Question:
The builder was the declarant and there have been no HOA meetings (per the by-lawys) until the last townhome was sold and it transitioned to the homeowners. We just elected a board and found out the builder told the property management company to no send notices/collect fees (late assessments, improper renting, etc.), nor did he add reserves as the community was built out. He did not have a reserve study done, not even a community in progress/not yet built study or in-progress study. He told the property management company to not replace landscaping in common areas (per by laws would be covered in the lawn maintenance contract). The HOA has been billed and paid for electricity for the model (which is now owned and rented by the builder). Does the board/HOA have any recourse? This is over and above the individual homeowner issues with the builder, refusing to correct issues due to the improper/incorrect design and construction (water, foundation, etc.).
– Tracy
Answer:
Hi Tracy,
The HOA board can take several steps to address the builder’s mismanagement during the declarant-controlled period. First, the board should review the governing documents to understand the builder’s responsibilities and obligations. Next, hiring a third-party auditor to conduct a thorough financial review is essential to uncover any irregularities, like improper use of HOA funds for the builder’s model home or failure to collect fees and fund reserves. A reserve study should also be conducted to assess the financial needs of the community moving forward.
If the builder failed to meet their fiduciary responsibilities, such as maintaining common areas or collecting assessments, the board could pursue legal action for breach of fiduciary duty. In addition, filing a formal complaint with the Virginia Common Interest Community Ombudsman may prompt an investigation into the builder’s actions. The board should also examine the management company’s role during this period and determine whether they acted appropriately or share liability for any lapses in duty.
Disclaimer: We are not lawyers. The information provided on this website does not constitute legal advice.
