Legal Question in Real Estate Law in California
Common Area ownership issues
The original developer of my HOA townhome complex filed bankruptcy and was foreclosed on after completion of most units in the 1st phase. Apparently, the common areas were used as collateral, and were also foreclosed on. Currently, the common areas are on file as being owned by an LLC comprised of the bank officers of the bank that foreclosed on all the affected properties, who also own approximately 44 of the undeveloped lots as a result of the foreclosure. The HOA has been paying for maintenance (pool, clubhouse, insurance, landscaping, etc)and improvements for the last 4-5 years, excepting property tax on the common areas, as well as the past due items (such as a $4000 water bill on the common areas).
Another developer is looking to build-out all the undeveloped lots, but says they can't as long as the HOA does not have the deed to the common property. Is this true, and why?
My overall question, is any of this legal? If not, is there an agency in CA who we can contact to investigate and get the common properties back in the HOA's name? What rights do the resident/developed lot owner have if the LLC tries to make good on any of their periodic threats to restrict access to common areas?
2 Answers from Attorneys
Re: Common Area ownership issues
This is really too complicated a set of issues for you
to get much of a response on a bulletin board.
The answers depend on a number of factors: What do the
CC&Rs say? What were the terms of the original
promissory note and deed of trust the developer gave
to the bank that eventually foreclosed? How did
this new developer that wants to complete the project
come into title on the remaining property? The
California Department of Real Estate might have some answers
for you, but I strongly recommend that you consult with an
attorney, and bring along all of the potentially
relevant documents.
Re: Common Area ownership issues
I suspect the answer may lie, at least partly, in the concept of "common area." Each parcel is probably assigned an undivided fractional interest in the common area. If there are 100 lots and 73 are sold, the developer therefore owns 27 unsold lots and thus has a 27/100ths interest in the common areas, which he can mortgage. Each lot owner has a 1/100th interest in the common area; this interest was (presumably) not mortgaged and thus was not affected by the foreclosure except to the extent that the bank and not the original developer is now the co-owner.
And, I could be wrong. You should have no difficulty finding a local real-estate attorney who will give you a free initial consultation on a matter like this. Also, what are the other co-owners doing? Consult and work together!
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