Ocean View Town Hall on Tuesday evening was packed with Fairway Village residents who had attended the town council meeting that night to voice their concerns about the community’s developer.
With standing-room-only spilling into the building’s foyer, more than 40 residents attended wearing “Fairway Village Homeowner” stickers and protesting the legality of the development company renting out properties that it owns within the community.
Fairway Village property owner Lisa Leary, a licensed attorney in Pennsylvania, said the entity Fairway Cap LLC has maintained ownership of five townhomes in Fairway Village. Leary opined that the developer maintaining ownership within the community created a for-profit commercial enterprise.
The townhouses were listed as rental apartments online, advertised as being located in the “Reserves at Fairway Village.”
“We homeowners learned of this for-profit commercial rental enterprise [FPCRE] by accident — not by notice from the developer or the Town — but rather via advertised on social media and the web for a rental apartment complex initially called The Reserves at Fairway Village, featuring the interior of 108 Augusta as a sample rental apartment.
“This FPCRE violates the FV Community Constitution and founding declarations. It also violates the laws of the Town of Ocean View and the State of Delaware, including the Delaware Uniform Common Interest Ownership Act,” she said.
Leary said the homeowners have legal standing to question the developer’s action.
“While our community documents allow individual owners to rent our homes and units, the developer cannot corrupt the community documents to unilaterally benefit itself at the expense of the entire community. By commencing such a rental scheme, the developer has engaged in self-dealing solely for profit and has thus breached the fiduciary duty it owes by law to all owners at Fairway Village.”
Saying she believed that the developer’s actions violate Delaware law and the development’s documents, Leary argued that the situation would “effectively allow the developer to control this community in perpetuity.”
“In either instance, it also prevents the developer from turning over control of the community to all owners within the designated timeframe, in violation of Delaware law and our community documents. Under our community documents, the developer’s authority continues until the later of either 20 years after recording the community documents (which took place in 2008) or until the developer does not own any portion of Fairway Village.”
Leary, speaking for the group assembled, requested that the Town of “Ocean View immediately definitively shut down and prohibit the developer’s existing for profit commercial rental enterprise from forever operating on the premises of Fairway Village, and confirm same in writing as notice for the benefit of homeowners.”
Town meets with
developer over concerns
Ocean View Mayor Walter Curran told the crowd that, upon being apprised of the issue, the Town took immediate action to investigate their concerns.
“A few weeks ago the town manager [Dianne Vogel] and I began receiving complaints from residents of the Fairway Village community regarding alleged name changes to the community and renting of townhomes by the developer.
“We investigated and discovered the developer, on at least two websites that we know of, advertised the renting of ‘apartments’ in the Reserve of Fairway Village — an entity that doesn’t legally exist within this town,” Curran noted.
“Since apartments are not allowed under the approved building plan, and a name change requires the developer to come before the Town’s planning and zoning board, and ultimately the town council, to receive approval, I instructed the town administrative official [Charles McMullen] to reach out to the developer and inquire as to what exactly is going on — what is their plans.
“At that same time,” Curran said, McMullen “advised them they were not allowed to create apartments or change the name without the approval of the Town.”
Curran said property owners within the community also told the Town the developer was subleasing individual rooms within townhomes and was intending to set up a rental office on-site, “which is in violation of the current Town approvals.”
“I issued instruction to the town administrative official to temporarily cease issuing building permits and certificates of occupancy, as well as to cease issuing residential rental licensing to the developer. At the same time, we reached out to the developer and requested they meet with the Town to discuss these issues.”
On Monday morning, Curran, Vogel and Town Solicitor Dennis Schrader had a conversation regarding the issues with representatives of Fairway Cap, Bill Krapf and Louis Capano.
“We had a full and frank discussion of these matters,” said Curran. “Before I relate the details of that meeting, it is important that everyone here understand that, while the Town can be sympathetic to your issues, we are limited in what our responses can be. We are a Town, a structured entity, and we have rules to go by.”
Curran had gone on to ask the two men a number of questions regarding the development.
“Why did you change the name of the development and advertise?”
“It was just advertising,” they had replied. “We didn’t realize we needed to get approval from the Town. We thought the homeowners would rather be identified separately from the rented townhouses. We will cease calling them apartments. They are not; they are townhomes. We will cease calling them by the name the Reserves at Fairway Village.”
Curran reported that the two men said it is their plan to maintain permanent control of the HOA via majority votes.
“As the largest property owner, we have the most to lose if the property devalues,” they said, adding that there would be a process to appoint homeowners to the board.
Currently, the developer is in the process of constructing a number of townhomes within the community.
“Do you intend to ever sell those 70 townhomes or maintain them in perpetuity as rental units?” Curran had asked.
“They will retain in perpetuity as rental units. They weren’t selling in the market, and we want to build them quickly and get them into the rental market.’”
Krapf and Capano told the Town they would pay into the HOA for maintenance and common areas, even though it is not required by the HOA covenants. They added that subleasing or the rental of individual rooms would not be allowed, as they plan to have all annual rentals.
When Curran asked the men if they would be willing to put that in writing to both the homeowners and the Town, the response was, “We would, but as the largest owner in the development, we won’t be excluded from our rights.”
Curran said he went on to ask what was meant by that statement.
