By Deborah Goonan, Independent American Communities
How would you feel if you went out of your way to purchase a home that is NOT governed by a homeowners’ association, only to have an HOA forced upon you a few years later?
That’s exactly what may be happening in Key Largo, a subdivision in Converse, Texas, near San Antonio.
According to an investigative report by KSAT reporter Dillon Collier, dozens of homeowners purchased homes in the past decade, and many have disclosure and mortgage paperwork that indicates their home is not subject to an HOA.
To add to the confusion, other homeowners say they were told about an HOA prior to purchase, even though the organization has been “dormant,” according to the developer, Helvetia Asset Management.
Helvetia Asset Management is owned by three principals: Berry S. Burkhart, CPA, Donald E. Peterson, CPA, and Robert Ripley. The trio acquired the development in 2007, after the original developer, Casa Linda, declared bankruptcy.
In 2013, developers discovered that an engineer, Burton Kahn, who used to manage undeveloped property, had transferred property deeds to himself. That prompted a lawsuit, and ultimately, the deeds were reversed. Reportedly, Helvetia Asset Recovery was awarded $1.7 million in damages in 2014. Fraud charges were then filed against Kahn, but those were dismissed in 2017, pending further investigation.
According to a copy of a letter recently mailed to homeowners in Key Largo, and published by KSAT, during this time, Helvetia never collected assessments from homeowners. But Burkhart, Peterson, and Ripley now claim they had the legal right to collect at least $500 per parcel each year, subject to 10% annual increases.
The letter appears to be an extortion tactic to force an HOA, hoping to entice a majority of homeowners to agree to the following:
to take ownership of a lake (retention pond), and build a trail around it, along with some piers,
to install a playground,
to make some landscape improvements
If homeowners agree to these “improvements,” then the developer will graciously waive ten years’ worth of unpaid HOA assessments.
The letter goes on to announce that the HOA will bill owners $600 for their 2018 annual assessment, beginning June 15 — less than a week from today.
That’s rather presumptuous, especially since it’s not entirely clear that an HOA legally exists.
Given the fact that some owners were provided documentation that their homes were not subject to an HOA, do Helvetia’s corporate owners actually have the legal authority to require anyone in Key Largo to make payments to an HOA?
Understandably, quite a few homeowners are very upset.
Should homeowners agree to common ownership?
What’s going on at Key Largo?
Well, essentially, developer are setting up their HOA trap.
Each and every one of their proposed “improvements” would effectively create common areas that would then require a private HOA to maintain them. Any small benefit that owners may derive from a pond and a playground are more than offset by the cost to maintain and insure these so-called “assets” long into the future.
My suggestion to homeowners: let Bexar County maintain the retention pond. If an HOA is created to take control of the pond, it will eventually end up costing homeowner-members of the HOA tens of thousands of dollars to dredge it, repair shoreline erosion, or maintain the dam that creates the manmade “lake.” As explained many times here on IAC, a retention pond is nothing more than a stormwater management structure, and an expensive liability for HOAs.
And maintaining a dam is also an expensive headache.
Also, don’t bother with a playground, which, if not properly maintained and supervised, becomes a huge legal liability for homeowners. In one case from Las Vegas, a teen was injured by a defective swing set, sued the HOA, and was awarded $20 million, well in excess of the association’s insurance policy.
Most importantly, know that, with common ownership of property, there is no legal obligation for forming an HOA.
Why would homeowners willingly agree to an HOA?
It’s rather clear from the response form provided by the attorney for Helvetia: if a majority of owners vote, and if a majority of those owners agree to an HOA, it will be controlled by the three developers, who will then manage Key Largo’s affairs to their own benefit.
Who, in their right mind, would agree to these conditions?
A little-know fact: home buyers agree to developer-controlled HOAs whenever they buy new construction in a housing project that is still under construction. In almost all cases, home buyers have no idea that’s what they are signing up for, because it isn’t prominently disclosed, nor are the implications explained to future homeowners.
The situation at Key Largo — one where developers are attempting to establish the HOA after they’ve built 90% of properties in the subdivision — sheds light on an important source of dissatisfaction and financial risk for homeowners.
One of the most read posts here on IAC, Homeowners fight HOA developers still in control of communities, explains why property owners might want to avoid putting a developer in charge of their neighborhood.
Key Largo’s developers make an outrageous claim in their letter to homeowners:
The activation of an HOA is generally found to encourage pride in the community, and often translates into improved home values as a result of area upkeep an improvements.
There’s absolutely no scientific proof, no reliable research that proves that the existence of an HOA encourages pride of ownership nor that it improves home values. On the contrary, there’s plenty of anecdotal evidence that HOAs decrease home values in communities where property owners are constantly bickering over selective enforcement of minor aesthetic issues.
Plus, HOA-ville tends to be litigious. Disagreements over how to spend the collective pot of money (HOA assessments or fees), and how to enforce rules and restrictions, regularly breed conflict among neighbors.
And, as well-documented here on this website, there’s absolutely no guarantee that an association-governed community’s board or management will maintain common property to high standards, or even minimal standards.
When the HOA fails to hold up its end of the bargain, homeowners have a single recourse: filing a lawsuit against the association, whose insurance company defends the corporation against liability.
Think it’s easy to sue your HOA? Don’t count on it. (See HOA Lawsuits: A Reality Check.)
Homeowners do not have the option of withholding HOA assessments. Even if the HOA does absolutely nothing in return for those payments, it retains the right to file a lien on an owner’s property when assessments are not paid in full and on time. Furthermore, the HOA can foreclose on the home to collect its money.
Do homeowners really want to be “managed?”
Another tidbit in the KSAT report — a management company, already chosen by the developers, is proposed to collect assessments and oversee the community. First Class Management is going to get a 10% cut of the action, too!
As for the response form that accompanies the letter to homeowners, First Class Management will be collecting these forms. Owners can select the developer as their proxy for a June 14 meeting.
Homeowners should be able to select any other member of the community as their proxy. And response forms, proxies, and mail ballots should be collected by an impartial third party, rather than the developer and management company who will directly benefit from the establishment of an HOA.
After the KSAT report aired, developers withdrew their May 15th letter. But, clearly, they intend to press on with their intent to force an HOA.
Residents near Converse outraged by developers’ move to form HOA
Key Largo homeowners call letter about overdue fees deceptive, a scare tactic
BEXAR COUNTY, Texas – Homeowners in the Key Largo subdivision near Converse have expressed outrage in recent weeks after many of them received a letter informing them that some properties have accrued upwards of $5,000 in past due homeowners’ association fees.
The letter, delivered in mid-May, indicates that developers of the subdivision are willing to waive the reimbursement fees as long as residents approve several property improvement projects.
The fact that the neighborhood even has a homeowners’ association comes as a surprise to many residents, who provided the KSAT 12 Defenders title paperwork showing that their homes were not subject to membership in a homeowners’ association when they purchased their properties.
“I’m not against it, but I’m against how this is set up. This is robbery,” said one woman who bought a home in 2016 but did not receive the letter.
A prearranged interview with KSAT 12 last week with residents both for and against the HOA erupted into shouting matches and Bexar County Sheriff’s Office deputies were eventually called to the neighborhood.
Many residents who spoke with the Defenders are in favor of forming an HOA, but want more control of it.
Other residents said they bought homes in Key Largo in large part because realtors told them it was not part of an HOA.
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