HOA claims ‘corporate veil’ obscures assets
The homeowners association at a Longmont townhome neighborhood claims in a lawsuit filed this week that the developer of the community — which the HOA sued a little more than year ago over allegedly shoddy construction work — is using a web of affiliated holding companies to obscure assets and to avoid paying a settlement during arbitration for the late 2022 case.
Parkes at Stonebridge Townhome Owners Association Inc., in its Feb. 20 lawsuit filed in Boulder County District Court, accuses Florida-based Dream Finders Homes Inc. of operating “a vast web of legal entities under the name ‘Dream Finders Homes’ to develop real estate, construct, and sell homes. The parent company created this web of legal entities for the purpose of sheltering its assets and evading financial responsibility for its liabilities. Each of these entities is merely an alter ego of the parent Company. The parent company orchestrates a series of transactions designed to hide assets and avoid liability while continuing its business as ‘Dream Finders Homes.’”
Dream Finders “was responsible for ensuring that the community was designed, constructed, and repaired without negligence, in accordance with all industry standards, in a workmanlike manner, consistent with all construction drawings and documents, and in compliance with all applicable building codes,” according to the 2022 lawsuit.
That lawsuit claims that construction defects at Parkes at Stonebridge, which was built in 2020, include non-compliant design and installation of heating and air-conditioning systems, poor quality concrete, improper grading and construction of drainage elements and incomplete painting.
The Parkes at Stonebridge HOA’S “experts estimate that repairs necessary to redress the construction defects will cost nearly $9.5 million,” according to the 2024 lawsuit.
A judge sent the HOA and Dream Finders to an arbiter in an attempt to settle the 2022 dispute. The outcome of that case is pending the completion of arbitration.
Dream Finders, representatives of which did respond to a request for comment Friday, “represent that they have no assets to pay any judgment or arbitration award that may be awarded in the construction defect case,” attorneys for the HOA wrote in the 2024 complaint.
The most-recent lawsuit alleges that “for each project and/or geographic area (where Dream Finders builds residential communities), the parent company creates single purpose entities to construct and sell the homes.”
In the case of Parkes at Stonebridge, Dream Finders used a holding company called DFH Mandarin LLC, according to the complaints.
“These entities have little or no assets or employees. These single purpose entities purchase and develop land, contract with subcontractors, and perform construction management services with the funding and direction of the parent company. Each entity has the same or similar related owners and management, and each entity is an alter ego of the other and are mere instrumentalities of the parent company itself, created solely to shield the parent company from responsibility for its liabilities. Together, the various entities function as one coordinated business entity, and all operate under the trade name ‘Dream Finders Homes.’”
The HOA argues that “piercing the corporate veil” is necessary to allow for “some hope of being made nearly whole. Without piercing the corporate veil, the association and its members are limited to recovery of grossly inadequate insurance proceeds, at most.”
The lawsuit is Parkes at Stonebridge Townhome Owners Association Inc. v. Dream Finders Home Inc., case number 2024CV30139, filed Feb. 20 in Boulder County District Court.