Early Transition

Started by GlenL • 4 replies • 1386 views

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GlenL
Posts: 5,429

Posted:

After reading another post about a Developer forcing a HOA to transition early it got me to wondering; can they legally do that? I am a big believer in the validity of the contract and if it says transition will occur at five years or 75% build out can it occur sooner if the homeowners do not want it to? Or can the Developer use his plenipotentiary powers to change the CC&R’s to cause an early turn over? I know we don’t do legal interpretations here but I am interested in your opinions on the matter.

RogerB
Posts: 4,986

Posted:

Glen, if the developer owns enough units to comply with the percentage required to approve amendments to the Covenants then yes they can. But why would they want to lose control of their investment? And just because they chose to amend the Covenants does not mean the other members are required to take over control.

MaryA1
Posts: 388

Posted:

Glen,

Some CCRs may state "or such earlier time as the declarant shall designate in writing", as mine do. AZ has no state laws governing transition so I don't know that there is a "legal" requirement that pertains to it. IMO, it may just come down to whatever the declarant decides is best for him. Transition usually occurs when the declarant no longer has control of the assn, meaning the Class A member votes out number his Class B votes.

DonnaS
Posts: 5,596

Posted:

Glen,

When my 1 Florida HOA was nearing the "Turnover" date from the Developer, a wise H.O asked if the Board could ask the Developer to address and possibly change a couple of elements in the CC&Rs. Seeing that he was a fairly nice guy, he agreed to meet with the new Board and with his attorney at his side. We had a few items that we felt better having changed. One was to increase the Board size from 3 to 5, which he did. We asked for "self enforcement, apart from the Master Association, which he did.
We asked for a removal on pet weights and no yard ornaments, and he gladly did that as well.

So what I am saying is the as long as he, the Developer has not given up his ownership of the association, he can basically do what he wants. As Mary said, he can change when he wants to give up control as well. I guess that it is leagl.

JanetB2 (Colorado)
Posts: 4,213

Posted:

Glen:

Check you state statutes: http://www.associationtimes.com/stateInformation.htm#C

My state statutes state:

(I) The declaration, except a declaration for a large planned community, may provide for a period of declarant control of the association, during which period a declarant, or persons designated by such declarant, may appoint and remove the officers and members of the executive board. Regardless of the period of declarant control provided in the declaration, a period of declarant control terminates no later than the earlier of sixty days after conveyance of seventy-five percent of the units that may be created to unit owners other than a declarant, two years after the last conveyance of a unit by the declarant in the ordinary course of business, or two years after any right to add new units was last exercised.

You need to consider certain pro's or con's. There have been associations who transitioned from the declarant after a number of years and had no money in their account to initially operate. After X number of years you will have certain items that may need replaced such as possibly irrigation pumps, etc. If the declarant has had control with no income in an account for the HOA then there may not be a reserve fund built up to cover such extra expenses.

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