This is the polite version of the horror
story, created by some homeowners in Eagles Reserve, who are obviously
careful not to be sued again.
You have definitely heard the industry
spin of mandated properties protecting property values? Here is a story,
where people followed the American dream, bought a home for their families,
paid the mortgage, taxes, homeowners association dues and everything else
expected from them. No violations, no fines - no nothing! And it seems
nobody was disgruntled neither, until they got served with the letters
for special assessments by a court-appointed receiver.
But nevertheless - it seems that a lot
of people are losing their homes. Just read it - and imagine it could be
you?
Eagles
Reserve Association - Nature Watch |
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Executive Summary
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What has Gone Wrong in Our Community?
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Implications for Other Communities
in the State of Florida
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Our Community Needs Help
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Nature’s Watch is a community of 182 homeowners
in Pinellas County, Florida managed by the Eagles Reserve Homeowners Association.
The community consists of villas and town homes that were purchased from
the developer at a price range of $125,000 - $240,000 (with the exception
of a few double units) between 1992 and 1998.
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ln 1992 the first six buildings or 24 homes
began to have significant water damage. At the time the problems
were identified, the developer had full control of the homeowner’s association.
The developer ignored many requests to fix the damages and in 1998 turned
the homeowners association and the problems over to the community.
Without resolution from the developer, the homeowners in the first six
buildings obtained legal counsel and sued the homeowner’s association to
fix their homes.
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ln July 2001, Judge Fred L. Bryson Jr. in
the Circuit Court of the 6. Judicial Circuit for Pinellas County ruled
that the homeowner’s association was responsible to fix the problems in
the first six buildings. The basis of his ruling was that, according
to his interpretation, the homeowners’ association is responsible for the
maintenance of the exterior of the buildings. He defined the exterior
of the buildings to be the inside paint outwards. Because of the
division in the community caused by the lack of clarity in the documents,
Judge Bryson appointed a receiver to replace the Board of the homeowner’s
association and to manage the reconstruction project.
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Because the homeowner’s association has never
had a master insurance policy to cover the exteriors of the buildings,
the reconstruction is being funded through assessments to the individual
homeowners. Neighbors are paying to rebuild others’ homes while many homeowners
have filed claims for collapse clause with their individual insurance carriers
and have received payments ranging from approximately $17,000 - $140,000.
Because the association does not have insurable interest in the individual
homes, the association has no legal means to collect these insurance payments.
While many homeowners will be losing their homes through foreclosures,
others will be unjustly benefiting from the situation.
In addition to bad construction, the homeowners
are now dealing with mismanagement of the project. The court appointed
receiver has stated that he does not have the experience managing construction
projects of this magnitude and complexity. The receiver has not estimated
a total project budget and simply assesses the community when the funds
from the previous assessment run out. To date each homeowner has
been assessed $28,000 and total assessments are estimated to be in excess
of $80,000 per homeowner. This will be a total reconstruction cost
of 16 million dollars. All of this being managed on a time and materials
basis and significantly over budget from the initial engineering estimates.
Since the first assessment of $10,000 in
the Spring of 2002, 10 homes are in the process of foreclosure and 1 is
in bankruptcy. In September of 2002, the homeowners received a notice
of our next assessment of $14,000. Each family was only given 4 days
written notice to pay $4,000 of the assessment with the remaining $10,000
due in equal installments to be complete by January, 1, 2003. In
summary, the assessments while under receiver management have been the
following:
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March 1, 2002 $ 3,333.33
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April 1, 2002 $ 3,333.33
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May 1, 2002 $ 3,333.33
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September 25, 2002 $ 4,000.00
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November 1, 2002 $ 3,333.33
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December 1, 2002 $ 3,333.33
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January 1, 2003 $ 3,333.33
At this rate, we believe many additional families
in our community will lose their homes.
Even further compounding the community’s
problems, after spending $2,000,000 reconstructing the first 6 buildings
or 24 homes, air quality tests indicate and confirm the presence of Penicillium,
Aspergillus and Stachybotrys mold. Further testing of other units
in the development are forthcoming.
