In November 2017, the 14th District Court of Appeals confirmed that GOMO could not enforce its deed restrictions against Peter and Katherine Chang, homeowners who challenged GOMO’s legal standing. After being denied a rehearing before that same court, GOMO has now hired a law firm to handle bankruptcy proceedings that would allow the homeowners’ association to effectively reorganize. At the same time, they have nearly $600,000 sitting in a bank account and questions remain about where that money goes now.
In 2012, GOMO filed suit against the Changs, seeking to stop an additional two-car garage they built. Not only did GOMO seek a permanent injunction, they also sought damages for every day the extra garage door was still standing. In the suit, GOMO claimed the deed restrictions did not allow more than a single two-car garage.
A trial court disagreed, but not because of verbiage in the Garden Oaks deed restrictions. Instead, the trial court ruled that the Changs didn’t have to abide by those restrictions because GOMO was an “invalid” organization. Specifically, the court said the Changs proved that GOMO was not formed legally.
Things got complex when the trial court’s ruling was appealed. The 14th District Court of Appeals agreed that GOMO could not enforce restrictions against the Changs, but the court also said GOMO, “as an association, has the legal standing and authority to enforce the neighborhood’s bylaws.”
In other words, the Changs won, but so did GOMO.
“Basically, GOMO was not formed exactly right,” explained W. Austin Barsalou, the attorney representing GOMO. “But GOMO is still a valid organization. It is a [homeowners’ association]. The issues are mandatory assessments and membership, but they can still enforce the restrictions.”
The real issue now, according to a number of sources who asked to speak off the record, is the money. GOMO has a lot of it.
Every time a home sells in Garden Oaks proper, title companies add what’s called a “Transfer Fee” on top of the sales price. That fee, which is .75 percent of either the purchase price or the appraisal by HCAD, must be paid at closing. For a $500,000 home, that would amount to $3,750. According to Barsalou, there is about $600,000 in the account, and GOMO needs a court to give legal instructions for what to do with the money.
“The [GOMO] board is still reviewing how they should move forward,” said Barsalou, who is not handling the bankruptcy proceedings. “What they’d like to do is reorganize, but the question is how much of the funds in their possession they can use.”
As Barsalou noted, paying for the bankruptcy attorneys will be expensive.
Peter Chang, whose lawsuit spurred the uncertainty, doesn’t want the board around, at all.
“I am cautiously optimistic that the board will do what’s right for the neighborhood,” Chang said. “That means closure of GOMO.”
Chang doesn’t believe the money should be used to reorganize, but rather it should be sent back to where he believes it belongs.
“They still have a lot of money. And with a lot of money, they have a lot of power,” Chang said. “I think they should return the money to the homeowners.”
The money GOMO has collected in the past has been used for neighborhood administration and safety. In GOMO’s fiscal year 2017, the organization spent a total of $72,179. More than $25,000 of that was spent on the Constable program. In the years prior to the Chang’s lawsuit, GOMO paid nearly $12,000 a month to fund two patrols of the Constable.
While timing is uncertain, one person close to GOMO said a filing with a bankruptcy court could happen as early as April 1.