DRE and contract re: original Condo fees

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Submitted by bzribee on January 1, 2007 - 9:58pm

My cousin, an L.A. builder, tells me that it is illegal for a builder to change the HOA fees that are on the original CCR's signed by the builder and the Department of Real Estate. In other words, when I read the CCR's for La Boheme (new complex in North Park--DR Horton), it stated that the HOA fees for my unit would be $225. When I work with the sales office and loan person, the monthly fees are $380. I was told by a sales agent that this is because "things cost more than expected".

The cuz recommends that I write the builder a NOT concillatory letter, which I should Cc to the City , The Department of Real Estate, Union-Trib, etc. Or threaten to?

He also recommended that I include my concern that the management company told me I needed proof of a $1 million dollar insurance policy in order to move in, non-negotiable, then lowered to $300,000. Again, I cannot find this anywhere in the documents I've gotten and it seemed like a power play as the agent changed the numbers. (BTW, I do have renter's insurance so I am not opposed to getting additional insurance--it was the insistence, even though my possessions are minimal and I won't be using a moving company...)

Any thoughts on the above three isssues: change in fees, change in "move-in" requirments, and should I write this letter?

Cuz says that the builders want owners and don't want complaints, especially the way the market is now.

Thanks for thoughts.

Submitted by 4plexowner on January 2, 2007 - 8:51pm.

DRE only gets involved for 5 unit and larger complexes.

Once the original CCR and bylaws are recorded, the HOA can do whatever they want to the HOA fees as long as they follow legal guidelines for holding an HOA meeting.

Until the first unit sells, the builder/developer IS the HOA so even if the CCR / bylaws said that HOA fee is $225, the HOA (builder/developer) could hold an HOA meeting and vote to increase HOA fee to $380.

If you have a legal issue with the HOA fee, which I doubt, it would be that the fee increase was not voted on at a proper HOA meeting. You might ask for the HOA minutes from the meeting where the fee was increased - you should have access to these as a unit owner.

I converted a 4 unit complex to condos and never had to say what the HOA fee would be - it is not listed in either the CCR or bylaws (again, 4 units vs 5+ so no DRE involvement). During the escrow process I told the buyers what the HOA fee would be but I could have changed it prior to them closing escrow because I was the only HOA member.

Not sure about the insurance. Your lender should not have closed your loan without seeing documentation showing that the HOA had enough insurance on the overall property. Your lender should also have required that you personally had enough insurance to cover the non-HOA portion of the property (ie, your unit). If your loan closed, you should have enough insurance - it isn't unreasonable for the management company to ask to see your insurance policy although they should know that you couldn't have obtained a loan without it.

Submitted by bzribee on January 2, 2007 - 10:10pm.

Thank you, 4plex--this is very clear and helpful. There are 224 units and I have not closed yet. I appreciate the time you took. bzribee

Submitted by 4plexowner on January 3, 2007 - 6:52am.

If you haven't closed yet RUN don't walk away from your purchase. If you have to give up your deposit, do so - take a small hit now or a huge hit later.

Condos values are going to drop significantly as more and more condos come online downtown and throughout San Diego.

When I am analyzing where San Diego prices are headed I look at three categories of property: trash, decent, premium.

ALL condos fall into the 'trash' category and I am expecting a 50-60% decline for them.

Not to mention that your current HOA fees are only going to go up from here.

Submitted by bzribee on January 3, 2007 - 10:05pm.

Hmmm. Pretty strong opinions : ) Actually, I do feel the HOA's will get higher and make it very hard to re-sell should I want to. They are already 33% of my total monthly payment, should I buy!

I didn't mention (I did on another thread) that I would be coming in under an
affordable program, and so the cost of ownership to me is much more reasonable, BUT even so, I do have many, many reservations. I"m holding out on deciding until I can go to a workshop the city puts on for affordable program homebuyers. I want to know the whole picture, which I suspect won't look much better.

I'm very lucky that under the terms of this program, I don't have to decide until 3 days after the workshop--with no loss of escrow. So I have time to explore, question, compare and then decide. Doesn't look good--I agree with you and the other bloggers on this site. If I want a nicer place, I can save a lot by just fixing up my (VERY old) apartment...

Thanks again for taking the time to respond. I'm listening.


Submitted by nsdrltr on January 3, 2007 - 11:36pm.

Your L.A. builder cousin is CORRECT. However, the H.O.A. fees would be shown in the Public Report, which MUST BE DISCLOSED to the buyer and cannot be arbitrarily changed by the builder. From the DRE website:

"Before marketing new subdivisions in California, subdividers must obtain a public report from the DRE. Public reports contain information of vital importance to prospective buyers including covenant, conditions and restrictions which govern the use of property, costs and assessments for maintaining homeowners' associations and common areas, and other material disclosures."

"After the subdivider conveys the last remaining lot/unit in the subdivision, the DRE's oversight ends and the board of directors of the homeowners association operates the subdivision."

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