With so many possible foreclosures, how
will the community pay to complete the project? Will the rest of
the community members be forced to pay the share of those who can not pay?
It is unlikely that the banks will be able to sell the foreclosed properties
to cover the outstanding mortgages because the market values have fallen
below what some homeowners still owe on their property. There will be no
more funds after the sale of the foreclosed homes for the assessments.
Our community and many families have become
victims and are being financially devastated because of substandard construction,
county inspectors who approved construction not built to code and an overly
complicated legal system. We can not believe our court system and
our county and state governments will allow so many families to lose their
homes and leave the residents holding the financial burden of responsibility
for a system that has gone awry.
The American dream to own a home should
not have become a nightmare.
WHAT
HAS GONE WRONG IN THE COMMUNITY? |
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Substandard construction
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Failure to maintain/repair community during
developer control
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Confusing and inadequate homeowner documents
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Legal problems and court intervention
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Receiver management
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Communication
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Practices and the need for an owner representative
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Competent management
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Reconstruction efforts
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Financial concerns
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What’s
Wrong: Initial Construction |
The developer used substandard construction
techniques and materials.
The developer and developer-controlled
board did not make necessary repairs to substandard construction.
The developer did not meet his fiduciary
responsibility as The Board of the Homeowner’s Association.
The construction of the homes did not
meet many county code requirements.
County building inspectors approved the
construction that did not meet code requirements.
Significant water intrusion has occurred
in the homes.
* For the record,
this builder/developer remains in business today building in the Tampa
Bay area.
Documented
Construction Problems
1.Roof tiles are improperly secured to
the roof.
2.Failure to utilize or improper application
of adhesive for roof materials.
3.Failure to secure roof pans to the underlayment.
4.Failure to provide skirt flashing to
the eave ends of the valley pans.
5.Failure to adhere mitered in-fill pieces
of tile adjacent to the standing seam.
6.Failure to apply roof mastique at overlapping
joints.
7.Failure to properly install or construct
the juncture of the garage roofs and the building walls.
8.Failure to adhere the skirt flashing
around hood vents, skylights, and plumbing vent pipes to the surrounding
roof tile.
9.Improper application of flashing over
dormer-type windows and garage roofs.
10.Improper application of elastomeric
waterproofing coating on walls and other exterior areas.
11.Stucco walls have developed material
and significant cracking.
12.Failure to provide flashings over the
bottom edge of walls.
13.Failure to provide or improperly performed
caulking adjacent to the frames of windows.
14.Improper window construction
permitting water intrusion.
15.Improper attachment and construction
of porches and side walls.
16.Failure to pressure treat sill plates.
17.Improper construction and connection
of mechanical fasteners of the wall assembly.
18.Inadequate draining provided around
the buildings.
19.Improper installation or failure to
install chimney and related components.
Code
Violations
1. Wood sole plates in contact with the
foundation where plate foundation anchors, stud/plate clips and anchor
bolts were improperly fastened, spaced, and in numerous areas missing.
Sections 1705.1, 1705.2 and 1706.1 of the Standard Building Code SBC were
not adhered to.
2. Areas of the base wall framing, sole
plates, wall sheathing and wall framing less than 6 from adjacent grade,
where pressure treated or a naturally durable wood species was required
but not installed in order to protect against decay and insect damage per
Sections 1703, 1703.1.1, 1703.1.1.3, 1703.1.4, 1703.2, 1703.2.5, and 1703.3
of the SBC.
3. Areas of structural wood framing where
the installation of structural load bearing members, connectors, fasteners
and sub-sheathing did not follow (standard to the region) engineering practice
per Sections 1701.2, 1701.2.1, 1701.2.2, 1701.2.3, 17012.4 and 1701.2.5
of the SBC.
4. Areas of wall assembly structural sub-sheathing
at openings and throughout the main body of the assembly where connections
and mechanical fasteners are inadequately spaced per Sections 1711, 1711.1.3,
811.6.7 and 1705.1 of the SBC. Observed numerous pieces of 4’x 8’
OSB sub-sheathing having only enough fasteners to hold it in place during
erections.
