Developer sold the Common Area

[kenham456]

What is the name of your state (only U.S. law)? Washington. Several years ago we bought the model home in a new gated development, 33 five acre lots bordering a river. We were the first home in the development. The flyers for the development, our home and the website picture the 40' X 80' covered building with picnic tables with access to the river and beach and state " Common river frontage for use by all residents" and "Community recreation area with pavilion for year round use". The notarized permit from the County for the development of the LLC state " the Common Area shown is for the benefit of all lot owners as described in the CC&R's for the subdivision". The development now has 22 homes and a new Home owners Association of which the developer is the President. We have learned that the developer sold his home in the development and included the three acre Common area which borders his five acres in the sale. The new owners now claim they own the Picnic area building and property. The President (developer) has agreed to reimburse these new owners for taxes and insurance in exchange for allowing residents to reserve dates to use the area. The developer claims since we still have access from the new owners he has not violated any agreements with the lot owners. Are we stuck? Thank you

 

[FlyingRon]

The HOA needs to get themselves to an attorney. The subdivision plan and the CCRs and all the deeds need to be reviewed as to whether you the community has no rights, a right of use (even thought he property is owned by one of the ohter lot owners), or whether the deeding of the property to a third party was just invalid.

What the HOA board should not be doing is entering into any arrangements with the putative owner until they find out what is really going on.

 

[kenham456]

My Deed of Trust and Title Insurance policy states " the common area shown on page 3 is for the benefit of all lot owners as described in the covenants, conditions and restrictions for (subdivision)".

 

[LdiJ]

My Deed of Trust and Title Insurance policy states " the common area shown on page 3 is for the benefit of all lot owners as described in the covenants, conditions and restrictions for (subdivision)".

The HOA needs an attorney and court action to enforce that. Waving your Deed of Trust and Title Insurance in the developer's face is not going to resolve the issue.

 

[kenham456]

The HOA needs an attorney and court action to enforce that. Waving your Deed of Trust and Title Insurance in the developer's face is not going to resolve the issue.

I know. Thanks.

 

[FlyingRon]

I'm not sure what power a deed of trust has for anything. That's usually a security instrument on your own property to protect the lender. it can't grant ownership you don't have.

 

[kenham456]

I'm not sure what power a deed of trust has for anything. That's usually a security instrument on your own property to protect the lender. it can't grant ownership you don't have.

Would the CC&R's filed with the County when the LLC was formed grant any rights to the property owner?
Thanks again

 

[FlyingRon]

Would the CC&R's filed with the County when the LLC was formed grant any rights to the property owner?
Thanks again

Possibly, but probably not. You'd need to see all the documents. You can put some right to access in the CCR, but if they weren't binding on whoever's property the right is claimed for, it is meaningless. Often the declarant (i.e., the developer of the community) is immune from CCR compliance.

 

[justalayman]

Would the CC&R's filed with the County when the LLC was formed grant any rights to the property owner?
Thanks again

You mention a "new" hoa. Do you mean new as opposed to the original hoa or is this simply a new hoa where there is no hoa created for the development previously. ?

 

[kenham456]

You mention a "new" hoa. Do you mean new as opposed to the original hoa or is this simply a new hoa where there is no hoa created for the development previously. ?

The developer established the HOA after 20 of the 33 lots were sold, about 2 years ago. The development was established in 2006. The original question regarding the Picnic pavilion, I just found that the permit for the construction of the common area building was in the name of the LLC issued in 2005. We bought the spec house in 2006. In 2007 the LLC quitclaimed the common area acreage and pavilion to the developer and his wife for $10. He owned the five acres adjacent to the common area and when he sold his house on that lot, in 2014 he included the common area in the sale. His house (a cabin) worth about 300k sold for 445K because the sales description and pictures included the pavilion. The new owners say the common area is private property. The developer has made an agreement to allow the residents to reserve use of the area with their permission. They have made it clear that they can refuse.
thanks once more.

 

[justalayman]

I'm still not clear on the hoa question but the newest info helps in other ways.

The llc transferring ownership to the developer gives them a claim of ownership of the land. Obviously they have a right to sell it to another as they have and due to that, the new owner has an owners rights to control their property

You need to research your deed to determine whether you have an enforceable right to use the property as promised

You should also research all documents (contracts, plat maps, permits for creation of the development , filings with any gonverentsl entity) to determine if the transfer to the developer was a valid transfer. Depending on all of the facts the llc might not have had a right to transfer ownership to a private individual. If they didn't, the quitclaim deed legally transferred nothing. All a quitclaim deed transfers is whatever rights the grantor holds. It does not purport to actually transfer anything in particular.


You need a lawyer. Given this affects all owners within the development I would suggest you band together and share the cost. It will be much more palatable to any individual owner.


How can the developer reserve any rights for anything? If they have sold their property, which appears to include the land in question, they do not have any rights anymore to do anything with the property they sold.

 

[kenham456]

The original plat map, notarized and dated November 2005 has a handwritten note #6 on the plat map which states "The Common area shown on page 3 is for the benefit of all lot owners as described in the covenants, conditions and restrictions for "LLC". In my Chicago Title Insurance Company statutory Warranty Deed, under Special Exceptions #17 it says "Restrictions shown as a note on the face of the plat as follows: The common area shown on page 3 is for the benefit of all lot owners as described in the covenants, conditions and restriction for "LLC" '.
I will talk to a lawyer, thanks for the help.

 

[justalayman]

It's sounding more and more like the llc might (and I stress might) have been able to transfer ownership but as with many properties with encumbrances on them, the legal owner of the property cannot inhibit others from using the property in some way. It's foolish for the adjacent landowner to knowingly do what he did in such a situstion since they are personally liable to pay taxes on and maintain the property with no right to prevent others from using the prosperity as their rights allow. If it remained common property held by the hoa, the costs associated with the land would be the liability of the hoa and as such, shared by the hoa members.

It may result in the new owner having a suit against the seller although not likely as the encumbrances would be a matter of public record. I suspect he will be really really pissed though.

The owner also has a huge exposure due to others being able to use the property. Hopefully his insurance agent is aware of his exposure and charges him accordingly



As has been suggested by another poster, do not enter into any agreement with the developer or land owner unless your lawyer says it's the way to go.

 

[kenham456]

thank you Flyingron and Justalayman for your help, Great site and I appreciate your guidance.