Covenants, Restrictions, and By-Laws…Oh, My! (Huntsville: sale, HOA, mortgage)

[Diffy Q]

We are relocating to Huntsville next year so I have been house hunting. I keep encountering subdivisions that have covenants, restriction, and by-laws that are very different from those found here in Northern Virginia. It appears as if they are being set up in such a way as to provide a perpetual income stream to the developer/builder (Declarant). Some of the things that have sent up a red flag include:

1) Declarant has the right to make changes to these documents at any time.
2) Declarant gets to choose who sits on the HOA board.
3) Declarant has veto rights over all HOA board decisions.
4) Declarant and/or any of his companies can be compensated from HOA funds.
5) Declarant can allow another of his subdivisions to use the amenities.
6) Declarant can do all of the above and more until he no longer owns any property in the subdivision or some arbitrary period of time decided by him.

While this may be legal in Alabama, it is certainly unconscionable. It reminds me of the feudal system in medieval England when the lords of the realm were the landowners. They allowed the common people to live on their land in exchange for providing crops/services that were needed by the lord for his manor. Fast forward to modern day Alabama and you will find that many homeowners now have two lords – their mortgage company and their developer/builder. I am not really interested in being a serf.

Whatever happened to having rules solely to protect property values? When did it become about protecting a developer/builder's bottom line?

[financelife]

I wouldn't move there because those covenants sound more like protecting the developer versus letting the homeowners protect their property values.

[ionlife]

I am living in a subdivision currently trying to separate as an entity, but we're at an impasse because of these rights listed in the HOA Covenants and Restrictions which reserve all the declarant's rights to do the things listed in this post. It's frustrating and upsetting, and I know some have said we should have read them first, but we did. Much of what is in the document bylaws is not clearly spelled out. I know I asked where the amenities issue was in the doc, and it was buried somewhere in an article with a lot of legalese--this was pointed out by a lawyer in our community.

I believe most of the developers overextended themselves and now want to cover their behinds by using our communities to help them. For instance, our declarant said he "had to reserve the right to sell our amenities to other potential buyers in his other developments so he could make the sale in this economy." Basically, he will do anything to sell a house. ANYTHING. So now I am concerned that we will run into some of the issues the county developments are dealing with regarding architectural guidelines. What's to stop the declarant from changing the guideline set forth in our C&R docs so he can sell a house "in this economy?"

The builders saw big dollar signs when the BRAC was announced. The realtors (sorry to those of you who are not part of the problem) went to the builders and said, "we don't have enough inventory, you need to push dirt and build us houses to sell." The builders saw big bucks coming down here from NoVA from relocating homeowners. They build a lot of houses that were at a high price point. Then the people came, and they were like, HUH??? If they came 2-3 yrs ago, they got more bang for their bucks. But not now.

To add to the problem, only 10-15% are willing to relocate to this area--and then the economy went bust! No one up there that is not an original owner can sell their house for the profit they need to invest in the big dog houses built here. It's insane. The market isn't there. We were lucky in that we sold before the housing market collapsed. And we were original owners. But others were not so lucky.

I also think that the developers out in the county build these humungous houses thinking NoVA would want the houses without checking the schools out. Most NoVA with kids do check the schools out carefully. We certainly did. We would not sacrifice our daughter's education (which was top in the nation and she was part of a gifted magnet program) for a bigger, better house. We had to compromise.

Of course now, we are still in a pickle with this HOA doc situation. What really rankles is I believe the bylaws allowing the declarant the option to sell our amenities and veto our decision were not posted on the website (and this was confirmed by another resident) until February (after the community successfully forced him to hold the overpriced mortgage on his pool/clubhouse). I often wonder if we're being punished for that win.

It's sickening, but our only consolation is that we're not the only ones in this boat and that some of the other communities are in even worse situations than we are.

We are paying for their overextension of their resources.

[ionlife]

Originally Posted by financelife

I wouldn't move there because those covenants sound more like protecting the developer versus letting the homeowners protect their property values.

It's not just one subdivision, it's all new developments. I went to several new development websites and without exception, they all carried similar rights. It's like they were cut and pasted from one builder to the next. I wonder how many of them used the same law offices or if the lawyers all got together to figure out a way to make this happen as well.

It's the good ol' boy network in action.

My advice to the poster is to stick to established neighborhoods where the HOA C&R are totally in the community's hands. Or wait this issue out and see if we who are in the middle of this nightmare can see it resolved in a positive manner--thus releasing her to seek houses in newer developments.

[Diffy Q]

Wow! What subdivision do you live in? I have read through at least six C&R's, maybe more. They have all been new/newer subdivisions. They are eerily similar. Some were prepared by the same attorney. Made me wonder if they were sitting around at their builder association meeting comparing notes.

Here, these documents are given to the potential buyer at contract signing. You don't even have to ask for them or search through public records on the county website. They are the first contingency for buyers. You have 72 hours to review them. If there is anything in there at all that you do not like, you are free to walk away from your offer. No questions asked.

I have heard tales of peole in Alabama not getting these documents until they sit down at the closing table. Most people don't even read their deed of trust. They just sign, hand over a check, and receive a set of keys. This situation is definitely not in favor of the buyer.

You are right about maybe avoiding new developments. Thank you for the suggestion.

[vakinderegg]

Diffy Q.... We lived in Northern Virgina too...Springfield. Our HOA was a long established one.We voted for our board and we had lots of input on our HOA decisions.We moved to Hampton Cove where the HOA is a long established community based HOA . The developers are not on the board. Have you looked at moving to HC? Lots of folks here from Northern Virginia!

[Diffy Q]

I will do that. You would think that the developer/builder received enough compensation from the sale of the lot and/or house. To resort to milking an HOA is too much to comprehend.

[DvlsAdvc8]

Even in VA, it was not uncommon for the developer to have full control until a development was built out. There was ordinarily a catch-all line that said the association has no authority/power until the rights of the developer end and specifying the requirements to terminate those rights.

I agree though, C&R's were def more upfront in VA.

[Diffy Q]

DvlsAdvc8 - You may be right, but I haven't heard of any NoVa subdivisions where there was a problem with the developer/builder trying to stay on. It may be that their motives for staying were not based on financial need. Let's hope it was to ensure they left behind a really nice property. One that they could look back on with pride. I am sure it would have been a hot button issue if there had been a problem. Folks here know the power of the media when they have a problem like this. Did you ever see "7 On Your Side"?

[ionlife]

Originally Posted by DvlsAdvc8

Even in VA, it was not uncommon for the developer to have full control until a development was built out. There was ordinarily a catch-all line that said the association has no authority/power until the rights of the developer end and specifying the requirements to terminate those rights.

I agree though, C&R's were def more upfront in VA.

Well I have no problem with waiting for a build out, or a minimum of years they think will take to completion, but 10-15 years??? And selling amenities to non members of the community?

Our transfer of power in our new sub was a lot more clear cut. And we received the HOA docs BEFORE closing.

Here, we didn't receive anything at closing, nor would we have had time to review the 47 pages in the time allotted.