Re-Phasing Your Subdivision

Remember that old saying about what happens when you ASSUME?  Well… it’s still true.

We have a client who bought close to 100 lots on a take-down schedule last year in an older planned development that had been stalled out.  It was a “broken” project, with 50 lots in Phase 1, with a half dozen existing homeowners who were very happy that our client was going to save the subdivision.

Being cautious, our client created a marketing phase schedule with fairly small phases after Phase 1, to see how his homes would sell.

Almost a year later, he’s halfway sold out of his lots in Phase 1 – in his words, they’re selling “okay… steady,” but he’d like to re-phase the remaining lots to make all the phases smaller.  This is his insurance against paying HOA dues on unsold lots – hedging his bets against a market slowdown if it doesn’t come back after everything opens up.

My first thought when he called was, “No problem at all – just another day in the life of a Budget preparer and DRE Processer – should be an easy change to make.” I was assuming, based on what he said, that the HOA was healthy and operating normally.

Well… so much for assumptions!  When the HOA financials came in, I quickly realized that my assumption was off base – here’s why:

  • The latest HOA financials indicate that the assessments were suspended for a few months last year, because the HOA Board believed they had a surplus of funds. This occurred just after furnishing us the financials for our DRE application last year!  We were completely unaware of the change, and so was our Client.
  • The HOA is unable to provide a resolution where the decision to suspend dues was made…. and to add to the messy situation, the 2020 budget reflects a deficit, due to the previous suspension of dues.
  • Lastly, their updated Reserve Study shows the HOA under-funded and recommends an increase to the 2020 dues!

Long story short, we completed the phasing and budget revisions and submitted the request to DRE.  We expect several questions on this one!  Lessons learned here:

Stay informed – Homebuilders who purchase in on-going subdivisions should be involved with the HOA Board, and serve on the Board if possible. Our client never attended an HOA board meeting.  The Board members were all homeowners with limited knowledge of HOA operations and went against the recommendations of the professional manager;

Plan ahead – the Public Report process can take as long as 6 months for subsequent phase filings when there are “issues” with HOA financial health.   Since the Final Public Report is issued for 5 years, it doesn’t hurt to start early and obtain it before you need it.

Hi, I'm Scott
President

I'd love to learn more about your new development or project. Use the link below to request a proposal.

Latest

Stay up to date.

Sign up our newsletter for latest article and news.
property What You Need to Know About Subdividing Land Today

Subdividing Land: What You Need to Know

As the world population continues to grow, the demand for land will only increase. By subdividing land into multiple usable lots, the possibility of reaping additional profits is highly likely. This has led many people to ask the question, “How do I subdivide land?”

Read More »
Red Flags that Signal Potential Problems with Your Reserve Fund

Red Flags that Signal Potential Problems with Your Reserve Fund

As a homeowner, board member, developer, or community manager, you bear a significant responsibility of ensuring that your community is always in top-notch condition, well-maintained, and prepared for any unexpected situations. One of your primary duties is managing your community’s reserve fund, which serves as a financial buffer to cover any unforeseen expenses or significant repairs.

Read More »
Making Your HOA more attractive for Insurance Companies

Making Your HOA more attractive for Insurance Companies

There are fewer insurance companies willing to write policies for HOAs due to perceived risk. In the events that have taken place in 2022, such as floods and fires, there is a massive deficit in insurance for HOAs. Community association insurance plays a significant role in budgeting for HOAs. Insurance premiums are a necessary expense that HOAs must include in their budget to ensure that the community is protected.

Read More »
Schedule a Call
Discuss your project or needs with someone from the California Builder Services team.