Planned communities age poorly
By Jim Wasserman
Associated Press
ROSEVILLE, Calif. — Jim Viele moved to Sun City Roseville in 1997 expecting to think more about golf than landscaping, drip irrigation systems and lawsuits.
Rich Pedroncelli • Associated Press
But as head of his homeowners association, Viele is mired in a lawsuit with Del Webb, the nation's premier builder of privately run adult communities. The association claims the developer saddled the 5,400 residents with defective water systems that caused trees and turf to die and the golf course to become soggy.
Frank McConnell, a resident of Sun City Roseville in California, likes to spend his days playing golf on the community's golf course. However, a poor irrigation system has required new landscaping because plantings have begun to die from lack of adequate water. The homeowners are suing developer Del Webb in hopes of getting the firm to deal with what they allege is defective workmanship.
Viele and other residents in this decade-old community east of Sacramento, fearing huge hikes in their $120 monthly dues or a big drain on cash reserves, sued Del Webb to fix it or pay the bill.
As developers build more planned communities, they are also turning them — and their multimillion-dollar annual budgets — over to residents and volunteers to run once the developers sell out. Often, development experts said, residents from California to Arizona to Florida learn they've inherited financial time bombs.
Cracks develop in clubhouses, tennis courts and roads. On the championship golf course that once lured buyers, grass either dies or turns soggy because of defective irrigation systems. Often, residents find that the problems are due to construction defects and that the developer didn't leave enough money in the reserve funds for fixing them. Either the associations have to raise dues or collect one-time special assessments, often hiking living costs beyond buyers' original expectations.
With so many of these communities being built each year, often to house baby boomers entering retirement, situations like the one in Roseville could become commonplace across the country, experts said. As they do, some of the nation's largest builders are finding themselves the targets of lawsuits from unhappy buyers.
One of those is Stuart Diamond in Delray Beach, Fla. He leads the homeowners association at Villa Borghese, which is suing the community's developer, Ansca Homes, after they inherited a $280,000 deficit and a defective irrigation system.
"I didn't expect to be involved in a quagmire," Diamond said of the association's $1.2 million lawsuit against the developer, which has also been sued by the Ponte Vecchio West Homeowners Association in nearby Boynton Beach for the same reason.
Industry watchers said problems stem from competitive pressures and a lack of government oversight. Some builders, they say, set monthly or yearly assessments as low as possible to attract buyers while they sell the community. After the developers sell out, the low assessments that enticed buyers aren't high enough to run the place or make necessary repairs.
Such "lowballing" of fees does occur, acknowledged Donna Reichle, a spokeswoman for the Washington-based National Association of Home Builders. But she said costs can rise after a builder sets the assessments and reserve funds.
"When the assessments are initially set, they reflect the price of labor and materials at that time," she said. However, the cost of building materials could "increase at a rate higher than at the time of the reserve study."
There are no statistics on how often these problems occur. But experts in association finances say they're one element in a larger phenomenon in which one-third of the nation's 260,000 associations don't have enough money for long-range upkeep.
At Sun City Roseville, where golf cart lanes line wide boulevards and retirees from Minnesota and South Dakota host golf tournaments and card games, Viele said Del Webb left the association with enough money when it departed the community this year. But the community's lawsuit alleges a flip side of the lowballing issue — leaving behind a defective infrastructure that could overwhelm even adequate financial reserves with repair bills.
"The budget may have been all right, maybe, if this thing had been built the way it was supposed to be built," said Tyler Berding, the association's attorney.
Del Webb's attorneys have denied allegations of defects, and are in talks intended to resolve the issue.
Del Webb, which began creating communities for adults 55 and older in 1960 — and became the signature name in communal Sunbelt retirement living — also has attracted lawsuits alleging construction defects or inadequate reserves at Sun City MacDonald Ranch and Sun City Anthem near Las Vegas and Sun City Grand near Phoenix.
Las Vegas attorney Edward Song has sued Del Webb's parent company, Michigan-based Pulte Homes, alleging it underfinanced a homeowners association that took over its 372-unit Stone Ridge condominium project in Las Vegas. Pulte's 2001 merger with Del Webb made it the nation's largest homebuilder.
Virginia attorney David Mercer said cities that approve development projects and property management companies that run them should be more outspoken about the financial foundations developers leave for private communities, which often consist of thousands of homes.
"They've created a little city in many respects," he said.
California is one of the few states that makes developers prove adequate startup association budgets and reserve funds. But it requires only the minimum, and formulas used to set it haven't been updated since 1999. Most other states have no rules.
