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Litchfield Plantation: Judge allows developer to control POA once bill is paid

By Charles Swenson
Coastal Observer

The developer of Litchfield Plantation is still in control of the property owners association – or will be once it pays its past due association fees, a Circuit Court judge has ruled.

After a 45-minute hearing last week, Judge Larry Hyman granted summary judgement to Litchfield Plantation Co. in a suit filed in March by the homeowners group, the Litchfield Plantation Association. The association asked the court to rule that the provision in the covenants for Litchfield Plantation that gives the developer control of the association ended when the company failed to pay a shortfall in the budget for common area maintenance and services.

The so-called Class B voting rights give the developer votes equal to all other property owners, plus one.

Mark Neill, attorney for Litchfield Plantation Co., argued that the covenants specify when the Class B rights are terminated, and said failure to pay the association isn’t included. The company, which was bought in April, wants to pay the shortfall as required, but can’t get an accounting from the property owners who were elected to the association board in February, Neill said.

“That’s ridiculous,” said Robert McMahan, a plantation resident and attorney for the association. He is also a plaintiff in the suit.

Until this year the president of the development company was also president of the association, McMahan said. That relationship, which existed before the current owners became involved, allowed the company to treat the property owners association “like a piggy bank,” he said.

McMahan told the judge there is a shortfall of $160,000 in the association budget this year.

“We want the opportunity to pay that shortfall and get those [voting] rights back,” Neill said.

He said John Miller, the new Litchfield Plantation Co. president, and some investors want to restructure the debt accumulated by the former owners. Three deals have been arranged “that would take care of this situation for years,” Neill said, but without the control provided by the Class B voting rights “no developer or bank will give them any money.”

Neill claimed that the suit was filed to thwart development. “They don’t want us ever coming back and developing these lots,” he said.

McMahan said suspending the Class B rights isn’t an adequate remedy. “This company has a long history of abusing this homeowners association,” he said.

There are $715,000 in promissory notes outstanding from the developer to the association, McMahan said, all at terms “unusually favorable to the company.” The development company is not allowed by covenants to take money from the association. It has breached its fiduciary duty to the association and shouldn’t be allowed to retain control of the association, he said.

“This is truly the fox in charge of the hen house,” McMahan said.

Neill said that for the court to allow the Class B rights to terminate for any reason other than those specified in the covenants amounts to a rewriting of the contract between the developer and the property owners, and he cited a state Appeals Court ruling that says that can’t be done.

“And that’s what concerns me,” Hyman said.

He said he was unwilling to go beyond the language contained in the covenants, which say that voting rights are suspended for any property owner more than 60 days past due in payments to the association. If an individual owner were past due, would the association terminate his rights forever, Hyman asked McMahan.

McMahan said this situation is different because the developer controls the association, unlike an individual owner.

Hyman said the issue is whether the court can terminate the voting rights. “I cannot do that,” he said. “I don’t know whether they’re terminated or not.”

He ruled that the Class B rights are still in effect, though suspended because of the unpaid fees, and ordered an accounting of the past due amount within 60 days. “I’m sure there’s going to be a dispute over that,” he added.

“If you don’t pay it, you don’t vote,” Hyman told Neill.

Neill said the association denied the company’s votes at a special meeting to elect board members that was held a day before the court hearing, and he asked if the Class B rights could be reinstated until the accounting was completed.

Hyman denied that request. “What’s good for the goose is good for the gander,” he said.

Related story: E-mails in federal suit detail struggle to sell Litchfield Plantation

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