Couple Terrified as “Zombie HOA” Takes Over Their House (And Other Stories)

A couple got engaged and bought their first home in 2022. It’s a freestanding home. The listing specified: no homeowners association (HOA). Their real estate agent confirmed that.

But now, a “zombie HOA” from the 1990s is coming back to haunt the neighborhood. And it’s making them feel terrified, they say.

A local attorney insists that the HOA was there all along. The attorney is threatening the couple with court action and a lien on the home’s title because they haven’t paid dues to this zombie. And they’re panicked that the company may try to use a lien to start a foreclosure process.

The Backstory: The Bygone That Couldn’t Be Bygone

The couple’s house was, years ago, built for an HOA. The association was created back in the 1990s. In 2018, on account of failure to submit necessary filings, it was administratively dissolved. Years later, some locals hired a lawyer to bring the HOA back to life. A newly formed board is now attempting to collect payments from the past. The board adopted bylaws that refer to condo situations—balcony maintenance, assigned parking, elevators. But the property has only freestanding homes.

Ticked-off residents are showing up at board meetings, opposing the authority of a new board.

Now, the key question is whether HOA deed restrictions run with the land despite the HOA corporation being dissolved eight years ago. And whether the restrictions can be enforced, although the buyers’ deeds made no mention of them.

A buyer’s lawyer will argue that the HOA can’t be forced onto new owners if no restrictions were attached to the title at the time of purchase.

Some of the homeowners are refusing to pay fees to the board. Would paying dues—even under protest—be treated as a sign of their acceptance of the situation?

Unexpected HOA disputes are not always this dramatic, of course. But any dispute can introduce financial and legal uncertainty. Deed holders who face serious questions about the value of and the language that appears on their deeds should call a real estate lawyer, who will apply their state’s Condominium Act (or other homeowners association law) to the facts at issue.

Tiny-Home Developer Allegedly Mismanaging Funds Via “Zombie HOAs”

A developer touted tiny homes with attractive amenities. The developer, Claude H., built the infrastructure and sold the land to buyers in Tennessee. Claude had various model homes on display, so buyers could have their choice built on the land. They would agree to pay dues to a homeowners association that the developer also managed.

Claude directed buyers to have specific companies build their homes. Once a home was produced, the idea was that the buyer could live in it or rent it out to tourists, via the developer’s property management division.

Three of Claude’s developments—Water’s Edge, the Retreat at Deer Lick Falls, and the Retreat at Sunset Bluff—are now embroiled in legal challenges. Residents say the developer is running a “zombie HOA” that ought to have been laid to rest. More specifically, buyers have claimed:

• They were promised hiking trails, kayak access, pools, and cabanas that weren’t completed. The pool’s installer sued Claude over faulty grading of the pool site.   

• Buyers who were promised land on the “water’s edge” didn’t all get lakefront properties.

• According to the covenants, conditions, and restrictions, Claude was supposed to (but did not) hand over control either five years after people began to buy or whenever 75% of the units were filled.

• An owner of properties in two of the three developments says Claude is “stealing our money from the HOA.” The same owner says Claude has put so many restrictions on the deed holders that it will be difficult to sell the properties to future owners.

• Unit owners claim property taxes against the HOA commons went unpaid long enough to put the property at risk of tax foreclosure.

• Claude’s disputes with building companies caused delays and severed relationships between buyers and the contractors.

• The developments are poorly designed. Many elements of the infrastructure have been improperly installed.

This zombie just can’t rest. This year, Claude tried to get a temporary restraining order to stop the Sunset Bluff community from voting to take the homeowners association into their own hands and elect their own board of directors—which they did anyway. In July, 40 Sunset Bluff unit owners accused Claude and his companies of self-dealing, overcharging for services, failing to fulfill fiduciary duties, and illegally controlling the finances in violation of the association’s charter. They say the vast majority of the budget was allocated to contracts with a landscaping company owned by Claude. They are asking for $5 million in damages.

The suit is in court now. And yet, despite all these legal troubles, Claude recently submitted an application to develop more land.

Fees Add Strain to Monthly Household Budgets. Is Buying Into an HOA Worth What’s Offered?

At Deeds.com, we root for the deed seekers. HOAs often offer the most affordable opportunities in a given town or city. Many people find their footholds on the ladder of homeownership by acquiring a deed to a condo unit. That’s all good.

Yet there are considerations that condo buyers need to take a thorough look at in advance. How do other unit owners feel about their community? Are there any lawsuits pending—and if so, are they well founded? Unit owners have to foot the bills for attorneys hired by the association, for starters. Will the dues (and potential special assessments for unexpected needs) fit into your monthly budget? The dues are on top of your loan principal, interest, insurance, taxes, the regular upkeep costs for the interior of your home, and the climbing cost of keeping the lights on.

More and more potential deed holders are asking these questions. Joel Berner, senior economist at Realtor.com, notes that one in four deed holders pays for HOA services. This is having a serious impact on affordability (or the lack of it) across the country. Seven in every ten newly built U.S. homes are controlled by an HOA.

So check the home you’re thinking of buying. Is it part of an association? Was it, at any point? And if you do buy a unit that’s subject to an HOA, consider whether the services provided will be worth what the association is charging its residents.