Tiny-Home Developer Faces $5 Million Lawsuit Alleging His ‘Zombie HOAs’ Are Mismanaging Funds

The developer’s model was simple: He sold residents the land. He built roads and advertised a list of community amenities. He also had a variety of tiny-home models owners could choose to build on their lots. Once the home was built, residents could live in it or opt to rent out their property as a vacation home through the developer’s property management service. Residents paid into a homeowners association that the developer also managed.But Tennessee developer Claude "Chip" Hayes III had some unusual rules. For example, Hayes had a list of approved builders that homeowners say they were required to use to build their homes.The trouble began more than two years ago, when residents of Hayes’ development the Retreat at Deer Lick Falls sued, claiming he failed to relinquish control of the subdivision's HOA and mismanaged HOA funds. The legal dispute has widened to include complaints at three of Hayes’ developments: the Retreat at Deer Lick Falls, the Retreat at Sunset Bluff, and Water’s Edge. Residents say the developer has retained control of their HOAs long after the proper handover date, a phenomenon known as a "zombie HOA."Earlier this year, more than 40 residents at Sunset Bluf...