5. Areas of exterior stucco finish assembly
thickness which measured +/- 3/8" to +/- 1-1/2" overall. A variance
of over 2" exists where there is a 7/8" nominal thickness requirement per
Sections 1803.2.1, 1803.2.2 of the SBC and ASTM C926 and ASTM C1047.
6. Balcony privacy walls (typical) with
no required coping, flashing, or weatherproof materials necessary per Sections
1609, 1709, 1709.2, 1709.3 of the SBC.
7. Roof and attic assemblies which have
no ventilation of attic spaces as required to furnish cross ventilation
of each separate attic space per Sections 1708.8, and 1708.1 of the SBC.
8. Area of chimney flue missing allowing
termination of open flue directly into the attic cavity. Construction
in place is negligent and in violation of Sections 802.1.1 and 802.1.2
of the SBC.
What’s
Wrong: Legal Problems and Court Intervention |
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Although each homeowner was required to obtain
homeowner’s insurance when they obtained a mortgage, the judge has assigned
responsibility to the association based on his interpretation of the documents.
The homeowners association has never had a master insurance policy.
Some individual homeowners have filed collapse clause claims and received
payments under their individual homeowner policies. Because the association
does not have insurable interest in the individual homes, the association
has no legal means to collect these insurance payments. Because of
this insurance situation, some homeowners are having their buildings repaired
by the assessment payments while retaining their insurance proceeds. In
addition, once the insurance companies learned of the judge’s ruling, many
have denied payment because they have stated that it is no longer their
responsibility. In addition, insurance companies are canceling or
refusing to renew insurance policies in the community.
What’s
Wrong: Receiver Management & Communication |
The court appointed receiver has stated that
he has a limited construction background. The estimated total cost
for the rebuilding of the community could be $16,000,000 in the receiver’s
opinion but is actually unknown because no budget has been established.
This is a large complicated project to have someone with little experience
managing the project.
The reconstruction of the first 6 buildings
is substantially over budget when compared to the initial engineering report
estimates without an adequate explanation from the receiver.
The community suggested that the receiver
hire a "owner-representative" with construction and restoration experience
to represent the community when making construction decisions but to date
the receiver has rejected this recommendation.
Observations of construction practices
to date:
Rebuilding of free standing lamp posts
with no apparent damage from the outside.
No roof materials or concrete tiles are
being saved and everything is being replaced.
Replacement of OSB Board with the higher
cost option of plywood. OSB is an adequate option when protected
and sealed from the outside elements.
Significant construction projects usually
hire an independent "owner representative" to work with the architect and
contractor to explore other value engineering efforts. This has not
been done to date.
What’s
Wrong: Receiver Management Practices
The
Need for an Owner Representative |
Inadequate Communication:
The receiver has failed to provide adequate
explanations in writing. Many homeowners have attempted individual inquiries.
Some have been responded to while others have not.
The size of the assessments alone have
been indicated to be $50,000 - $80,000 but in actuality could be unlimited
since a total budget has not been developed and because of the high cost
renovation process that is being applied. The size and speed of these
assessments will result in the loss of many families’ homes and no thought
has been given to the end result of so many foreclosures.
Understanding the impact of such large
assessments, on September 26, 2001. Judge Bryson wrote in his brief, the
first that you have to do is decide the extent of the project.
After appointment on October 5, 2001,
the community asked the receiver in his first meeting to assess the total
liability for each homeowner so that each family could make an informed
appropriate decision for their future. It has been one year that
the receiver has been managing our community and we have still seen no
budget or total estimate.
Some members of our community have asked
for a monthly payment plan because of their inability to pay. He has not
been
willing to help these families.
He has not developed a construction timeline
and corresponding timeline of cash flows. He is assessing when the
monies run low and is giving inappropriate notice for families to produce
the funds. We were given 4 days to pay $4,000 of assessments in September,
2002.
The community was hopeful when the receiver
appointed a community Advisory Board to allow the community to have a voice.
The Advisory Board has not been used to date.
There is no adequate routine maintenance
being done on the rest of the community.
Competent
Receiver Management |
The following outlines what our community
needs from a receiver, yet to date has not been provided:
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Detailed information and reports.
