By Deborah Goonan, Indepdent American Communities
Five homeowners in a Laredo, Texas, gated community are suing the developer and his family members, who continue to control boards of directors for two homeowners associations governing the planned common interest community since 1992.
Attorney Doanh “Zone” T. Nguyen, Lopez Peterson, PLLC, of Laredo, filed the lawsuit in Webb County on behalf of the homeowners last week.
In their third amended complaint, homeowners Guillermo Castro Jr., Petra Castro, Andres Perez, Vanessa Perez, and Pedro Ballesteros allege misconduct and conflicts of interest by La Bota’s developer Albert F. Muller III, and affiliates and family members Greg Ebe, Virginia Muller, and Alber Muller Sr.
Two HOAs serve the community: La Bota Ranch Owners Association, Inc., and La Bota Property Owners Association, Inc., which serves the Cardinal Creek section of the Ranch only.
Developer conflicts of interest?
The four named defendants serve on both HOA boards. Neither HOA has ever held an annual meeting to allow homeowners to elect their own board members.
Homeowners say that, beginning in 2012, the Muller-controlled board created a subsidiary company to lease the community’s private streets, gated entry system, and amenities to the La Bota Ranch HOA. The annual cost of this lease exceeded $77,000, and developers added these costs to regular HOA assessments.
When homeowners bought into La Bota Ranch, they believed the a homeowner-controlled HOA would eventually own common property, not lease it.
The lawsuit also alleges that the Muller board entered into a lease agreement to pump water to homes governed by both HOAs. However, the lease requires HOAs to pay to supply water to Muller family personal residences, none or which are part of either HOA.
Other budget increases
This year’s budget also includes a 47% increase of the management budget. RealManage oversees operations at La Bota Ranch, according to homeowner Vanessa Perez.
HOA assessments increased significantly in the past few years under the developer controlled boards, as detailed in the lawsuit:
Dues for the LA BOTA RANCH OWNERS ASSOCIATION, INC. jumped to $2,268.52 from $1,328.28, annually. Dues for the LA BOTA PROPERTY OWNERS ASSOCIATION, INC. increased to $2,600.00 from $1,651.48, annually.
According to the complaint, La Bota Ranch community now has an annual budget of more than $1 million. However, the steep increase in HOA dues caused some owners to fall behind on their payments. The HOA boards have allowed bad debts to rise to “$80,000 to $100,000” — 8 – 10% of the annual budget.
According to an article in Laredo Morning Times, the HOA filed liens and lawsuits against 65 homeowners.
Will developer control ever end?
With only 13 lots left to develop, homeowners say that the period of Declarant (developer) control should have ended years ago.
Instead, the Muller board used their weighted voting interests to amend La Bota Ranch’s governing documents, extending the control period to January 1, 2050.
Plaintiff homeowners ask the court to declare an end to developer control. Owners also want access to financial records and an audit of those records. The petition also asks the court to reimburse the homeowners for excessive or unnecessary costs billed by both HOAs, and to pay their attorney fees.
According to Perez, a jury trial is scheduled for March 25, 2019.
Tensions rise as lawsuit against HOAs drags on
Homeowners remain unhappy as HOAs increase association dues
By Julia Wallace LAREDO MORNING TIMES
Amid pending litigation and a growing fight between developers and homeowners, both of the homeowners associations for La Bota Ranch have again raised annual dues for their residents. The HOAs are still controlled by the original landowners and developers of the subdivision, not the homeowners.
These are two of the central reasons why La Bota residents filed a lawsuit against the developers in the first place, in June 2017. In 2016, their HOA dues increased by nearly $1,000 year over year, from $1,328 to $2,268 and from $1,651 to $2,600.
Commentary: Not an isolated HOA problem
I often hear from homeowners of common interest communities with developer-controlled HOAs.
They describe a pattern of exploitation. Developer-appointed boards commonly arrange self-serving contracts, and double or triple assessments and fees with a few years. When homeowners question rising costs, the HOA usually prevents access to financial records.
Quite commonly, board members use their weighted voting power to change the terms of the governing document “contracts” without advance notice, and without any vote of membership.
Similar control issues also put homeowners at a disadvantage with Development Districts. During the initial years of active construction, a developer-controlled Special District board can take on additional bond debt to finance new construction. Then developers pass on costs of land development to future homeowners in the form of fees paid on top of regular property taxes.
That’s why it’s dishonest for the industry trade groups to claim that HOAs, and common interest communities in general, democratically elect their leaders.
The fact is, during years or decades of active construction, developers control the governing bodies of most planned communities. Developer-controlled HOA or District boards have the power to make all financial decisions without input from homeowners.
At best, developer control is a benevolent dictatorship. More likely, it’s a corporate/fascist dictatorship.
And, it’s not widely publicized, but family owned developer controlled residential communities are fairly common in the U.S.
One other important point to consider —
if and when a developer gives up control of a community to its homeowners, residents still expect someone else to take care of business and maintenance.
Few homeowners choose to take an active role in leading and managing their community by serving on HOA or District boards. And, unfortunately, some who do serve on the HOA board have ties to the orignal developer. Others may use their power to advance their own personal agendas.
Too much power
In the U.S., developers of common interest communities are entitled to extensive Declarant powers. They often hold a majority of voting interests and political clout until new construction has ended, or nearly ended.
Developer control can last several years or even decades. During that time, homeowners have little to no control over how their money is spent, and how rules are enacted or enforced. In short, homeowners have almost no control over the ultimate fate of their communities.
Read the lawsuit: