Home construction giant D.R. Horton Inc. is accused in a lawsuit of failing to pay its association dues, enforce collections and report the deficit to residents of one of its Miami-Dade County communities.
The complaint alleged the homebuilder wanted to avoid liens and foreclosures that would reduce prices and hurt company profits.
The Arlington, Texas-based company built Mandarin Lakes with 875 single-family homes and townhouses along Southwest 140th Avenue between Florida’s Turnpike and U.S. Highway 1 near Homestead.
D.R. Horton managed the community by appointing employees to the homeowner association board from 2004 to 2014, according to the Nov. 30 complaint filed in Miami-Dade Circuit Court.
The developer retained control because it hadn’t sold 90 percent of homes, said attorney John Arrastia, who filed the case against D.R. Horton. He is a partner at Genovese Joblove & Battista in Miami.
The Mandarin Lakes Neighborhood Homeowners’ Association Inc. is suing D.R. Horton and five company staffers who served on the board. The lawsuit claims they had a conflict of interest between their duties to the homeowners and to D.R. Horton — and ultimately failed the residents.
D.R. Horton didn’t respond to an emailed request for comment. A voicemail left for Amalia Papadimitriou, one of the individuals named in the suit, also wasn’t returned.
The lawsuit claims the D.R. Horton-appointed board was supposed to collect assessments from Mandarin Lakes owners to pay for community operations but failed to enforce payments. The developer was in a bind with units to sell and prospects for some homeowners falling into foreclosure.
“The resale of foreclosed units would dramatically and negatively affect the fair market value of D.R. Horton’s unsold units, which would lower the new unit sales price, increase the difficulty in obtaining bank financing, and depress both the number and profitability of sales,” the complaint said.
The Mandarin Lakes board ran up a $1.8 million deficit, which was inherited by homeowners when they took control of the board Dec. 31, 2014. It breaks down to a $1.07 million budget gap that D.R. Horton was supposed to have closed while its staff ran the board and $838,000 owed to cable TV and internet provider H-Control Inc., according to the complaint.
The gap stems from an agreement when D.R. Horton had its board in place for the developer to fund any operating deficit that wasn’t covered by homeowner assessments. D.R. Horton paid $865,633 of the total $1.9 million deficit it was responsible for covering, the complaint said.
The complaint said homeowners have had no idea about the debt because the budgets circulated by D.R. Horton’s board made the association look “financially vibrant.” .
“If the community in Mandarin Lakes is living and saying, ‘Hey everything is going OK,’ and they are unaware that they have a $875,000 bill and they are unaware that their budgets are artificially low, if they are not educated as to what’s going on and then D.R. Horton just walks away, all of a sudden look what you are left with. You are left with $1.8 million that’s missing, and you don’t have a collections program in place to collect the assessments,” Arrastia said. ”That really put the board of directors in a very difficult position.”
Separately, D.R. Horton is accused of construction defects at Mandarin Lakes and not fixing issues that now are estimated to cost $4 million. Issues include water intrusion at the clubhouse and gym and planting trees too close to homes and utilities, which could result in cracked foundations and sidewalks, according to the complaint.
While association leadership was turned over four years ago, the lawsuit was filed recently in part because it took some time for the new board to perform an audit, research issues and trace the root of the debt.
The issues of D.R. Horton preventing foreclosures so it could sell units at market rate and its obligation to close budget gaps are connected, Arrastia said.
“If they don’t sell out the community, then they can’t turn it over to the unit owners. And if they can’t do that, then they are still obligated to deficit-fund any deficit in operating expenses in the association,” he said.
The lawsuit seeks declaratory judgment on counts of breach of obligation to deficit fund, negligent design, building violations, aiding and abetting breach of fiduciary duty and vicarious liability against D.R. Horton. It also lists breach of fiduciary duty counts against the five D.R. Horton employees who served on the board.