54 Declarant Votes to 1 Lot Owner Vote

Started by BJ3 • 10 replies • 2973 views

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BJ3 (North Carolina)
Posts: 3

Posted:

Hello,

I found this forum while doing some google searching on a predicament that my neighborhood is involved in. Our community is newly developed but most of the houses are already sold. My wife and I went around counting houses last night and the situation is that there are about 98 houses privately owned, 5 built but still need to be sold and 4 lots still undeveloped.

We recently got a letter from a management company saying that our developer contracted them to manage the HOA and the homeowners dues will be going up $17.50 a year. Hearing this made me go into our contract and see that the declarant gets 54 votes for each lot versus the lot owner getting one vote. Class B membership ceases when outstanding Class A and outstanding Class B votes are equal.

I'm no lawyer but the math seems to work out that as long as the declarant maintains 2 lots, they control the HOA. Moreover, some of the lots they have marked will probably never sell. One of them is a chunk of land that goes downhill steeply right off of the road.

I feel like we're getting screwed here. I don't know for sure but it seems like the declarant wants to maintain control of the HOA for some reason (maybe kick-backs from the management company).

Any help is appreciated. We are in North Carolina.

TimB4 (Tennessee)
Posts: 21,059

Posted:

BJ,

Don't feel alone as this is typical in new developments. When my development was being built, the builder got 20 votes for each lot he owned. What you might want to do,if it hasn't already happened, is to gather neighbors together and request that homeowners be allowed on the board of directors. Don't expect the builder to give up a majority of the seats, but even having one or two owners on the Board can help prepare for the transition to full homeowner control.

The following NC laws would also apply:

Chapter 47F: North Carolina Planned Community Act.

Chapter 55A North Carolina Nonprofit Corporation Act

These would be in addition to anything in your own governing documents.

I would also encourage you to look into the Associations Reserve fund to make sure that it is fully funded. Perhaps requesting at the next annual meeting that a reserve study be completed.

Hope this helps,

Tim

TimB4 (Tennessee)
Posts: 21,059

Posted:

This is also very similar to the discussion involving a South Carolina community. Here is the link to that thread:

http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/108880/view/topic/Default.aspx

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi BJ:

Thoroughly read your governing documents and I also recommend you read the state statutes Tim posted. Your HOA documents should state the period of declarant control, so find out this information. The following are a few snippets from the statutes for you to be aware of at this time:

§ 47F 3 103. Executive board members and officers.
(d) The declaration may provide for a period of declarant control of the association, during which period a declarant, or persons designated by the declarant, may appoint and remove the officers and members of the executive board.
(e) Not later than the termination of any period of declarant control, the lot owners shall elect an executive board of at least three members, at least a majority of whom shall be lot owners. The executive board shall elect the officers. The executive board members and officers shall take office upon election.

47F 3 115. Assessments for common expenses.
(a) Except as otherwise provided in the declaration, until the association makes a common expense assessment, the declarant shall pay all common expenses. After any assessment has been made by the association, assessments thereafter shall be made at least annually.

Also … keep in mind once the homeowners take control if you wish to eliminate any contracts entered into by the declarant (i.e., management company, landscaping, etc.), then you can eliminate at that time if needed per the following statute:

§ 47F 3 105. Termination of contracts and leases of declarant.
If entered into before the executive board elected by the lot owners pursuant to G.S. 47F 3 103(e) takes office, any contract or lease affecting or related to the planned community that is not bona fide or was unconscionable to the lot owners at the time entered into under the circumstances then prevailing, may be terminated without penalty by the association at any time after the executive board elected by the lot owners pursuant to G.S. 47F 3 103(e) takes office upon not less than 90 days' notice to the other party. (1998 199, s. 1.)

BJ3 (North Carolina)
Posts: 3

Posted:

Thank you for all the replies so far.

I've tried to read through our CCR as well as those North Carolina statutes with a fine tooth comb.

As far as the declarant control period, it states that either the votes are equal or on January 1, 2040. Which just furthers my belief that the developer intended on hanging on to the HOA for the long-haul.

I also wanted to point out that my copy of the CCR only appears to be for part of our neighborhood. As I said, there are 107 lots in the neighborhood but my CCR only refers to Lots 1-54. I've tried finding the plat on the county website but I haven't had any luck.

Has anyone had experience with this type of "sectioned" neighborhood and CCR?

Thanks again for all the help.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi BJ:

For copies of Plats you will need to probably physically go to the County Records office to obtain. These are generally large files and not accessible via internet in most areas. Also another option is to maybe visit your local city planning department. They may also have a copy of the subdivision plats and you can ask them questions regarding the divided lot areas in the HOA. It may be a Planned Unit Development which is completed in various phases.

Unfortunately, I did not find anything in your state statutes that curtail the duration of declarant control, everything I saw stated HOA documents. However, that does not mean in the future your state may change the statutes and include a provision, so it is something to check once in a while.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi BJ:

Something else I just thought of is you might call a local attorney and ask about the declarant control period. Many attorneys will offer a free consultation, so it does not hurt to ask. There might be other contract laws other than the HOA statutes which may come into play for your situation.

There is supposed to be a little bit of equality in HOA’s between homeowner’s and declarant rights. There might be a law where such voting rights for the declarant could be considered unconscionable with regards to homeowner rights. Your HOA is not supposed to be a perpetual play ground for the declarant.

BJ3 (North Carolina)
Posts: 3

Posted:

I'm going to put one more wrinkle into this story.

I've been researching this all day and I have found out that there are two section to my neighborhood. Section 1 and Section 2. Contrary to what I thought, I am in Section 2. The CCR that I have a copy of only mentions Section 1 and nothing about Section 2. I found the plat that this CCR refers to and my property is not on this plat.

I have been able to find the CCR for Section 1 on my county's online record storage but I have not been able to find any CCR paperwork for Section 2.

Perhaps it is too good to be true but if the CCR that I have doesn't include my property and I can't find one for my property, does this mean that the property isn't subject to the HOA? It really does seem too good to be true.

Thanks.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi BJ:

Check your Warranty Deed to see what it states regarding covenants attached to the property. Also review your Title Insurance policy which also should list anything that was running with the property at the time they did their title search.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

the homeowners dues will be going up $17.50 a year......I feel like we're getting screwed here.

Yep, and the dues will keep going up, and up, and up, and up. Especially with a mgmt company running things.

Welcome to life in an HOA.

TimB4 (Tennessee)
Posts: 21,059

Posted:

BJ,

Having CC&R's only mention one section is typical in multi-section developments that are still under construction. Based on my own Associations records, we had a similar issue that wasn't corrected until the HOA transferred to the owners.

The CC&R's you have are most probably the CC&R's for your section as well and were attached to your deed in the county office.

Tim

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