production builder may by vacant lots in luxury gated community

You're probably going to need legal advice on this. But for a start, I suggest you very carefully review your declaration (CCRs) for the following:

1). What legal entity is/was the declarant?
2). Is that legal entity still in existence?
3). What, if any (likely there are), special rights did the declarant have prior to HOA turnover?
4). Look particularly for the declarant's right to unilaterally amend the CCRs.

Others here will probably chip in with additional advice.

Hi Marsha:

At least you are aware of this issue now and hopefully not after the fact of amendment and property already sold.

IMPORTANT: Be sure to go to your local County Records website and make sure there have been no amendments to your governing documents filed. You need to do this often maybe weekly or at minimum monthly during this situation.

For something to move forward there would potentially need to be an amendment to your CCR’s. You need to make sure that they do not try and file something behind the current homeowner’s back and without their knowledge. You might also keep an eye on the county assessor's regarding the various lot's and owner changes.

Then you need to follow John’s advice … carefully read your CCR’s and State Statutes. I would print an extra copy of these documents and go through with a highlighters and note declarant rights and options in say orange and homeowner rights in yellow. When reading the state statutes, be sure to check the definitions on items you have any questions. For example in CO the statute refers to units quite a bit. Many people think units refer to houses in a single family association; however, units actually are the lots.

I will be very tied up most of this week, but will try and review statutes and information to help as much as possible. Some information we will need to help research will be:

1) What date was community formed and documents filed.
2) What do the HOA documents state regarding period of declarant control.
3) Answers to John’s questions 3 and 4.

I wonder how you can prevent this.

You have 13 lots versus 50 undeveloped lots. Even if you aren't under declarant control, they can use those 50 votes to ram through almost anything that they like, including amendments that they need and recalling/voting in a new Board who will do as they wish. If you are still under declarant control, it's even easier for them.

I'm not sure how you can resist. Maybe if you work with them, you can get some concessions. I'd be leery of being confrontational, better to get a little something than to be completely frozen out and get nothing.

But, of course, check with experts to see if you have some leverage that I don't see.

This is a risk that first buyers in a development often aren't aware of.

One disadvantage is that the development may not develop as you expect or, in these trying times, may not be developed at all.

There are few benefits to being among the first buyers in development as far as I can see. Ideally, you want to buy during the last phase of a development. Often, developers save their best lots for the end because they want them to sell fast rather than be stuck trying to unload some obviously inferior lots in a finished development. As one of the last buyers, you can also see that the development when it is mostly finished.

Sometimes, early buyers can negotiate better deals but I'm not sure that it compensates for the risk.

I hope you are right Janet

Excellent idea, thanks. I understand we have quite a bit of this material as the community is on 3 years old and many people custom built their homes with the developer based on that bill of sale.

I understand Florida law is very strict on HOA's and very homeowner supportive.

I am reviewing the CC&R's now and I am afraid the declarant has all rights to amend at this point. I have to wonder if declaring bankruptcy may change that in the eyes of the law becasue... now he is wroking in his best interest to dump the land and get out from under the note; this certainly is a direct conflict with the CC&R's he is bound to uphold as the declarant. There must be some posture based on that status I would think.

Hi Marsha:

You potentially are incorporated; however, do your Articles of Incorporation say you are subject to Chapter 607 or Chapter 617? I want to be sure to review the correct Corporate statutes as needed.

Hi Marsha ... are your association documents available to view somewhere i.e. website or county records?

Marsha & Janet, I don't want to rain on your parade but Daniel hit the nail on the head.

Say I'm the new builder, I just bought 50 lots giving me 50 votes, the existing homeowners have 13 votes. I don't need to be the new Declarant, I have the votes.
Now with my 50 votes I have the power* to amend the CC&R's to whatever I want as long as it doesn't violate the law. Included in my changes would be removing any requirement that a Board member live in the HOA. I can now vote my friends and family on the Board, replace the ACC etc.

My advice, is before you declare a war you might not win, I would get the 13 H/O's to pony up some cash and hire an attorney to find out just what you can or cannot do.

*50 votes is more than 75% of 63 which is usually the upper percentage required to amend the documents.

Per Marsha’s statement above they are meeting with an attorney on Monday.

However, it does not hurt to look at statutes and documents so they can have items to reference and ask questions of the attorney. It can help them to be a little bit aware of what the attorney may reference and also help understand what he is stating regarding the issue, if they read their documents carefully and the state statutes.

What I was hoping to find in FL is something similar to the CO and other state’s statutes and which state:

What the above type statutes potentially do is the developer reserves items in the CCR’s which they want to be able to change, and can do so with their majority of vote. Other items not reserved require 67% of vote “including 67% of units not owned by a declarant”. This in essence protects both the declarant (who can reserve what they want to change) and the homeowner (who purchases in good faith based on the CCR’s).

In essence if I read the CCR’s before purchasing and they state that the declarant reserved the right to change the construction and design guidelines, then I have the option to NOT purchase one of the properties. If declarant did not reserve the right, then I know in order for him to change he would be required to get 67% of units and which he does not own to agree, and would therefore be more apt to buy within that new subdivision.