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Have a "stay on top" attitude for problem
areas.
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Keep all parties involved and made part of
the information loop.
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Always adhere to the client’s procedures and
policies
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Work in a cooperative atmosphere
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Create new disposition strategies
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Adhere to strict quality control guidelines
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Maintain strict confidentiality in the area
of non-public information
What’s
Wrong: Reconstruction Efforts |
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Original estimates to rebuild buildings 1-6
was $1,100,000 but it has already cost our community $2,000,000 (on September
11, 2002 the receiver stated that it has cost $350,000 per building) for
this work and to date is still incomplete. None of this information
has yet to be provided in writing to the homeowners.
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In addition to the reconstruction of the first
6 buildings being over budget, the work was to be completed in August.
To date it is not complete and there has been no explanation to the community.
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To date the procedures to "repair" these buildings
have been complete reconstruction including removal of 100% of stucco and
replacement of all windows and roofs. Would a reasonable homeowner
tear off all of his exterior walls and replace almost all building components
from the inside paint out at their own expense in case there may be a problem?
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After spending significant funds to rebuild
buildings 1-6, air quality problems are surfacing and Penicillium,
Aspergillus and Stachybotrys mold have been identified in the
buildings. The cost to fix this problem is unknown at this time.
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The mold issue is currently one of the largest
issues in the insurance industry. This is another example of potential
exposure to unlimited liability for the homeowners.
What’s
Wrong: Financial Concerns |
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This proposal to assess each homeowner an
estimated $80,000 is not economically feasible for most homeowners.
Many owners of homes that range from $125,000 - $240,000 (the majority
of our community) can not afford such large assessments.
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The community has explored other means of
long-term financing of the project such as a bank loan but have been unable
to obtain a loan to date. The only option given to date is assess
and foreclose.
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Second mortgages have also been unsuccessful.
Without an estimated cost per homeowner, how can someone obtain a second
mortgage not knowing the entire costs?
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As the problems persist, the assessed tax
values of our homes have plummeted. The assessment could soon be
higher than the assessed tax value of our homes further making a second
mortgage unobtainable.
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As more homes continue to be foreclosed on,
lenders will soon not provide first mortgages.
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If many of the homes are in foreclosure, how
will the funds be generated to complete the projects while the homes are
in foreclosure? Will the rest of the homeowners be required to pay
for the foreclosed properties?
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Families and retirees are watching their life
savings disappear while others are being forced into financial ruin.
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The size of the assessments is unprecedented
without any ability to finance.
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Compounding our financial distress is the
worst economy in 40 + years and this process is moving ahead without any
flexibility.
Implications
for other Communities in the State of Florida |
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How many Florida residents live in a homeowner’s
association?
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How many other homeowners associations in
the state of Florida could be exposed to the same such liability?
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How many homeowners truly understand the implications
and risks of their homeowners documents?
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Should a technical interpretation of your
homeowners documents violate every principle of common sense?
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Shouldn’t county inspectors protect you from
inadequate construction or at least having your home built to minimum code
requirements?
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How can the developer still be building other
families’ homes in the Tampa Bay area?
Estimation of the entire project costs
before moving ahead.
To obtain private or government funds
for the reconstruction and to make these funds available to individual
homeowners to offset current and future assessments.
Long-term financing to pay for the costs
of the reconstruction. If unobtainable through the private sector
than sponsored or provided through public funds.
Restructuring of assessments so that families
do not lose their homes while the homeowner’s association tries to obtain
responsibility from liable parties.
Efficient management of the construction
process by qualified, objective people.
Development of a reconstruction plan and
timeline based upon the findings in the evaluation of the entire community.
Financial restitution from responsible
parties/developer.
A court approved solution for the insurance
conflict created by the judge’s ruling.
Formation of a Homeowner Advisory Board
to communicate with the receiver, express wishes of the community and eventually
take over from the receiver.
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Welcome Statement
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Who Are We and What
Have We Tried to Accomplish
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Rules of The Meeting
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Purpose of Community
Summary
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Community Summary Presentation
Next
Steps:
Community
Support
Committees
Implementation
LEGISLATIVE
CHANGES! |