Why can’t City help homeowners in developer controlled HOA?

Homeowners in the Pine Grove subdivision in Stockbridge, Georgia are so fed up with their developer-controlled HOA, they lined up to complain to their City Council at a June meeting.

By Deborah Goonan, Independent American Communities


Construction began in the Pine Grove subdivision a few years before the 2008 recession, when the original developer, Knight Builders, declared bankruptcy. According to a report in the Henry Herald, several different real estate investment groups have cycled through Pine Grove in the past eight years.

Silverstone Communities is currently advertising, building, and selling homes in the “tennis and swim community” with starting prices hovering around $200,000.

But many current homeowners are not happy with life in their HOA-governed community.


Homeowners complain to City

Last month, owners lined up at a meeting of Stockbridge City Council to voice their complaints. They objected to paying $400 per year — new owners pay $800 annually — for common area maintenance. The fees are supposed to include operation of a clubhouse, tennis courts, and a community swimming pool.

But all of these common amenities, including the clubhouse, have been closed since 2011. That led one homeowner to accuse Silverstone of “false advertising.”

In addition to closing down the pool and clubhouse, many owners say Silverstone, and developers that came before them, have not been keeping up with general common area maintenance.

Homeowners in attendance at the city’s meeting expected council leaders to do something to make the developer deliver on its promises.

However, city leaders explained that, while they can address maintenance code  issues, they cannot intervene on the dispute with Silverstone. That’s a civil dispute between property owners and their present (and past) developers.


Dozens of code violations

Following the June meeting, city code enforcement reportedly cited Silverstone with 53 code violations. The developer was ordered to repair fencing, handrails and guardrails by July 1.

I was unable to find any update on the status of Silverstone’s code violations, or any further action taken by the city to enforce local codes. But the developer’s website was still selling a “tennis and swim” community in Pine Grove, as of the time of this post.


No homeowner control

Regrettably, homeowners cannot take any direct action to fix the management problems in their community, because they don’t control their Property Owners Association (POA).

You see, Knight Builders never turned over control of Pine Grove POA, because the number of new homes sold had not reached the required threshold for turnover.

In most cases, state law allows developers to control the Owners’ Association until a subdivision is almost completely built and sold to non-affiliated homeowners. It can take many years, even decades, for developer turnover to occur.

In Pine Grove, it appears that, as construction continues, that turnover threshold has still not been met.

That begs the question:

If the city doesn’t enforce local codes, and a developer doesn’t care about impressing new home buyers with an attractive subdivision and usable swimming pool, what can homeowners do?


Developer spends homeowners’ money

Most home buyers don’t think about who will control the HOA/POA when they buy a new home. They assume that their HOA fees will go to someone who will use that their money responsibly.

But when developers control a property or homeowners association board, they control all of the money they collect in HOA fees, with no meaningful limitation on spending decisions.

Specifically, the property owners’ association sets the annual budget, including monthly, annual, or quarterly HOA fees. They contract for, or hire, all of the labor needed to maintain the community.

You might have heard common interest housing industry trade group promote the myth that HOAs and POAs are “democratic” groups, where homeowners freely elect a few of their neighbors to serve on its association’s board.

But, when a developer or real estate investment group owns enough vacant lots, and holds enough voting power to outnumber actual homeowners, the association operates more like corporate oligarchy than a democracy.

That’s the case in Pine Grove and many thousands of other developer-controlled HOAs or POAs in the U.S.


Why can’t city leaders hold developers accountable?

A city (or county) government insists upon issuing permits for community development. And it regularly charges impact fees to real estate developers. Mostly, though, it’s about collecting the fees.

There’s not much serious oversight of the construction process, as evidenced by many reports of defective or shoddy construction. After all, when the future homeowners will be paying for maintenance and repairs by way of a mandatory membership homeowners association, a local government has little incentive to ensure high quality construction.

And the more your local government can shift governance responsibilities to private organizations or groups (such as developer or homeowner controlled HOAs), the less actual work it must do to satisfy taxpayers.

At least that seems to be the mindset among many government leaders in the U.S.


No review of HOA / POA governing documents

Housing consumers should not be surprised that local government also allows attorneys working for a developers to write one-sided Covenants and Restrictions (CC&Rs), Bylaws, and Articles of Incorporation for each new residential housing project or community.

As long as the documents create a mandatory membership association, local government is happy.

No one from local government is required to read or review any HOA governing documents — so-called ‘contractual agreements’— to ensure that the terms are reasonable and fair to consumers and taxpayers.

Nor is there any effort to ensure that the HOA governance model is Constitutional. Therefore, HOAs frequently ignore Constitutional constraints on their power.


Hands-off approach

It’s so much easier for the local government to think of the CC&Rs as a business contract with home buyers — even if it’s severely one-sided in favor of developers.

That way, city leaders can simply allow the developer call all the shots. Your elected council members need not offend what they consider to be deep-pocketed drivers of economic development.

And, let’s be truthful. Politicians generally prefer to take a hands-off approach toward HOA disputes. HOA controversies have a reputation for being complicated, messy, and downright ugly.

Besides, in addition to stretching the local government’s budget, one of the main reasons for force-feeding HOA-governed housing is to make its job easier.  Intervening in HOA disputes certainly doesn’t make for easy work!

That explains why housing consumers are so often left fighting a David vs. Goliath battle against their real estate developer.

But American homeowners should wake up and recognize that local government — through its apathy and cronyism — enables HOA abuse and dysfunction. 

News Source:

Pine Grove residents frustrated over issues in neighborhood
By Joe Adgie joe.adgie@henryherald.com
Jun 25, 2019 Updated Jun 25, 2019



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