HOA law loophole leaves some homeowners powerless

Colorado Crossing neighborhood in south Austin. (KXAN Photo)
Colorado Crossing neighborhood in south Austin. (KXAN Photo)

AUSTIN (KXAN) -- New neighborhoods are popping up across Central Texas at a staggering rate. Many of the new neighborhoods have homeowners associations that offer you amenities and help you preserve your home's value. However, a KXAN Investigation uncovered there is a loophole in the Texas law that keeps homeowners from having control of their HOA.

Reinna Ortega and her family live in Bradshaw Crossing in south Austin. The mother of two worries her sons, Jonas and Jason, will get hurt when playing in their neighborhood park. “Sometimes when we come to the park and there will be broken bottles or beer tops, condoms,” says Ortega. All of it left over from people hanging out in the park at night when the park is supposed to be closed. Ortega says her husband was attacked earlier this year by a group of teenagers when he told them they couldn't be there after dark. “As he turns to leave he gets hit on the side of the head with a branch and he goes down."

Ortega and her neighbors turned to their HOA to ask for lighting to improve safety and to keep out vandals at the park but the HOA did nothing and the park still sits cloaked in darkness as homeowners continue to pay their HOA dues.

Robin Callan has lived in another south Austin neighborhood called Colorado Crossing for nearly a decade. Since January 2016 her HOA increased residents' dues by 33 percent to pay for an unfinished pool and amenity center. “We don't have ownership of or control the HOA as homeowners in the community. So in a sense, it's taxation without representation,” explains Callan.

The builder of both neighborhoods, Lennar, controls the HOAs. Both developments have been under construction since 2006. That's because the way state law is currently written, there is no limit to "the development period," which is essentially how long a developer or builder can control an HOA.

Unfinished pool at Colorado Crossing neighborhood in spring of 2017. (Courtesy: Robin Callan)
Unfinished pool at Colorado Crossing neighborhood in spring of 2017. (Courtesy: Robin Callan)

KXAN Investigator Brian Collister caught up with the Lennar representative outside a recent HOA meeting in Bradshaw Crossing to ask why they haven't handed over control to the homeowners.

“Well, because we are still the declarant of the HOA, and that's how they are designed," says Tara Thomason with Lennar.

“Calling it a homeowners association is kind of misleading,” says real estate attorney Bill Davis who helps homeowners sue their HOAs and has been involved in helping pass HOA laws to protect homeowners. Davis says often neighborhoods are still in the development period, and many people who live there don't even realize it. “The restrictive covenants and the HOA are primarily used to shift control away from the homeowners into an entity that the developer controls," explains Davis.

Developers and home builders are represented by the Texas Association of Builders which says the open-ended development period in the law is to protect their investment. “It makes sense that a lender or an investor is going to want to make sure that the vision they bought in to when they made that investment comes to fruition,” says Susan Wright who heads up the group's property owners association task force. “The only way to ensure that is if the developer is in charge of that association."

In most cases, developers usually transfer the HOA over to residents only after they complete the entire project.

The lack of local control is frustrating to some homeowners. “It makes me not want to pay my dues. You just let it sit in the back of your mind and fester and you just get angrier and angrier. It's made a lot of us very unhappy.” says Ortega.

There is no state agency that oversees or regulates homeowners associations. State Rep. Eddie Rodriguez's district covers the Bradshaw and Colorado Crossing neighborhoods. While limiting the length of the development period is a long shot in the legislature, Rodriguez thinks a more realistic goal is more transparency. "When a constituent calls me, and I have had constituents call about this, not a hoard of them but a number of them have, I take it very seriously," says Rodriguez. "So I will take a look at it internally, here in my office, see what we can do. Understand what the current law is, see where there might be some ability to close some of these loopholes if there are any."

It's In the Fine Print

Before you buy your home, make sure you check the fine print to determine whether or not your neighborhood is controlled by a developer or builder. In your HOA Bylaws, look for the word "declarant" —that's the term for the developer or builder. If the declarant has the right to appoint and control the HOA board, then you live in one of these neighborhoods. Homeowners can be appointed to the board by the declarant, but typically they have either no voting rights or the declarant has the majority of votes on the board.

The documentation given to you at the time you purchased your home should include bylaws for the homeowner or property owners association and the covenants, conditions and restrictions.

Below are examples from Bradshaw Crossing of the terms in those documents (highlighted) that show whether or not the developer or builder controls your association:

Section 2.9. Declarant: "Declarant" shall mean Lennar Buffington Zachary Scott, L.P., a Texas limited partnership, and its duly authorized representatives or their successors or assigns; provided that any assignment of the rights of Declarant must be expressly set forth in writing and the mere conveyance of a portion of the Property without written assignment of the rights of Declarant shall not be sufficient to constitute an assignment of the rights of Declarant hereunder. BOARD OF DIRECTORS - Section 4.1. Authority; Number of Directors: (a) The Affairs of the Association shall be governed by a Board of Directors. The number of Directors shall be fixed by the Board of Directors from time to time. The initial Directors shall be three (3) in number and shall be those Directors named in the Certificate. The initial Directors shall serve until their successors are elected and qualified. Except as provided in the Declaration and in Sections 4.1)b) and 4.1(c) below, Declarant shall have the absolute right to appoint and remove members of the Board of Directors.
Bylaws of Bradshaw Crossing Master Community.

Lennar's Response

Communities with a homeowners association have various rules and requirements that are described in recorded deed restrictions.

As is customary in Texas and throughout the United States, the deed restrictions allow the developer to control operation and administration of the homeowners association. This control is necessary to ensure that the project is completed in accordance with the developer's plans, and to allow the builder to complete homes in accordance with development requirements and their customer's expectations. The developer will often retain control of the homeowners association until the project is complete or near completion. Lennar is the developer of Bradshaw Crossing and Colorado Crossing and, at the present time, controls the homeowners association for each community. Residents will be elected to each association board as required by the deed restrictions and Texas law.

We understand that some residents have expressed frustration regarding the completion of certain amenities in each community. Unfortunately, we have experienced construction delays due to factors beyond our control. We would like to make it clear that all amenities designed for each project will be completed as soon as possible and, upon completion, provided to community residents.

Meetings are held with residents, both formally and informally, to solicit and receive feedback on issues associated with each homeowner association and the development. To the extent any resident has a question concerning their association, the development, or community amenities, each community is managed by a professional third-party community association manager. We encourage residents with questions to contact their association manager. If the manager is unable to answer or resolve a question, we would be pleased to discuss the matter directly with the resident.

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