How do you get out of a home owners association when your builder-developer is going bankrupt?

Answer 1

You cannot necessarily separate your property from a home owner's association because the developer is in bankruptcy. If the remaining property is sold to a new developer it would acquire all the rights appurtenant to the land including sponsorship of the homeowner's association. When you purchase a property in a planned community you are automatically a member of the association. Unless the association is dissolved, you will remain a member as long as you own the property.

Depending on how many lots were already sold you may need to bring an action in court to have the homeowner's association extinguished. The homeowner's association was intended to protect the rights of anyone who purchased a lot in the subdivision and until something changes legally it would remain effective.

In some cases, the association simply becomes idle when there are not enough members to support it. However, even in that case, the property remains subject to the HOA until it is dissolved. In other cases where the development is not brought to completion all the lot owners can agree to disband the HOA. They need the advice of an attorney who specializes in real estate to guide that process.

Generally, HOA funds are kept separate from the assets of the developer. If the funds were co mingled, when your builder-developer files for bankruptcy, your association's attorney may be able to preserve rights, monies and other assets of the community.