdictions – the owner paid taxes to counties and municipalities, and these government entities provided all public services. With rare exception,  there was no common ownership of infrastructure such as roads, stormwater ponds and basins, and water or sewer utilities.

Prior to this time, the vast majority of multifamily housing was built for rent, not for purchase. Early condominiums were more likely to be sold as vacation properties than year-round or seasonal residences.

If construction of the home and surrounding subdivision turned out to be shoddy or downright defective, even in the days before the internet and social media, it did not take long for word to spread. Prospective home buyers would be alerted to avoid certain builders or new home neighborhoods.

That would put irresponsible developers and home builders out of business. New builders would then take over and build better homes that people would buy. They would recommend good builders to their family and friends. So good developers and builders would thrive.

When the bulk of new construction was sold as individual lots without mandatory HOAs, local governments had more skin in the game. City inspectors were more likely to make certain that infrastructure and homes were built to function properly and to stand the test of time.

However, by the 1990s, privatization of governance and maintenance by way of association-governed common interest communities became the norm. Local governments reduced or eliminated many public services to these new communities, thereby eliminating public accountability for quality of construction and services.

Put simply, why would a city care about the quality of construction of private infrastructure it does not have to maintain? Why would a city care about ensuring strict adherence to building codes in condominiums with private owners, as opposed to public housing or commercial rental properties?

After all, private owners and consumers have essentially “agreed” to pay to correct whatever defects or problems surface in the future.

And because developers control boards of association-governed communities during construction, and can stack post-turnover boards with their affiliates, homeowners face steep opposition to their attempts to hold a developer, home builder, and construction contractors accountable for poor workmanship or fiscal irresponsibility.

Three common examples follow.

Snow plow (morguefile.com free image)

In this Pennsylvania community, the developer failed to pay for township services as agreed. Since the developer did not pay for snow removal for three years, the Township decided to cut services. Now homeowners must locate and pay for a private snow removal contractor on short notice, even though they have been paying HOA assessments that were supposed to include the cost of snow removal from their streets.

COLLIER Twp. Residents Left Frustrated By Dispute Over Snow Removal

December 13, 2017 at 12:11 pm

COLLIER TOWNSHIP (KDKA) – As we brace for another night of snowfall, one community in Collier Township claims their streets aren’t getting any attention.

“It’s just bad timing.”

That’s what neighbors say about a dispute that popped up over who is responsible for clearing snow from the community.

“It’s going to snow tonight I understand and to have this happening now I think the timing is awful,” Brian Cummings said.

Cummings walked his dog, Bailey, through the Villages of Neville Park Wednesday morning.

He was left frustrated by an email he received the night before which reads in part:

“Please be informed that the township has elected to stop salting and plowing our streets. The Township has notified the H.O.A Board that the developer has not reimbursed the township for the last three years for these services. They made this decision because the developer has not reimbursed for the snow removal and salting of streets.”

Read more (Video):

Collier Twp. Residents Left Frustrated By Dispute Over Snow Removal

A road in need of repair and repaving. (Pixabay.com)

Meanwhile, in North Carolina, a home builder never properly completed the roads for this community, before turning them over – incomplete – to the homeowners. The roads are supposed to be public, but the city will not agree to maintain the roads until they meet NCDOT standards.

The city has already released most of the developer’s bond, and now there is not enough money left to repair poorly constructed roads. Once again, homeowners are stuck paying to correct the problem, and it will cost them $300,000, and the HOA is planning to take out a loan to complete the work.

It will be difficult, if not impossible, to obtain full reimbursement from the builder, who has now moved onto other projects.

With insufficient bond withheld, Cades Cove homeowners faced with correcting deficiencies

By Renee Spencer, Staff Writer (Stateport Pilot)

Wednesday, December 13, 2017 11:58 am

When residents of Cades Cove drive to and from their homes each day, they traverse potholes, sinkholes, crumbling pavement and deteriorating infrastructure.

For nearly two years, they’ve attempted to have the issues addressed. But after the developer, Cardinal Builders, has failed to respond, the homeowners association must now look at taking out a loan to complete the repairs.
Problems at take-over

The Cades Cove Homeowners Association took over the property from the developer on January 1, 2016. Bill Veno, who serves as treasurer for the HOA, explained that when the transfer from Cardinal to the Cades Cove Homeowners Association occurred, some infrastructure improvements had yet to be completed and some defects were already evident.

The neighborhood is within Southport corporate limits, west of Howe Street and south of Robert Ruark Drive.

An “improvement agreement” between the City of Southport and Cardinal Builders, dated May 7, 2012, states:

“Developer shall complete, at developer’s sole cost and expense, all remaining required infrastructure improvements for Cades Cove.”
It further stipulates that “failure of the developer to complete all required improvements in a timely manner in accordance with the city’s ordinances and policies and in accordance with the approved plans, specifications and drawings, such determination to be made by city’s designated engineer, or the failure of the developer to comply with the terms of this agreement or the letter of credit, shall constitute a default hereunder.”


That agreement was signed by Scott Cook, the builder.

Veno explained that despite promising to fix the infrastructure, Cook was “elusive” after the property was transferred to the HOA. The partnership between Cook and the other half of Cardinal Builders has since dissolved and the parties are involved in a lawsuit.

City planner Thomas Lloyd has been working with the residents in Cades Cove. He explained that while the streets are public, they are not “city-maintained streets.”

“When the subdivision was platted they were designated to the public, which means the public can use those streets as a right-of-way,” Lloyd said.

But in order for the city to begin maintaining the streets, Lloyd said the board of aldermen must adopt a resolution stating that the city will be responsible for road maintenance.

“The city has never done that for Cades Cove,” he said.
In order for the city to take over the roads, they must first be brought up to NCDOT standards. That would include fixing the storm drains and repaving the roadways.

Read more:



Random photo of Broken tiles (pixabay.com free image)

Even expensive condominiums are not immune to shoddy construction. Owners of units in this brand new subdivision face extensive repairs to the exterior of their buildings. Mass production homebuilder KB Homes is now making repairs, but homeowners are not confident about the process, and many regret their purchase.

Homeowners have reported other issues, including plumbing leaks.

Million Dollar San Jose Homes Plagued By Falling Tiles Get Repairs

By Len RamirezDecember 12, 2017 at 6:38 pm

SAN JOSE (KPIX 5) — The brand new housing development that’s been falling apart in San Jose is finally getting repairs.

It’s happening in the Communications Hills Promenade, a brand new subdivision in South San Jose.

The repairs aren’t making homeowners feel any better about the situation.

KB Home continues to build new homes at a fast pace on Communications Hill, even as it begins tearing down the exteriors of many homes found to have dangerous, faulty construction.

Workers built three-story platforms around a practically new house. It’s the first of 70 homes in the neighborhood to get an exterior do-over.

Neighbor Michael Clark said, “There’s still going to be a lot of work being done here. They’re going to start tearing stuff down, people are not going to be happy. Look at all these trucks and stuff still here. These homes are done, but they’re not.”

Read more (video):

Million Dollar San Jose Homes Plagued By Falling Tiles Get Repairs

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