“‘In other words, whatever limitations there would be on our right to rent would apply to all homeowners,’” Curran said he was told. “What he’s saying is he’s willing to abide by the rules, but then everybody else has to, too.”
Krapf and Capano told the Town they did not know that special approval was needed for an on-site rental manager, and that they would be applying for such an approval, “as we believe it’s in the best interest of the tenants and the homeowners if we got someone on-site to deal with issues as they arise.”
Town bows out of
dispute, urges direct
Curran said town officials strongly recommended the developer communicate directly with the homeowners, and do so quickly and face-to-face.
“They said they are sending out a letter to homeowners and will meet with you in a few weeks.”
Curran, speaking to the homeowners in attendance at Tuesday night’s meeting, said he, as the mayor of Ocean View, has the authority to demand developers live up to their commitments to the Town.
“I will strictly enforce that authority,” he said, noting that he temporarily suspended the issuance of permits and licenses because “we had proof of actions that were inconsistent with the approved plan. … Those issues essentially now have been addressed.”
He added that, as of that evening, the developers were delinquent with property taxes for those undeveloped lots.
“The minute that check arrives and clears, we have no choice but to allow them to recommence the process of issuing licenses and permits.”
Curran encouraged the property owners to contact attorneys, as they could have a case against the developer.
“I have no idea how that would end up, and the Town, quite frankly, cannot take part in that fight. This is not a Town legal matter. This may be a moral and ethical issue, but it’s not a Town legal matter.”
Leary said she believes the developer is running a for-profit commercial enterprise through the renting of the properties. Curran said that, under Town ordinances, the developer has every right to rent the units they own, just as every homeowner within the community has the right to rent their homes.
“There is no difference, other than scale,” he said.
Property owner Hal Solomon noted that, in its process of reviewing applications made by the developer, the Town reviews its legal documents, including its constitution and covenant with homeowners.
Curran said the documents are reviewed by the Town solicitor; however, they are reviewed for specific reasons, such as ensuring the long-term maintenance cost of streets would be addressed.
“You don’t regulate homeowners’ associations?”
“No, we do not,” said Curran.
Homeowner Liz Reynolds voiced her disapproval of the Town’s response to the residents’ concerns.
“This was supposed to be my forever home,” she said, noting that she had moved to the area from Pennsylvania two years ago. “I come from a county and a state that backs their people… You need to support us… What more needs to be done to one community before our representatives back us as individuals, except saying, ‘Hire a lawyer.’? I can get us a lawyer. I’m not worried about that. I’m worried about the fact that we’ve respectfully come to you and you’re turning your backs. That’s how I feel.”
“I’m not saying it’s fair at all. I’m saying it’s factual,” responded Curran. “Whatever violations, perceived or real, on the HOA side are now at this point solely HOA issues. You are all individual signers of private contracts with that company. That is a private-enterprise deal this Town cannot get into. We cannot… We are a town. We have rules. We have limits to what we can do.”
He added that, while Fairway Village may be a large community within the Town, it is one of many communities within the Town and it would not be right for the council to allow taxpayer money to pay for the legal battle of one community.
Developers’ construction hours also a concern
Reynolds also complained that the developer has construction at all hours, seven days a week.
McMullen said construction hours in the town are 7 a.m. to 7 p.m., Monday through Friday, and 8 a.m. to 7 p.m. on Saturdays. There is no work permitted by private contractors on Sundays.
He recommended that if those in communities have issues with contractors working beyond those hours, they should contact him. Or, if it is after-hours, they simply need to contact the police department, who will take the appropriate action.
“I, for one, applaud the police department and want them to come help me when I have a robbery, not when someone is working when they’re not supposed to be,” said Reynolds. “That’s a waste of the police time.”
McMullen said he would speak the following morning with the developer regarding construction hours, but pointed out that the police department is empowered and charged with enforcing town code, which includes construction hours.
Homeowner Ed Leary voiced his upset with the situation, noting that his family relocated to Ocean View because they believed it would be a good place to live.
“Many of us here — our life’s work is in Ocean View and in Fairway Village. All of us in good faith came to Ocean View and decided it would be a good place to live. We met in good faith with builders... And we made a decision based on the fact that our life’s work would be in Fairway Village. This is what we thought.
“This builder knows good and well that the original intent of Fairway Village was single-family and homeowner-owned homes. If we would’ve known for one minute that this was going to be a rental community, this room wouldn’t be filled today. That’s not what we bought into.”
“We are enforcing everything we are legally empowered to enforce,” responded Curran. “We cannot go after someone because we don’t like the way they do business.”
Homeowner Al Banister insinuated that the Town could take more action but was choosing not to, as they receive gross rental receipts tax from rental units within town limits.
“I disagree with you,” replied Curran “We collect equally from everybody who rents. The fact that this pops up now and irritates everybody in this room doesn’t make it that we are conspirators in this. We have done everything we can to stop it in its tracks, and now we’ve hit the wall. Now it’s up to you to try and find other ways to stop it, if you choose to.”
Curran noted that the development was brought before the Town in the early 2000s; however, the original developer went into foreclosure, which is how Fairway Cap came into ownership of the development.
The Town wrapped up the public discussion, stating that a representative from Fairway Cap was in attendance and was willing to field homeowners’ questions following the meeting.