A controversial homeowners’ association will soon emerge from bankruptcy proceedings tasked with doling out more than $300,000 in homeowners’ funds, and at least some residents living within the organization’s boundaries are wondering if they can be trusted. group leaders to manage this money properly.
Residents began asking questions about the group and demanding a bigger role in deciding its future and funding, before a years-long legal battle ended.
Only three members of a 12-person board remain with the organization which first came under fire following an ownership dispute in 2016. A state district court judge ruled ultimately sided with the plaintiffs in the case, determining that the organization violated the Texas Property Code when it was formed in 2002 and therefore did not have standing to collect transfer fees on completed real estate sales . The organization filed for bankruptcy in 2018.
“I don’t support the idea (that) a few hand-picked inner circle residents should arbitrarily decide how the remaining $300,000 of neighborhood funds should be used,” owner Frances Schwartz said. “Anything that is done must be done with broad owner support.”
At the very least, those like Schwartz believe that all Garden Oaks landowners should have the opportunity to participate before any remaining funds are used to pay for further legal advice, fund the formation of a new entity, or efforts to obtain majority approval and support from owners for a new HOA.
But for those who don’t necessarily trust what might happen, current GOMO board member Stuart Arouty encouraged residents to become more active themselves and make sure every voice is heard. .
“Join the board and help the neighborhood,” he said. “Make sure your voice is represented.”
GOMO’s volunteer board – which has 12 seats and will ultimately decide how funds are distributed – is currently down to three members as elections did not take place during the process, and three-year terms many board members expired during the bankruptcy, according to the organization’s website.
“The current organization is still broken in the same way – badly formed – as it was before the bankruptcy,” resident Gary Ingram said. “So it will have to be reformed. … The first step is to put together a new board to start debating and making decisions on behalf of the (neighborhood) about where to go with these assets.
Arouty says the board is considering those requests and plans to hold elections for new members in the coming months to fill the 12 positions before making a decision on how to distribute those funds.
“The current plan is to hold an election before the bankruptcy is over and let the new board decide what to do with our future,” he said in an email to The leader.
But without the aforementioned “broad” community input, Schwartz said, he doesn’t necessarily believe the decisions made will be truly beneficial to the neighborhood — even with a potentially newly elected council.
“GOMO, and its predecessors dating back to the original formation, have gone through many iterations, most of which have proven to be highly flawed, illegally formed, and acting subjectively and without proper authority,” he said.
Arouty said he was only appointed to the board after bankruptcy proceedings began in 2018 and had no comment on any trust issues that may arise from what led to the initial bankruptcy. A district court judge sided with a Garden Oaks landlord in a 2016 real estate dispute, ruling that GOMO violated Texas property code when it was formed in 2002 and failed to therefore not eligible to collect the transfer fee of 0.75% at the end of each property sale. in the neighborhood.
Transfer fees had been the main source of income for GOMO, which then filed for bankruptcy in April 2018. The owners’ association initially tried to reorganize in a Chapter 11 proceeding, but the Neighborhood owners did not sufficiently support a restructuring plan that included changes to deed restrictions and a mandatory $80 annual fee in lieu of transfer fees. Then, in 2019, it was upgraded to Chapter 7 and has hung around as such ever since.
A Chapter 7 bankruptcy does not require payment from creditors, but requires the entity to sell certain assets to pay creditors, whereas a Chapter 11 bankruptcy is a kind of plan of reorganization that allows the entity to maintain day-to-day operations while working on a creditor repayment plan.
“We still have a lot of unknowns in the schedule,” Arouty said on Tuesday.
Some owners have said they would support the creation of a new entity, according to Pam Parks, who previously served as GOMO’s office manager.
“I guess if we as a neighborhood express the same opinions that we have in the past… that the money will go towards the review of deed restrictions and door-to-door campaigns to obtain the necessary signatures for approval (of the new HOA),” she said.
Ingram echoed the sentiment.
“I hope they don’t try to go back to business as usual and go in the direction of legitimization,” he said. “I think most would agree that they need an HOA — I’d like to see one that actually collects dues and provides benefits, not just enforcing in-act restrictions.”
Some, however, like Schwartz, said they think many would prefer to see much of the remaining funds used for things like the constable program or neighborhood beautification before reinvesting it directly into GOMO — or whatever. the least, have the decision to be open to community input.
“Before additional funds are wasted on yet another reincarnation of a deficient entity, I would like to see the district solicited or questioned for its contribution,” Schwartz said.