Declarant Turnover/Transition

Our builder (who is also the Declarant) sent an email yesterday that he is resigning his 3 board seats effective August 23, 2010 when the last home sold equaled 75% of units sold in our development. Our development is a 40 unit townhome development

The builder owns 10 (which he rents), his brother owns 1 (which he rents) and the Declarant (owns 8). 4 are cemented lots not framed. 4 are unsold finished homes. Total 19

The builder stated in his email that his attorney agrees that the homes he owns privately are not considered Declarant controlled, therefore per our CCR's he is resigning his seats on the board and asked the PM to send out a notice to the homeowners that an election will be held in one week at our Annual Meeting. Myself and my neighbor are the other two board members and we are being asked to resign. When I emailed the PM and asked if he and his brother will be on the voting proxy she responded that they can be because they are owners (which is true) but they are also affiliated with the Declarant (and are the builders). The Declarant can also vote on the homes it still owns (8) and the Declarant is also affiliated with the Builder. Regardless of what the attorney says they are one in the same person.

There are 21 homes owned by homeowners other than the Declarant. 19 are owned by the Declarant and privately by the builder (who in essence is also the Declarant).

I think the builder/declarant is trying to pull a fast one in order to gain complete control over the development. He wanted to resign his President position and hand it over to me because he is in a dispute with the Developer. There are many unfinished items such as gates, landscaping, underground wiring etc. I declined the position.

The resident board member emailed the PM and Board President that we need legal counsel to proceed with this. The only way we could possibly get 5 homeowners on the board if we obtain 21 signed proxies voting for each other (including three resident board members) and the Declarant/Builder gets 19 votes (assuming the cemented lots have 1 vote each).

Any advice would be appreciated.

Maureen,

Normally the CCRs state that after transition, all of the Class B memberships revert to Class A memberships, meaning that whatever properties the developer owns, either through his corp or personally, have only one vote. Therefore, the builder would have only 10 votes and the declarant would have only 8 votes. I cannot see that the builder/declarant is trying to "pull a fast one" to gain complete control over the development as he would not have the majority of votes since there are 21 homes sold. Until transition occurs he has complete control and if his goal was to maintain that control then he would not want to transition to the members.