Potentially before a declarant sells a home he can make many changes to CCR; however, once he sells to an individual then there should be certain rules as that individual purchases in good faith based on the CCR’s, advertising, verbal communication, etc. At that time there is other potential statutes such as possibly consumer protection, real estate, etc. which could also come into play.

After doing some reading FL does not have a similar statute as other states, but they do make a point of putting the above statute I referenced in the HOA statutes. This in essence tells me that Marsha needs to be sure to check with their attorney regarding this statute and other consumer protection laws regarding this issue. Potentially once the developer sold any homes based on the CCR’s and other advertisements he reeled in buyers to purchase for large amounts of money and to not follow through based on the information they purchased under could potentially incur liability and which hopefully could be a deterrent.

One of the best statements I ever saw in a lawsuit case said the following, and which I feel is very true when it comes to an HOA and new development:

Generally public policy forbids unfair contracts of adhesion and unconscionable contract terms. Homeowners rely on covenants and restrictions to protect the value of their single-most important investment … their homes. For any developer to unilaterally amend covenants and restrictions to suit their own financial needs deprives any protection afforded to the homeowners by virtue of the covenants and restrictions.

DanielH1 has it right, you will not be able to force any builder to build what won't sell. I'll bet the only way you can control what is built and who builds it is for the 13 owners to buy the available lots.

Jim

Interesting … so here is the potential scenario:

1) Developer decides he is going to build a subdivision and has a choice say between:
a) Luxury Homes
b) Above Average Homes
c) Moderate Homes
d) Cheaper Homes

2) Developer chooses to build Luxury Homes (even though he has all the other choices), and sells the idea to a lender who in turn gives him potential financing for his project as long as maybe he gets appropriate approval from certain entities as required.

3) Developer sells the big idea along with submitting the subdivision documentation to:
a) Potentially State real estate or subdivision department, if required.
b) The local County/City planning department for approval.
c) The County/City Council then of course must agree and vote to approve everything including Declaration of CCR’s so the government entity does not need to maintain certain aspects.

4) Developer then subdivides and starts advertising to sell his grand plan. Developer now is reeling in one buyer after another and making some really darn good profit. Maybe times are good and he is spending that money on toys just as fast as he is making it and enjoying life. Who cares if he still has homes to build and obligations to maintain, life is fun right now.

The buyer knows:

1) Developer potentially received financing from some entity, so developer must be financially stable otherwise how is he able to finance and build nice luxury homes.
2) The local planning department of course approved and supposedly reviewed all the various stages of the development process to insure all proper code requirements are met.
3) City/County government officials had to vote and approve the subdivision including the Declaration of CCR’s which of course were reviewed by city attorney to insure all aspects that city does not want to maintain are accounted for and documented.
4) Consumer potentially reviewed development brochures, seen advertisements, etc.
5) They spoke with realtor and developer, who along with those brochures potentially make statements such as the entire development is going to be above average homes, stucco exterior, granite counters, lots of tile, travertine, marble, etc.
6) Important they also must read the Declaration of CCR’s, By-Laws, etc., at least if smart. They also potentially have been told that these documents will be followed and are in place to help protect the value of the homes and therefore protect your investment.

After all the above takes place the consumer (potential home buyer) purchases because everything above is potentially the truth, after all look at who all had to finance, review, approve, etc. this grand adventure.

Then when times get a little tough … who gets hung out to dry … the end consumer of course. The person who spent hundreds of thousands or even millions on a home they purchase, agreed to the CCR’s, all in good faith based on the documents, etc. because their property is suppose to be protected.

Now if the consumer had gone to the local store and purchased a lousy ten dollar item and said item was not what was advertised, they could return it and get their money refunded. But if you purchase a million dollar item and said item ends up not as advertised, the developer just changes the advertisement to line his own pockets, while potentially emptying the home buyer’s pockets … and it is amazing people think that is acceptable practice.

So, why do all the other above entities potentially have no responsibility and the home buyer is allowed to be given the shaft, when they are in essence the totally innocent party in the entire scenario?

If developers or other entities were held responsible then potentially they should have to pay homeowners they took advantage of and then in the future when they start something they will be sure they can finish, or pay the price to lower the standard. Potentially they would choose to build moderate homes and take care of business instead of choosing luxury homes with the attitude of … if I can’t finish then I can just give everyone the shaft after living high on the homeowner’s money for a while. This is something HOA lobbyists need to look at because this is where the rubber meets the road when it comes to protecting property rights, especially in some states where developer is given in essence cart-blanche and no set turnover date.

Glen … I have to admit you have a very valid point. I agree if bankruptcy is filed that potentially puts a different scope to the equation. However, if bankruptcy not filed and CCR’s changed for personal benefit of just the developer then it is very morally and ethically wrong. I’m not an attorney either, but it is just not right depending on certain circumstances. Maybe my morals and ethics are set at too high of a standard.

Potentially if this is a risk that early buyers face … then the future could become bleak with nobody willing to purchase in a new HOA development.