Texas - Developer's CPA is Sec/Tres/CPA for HOA

Dan - are you saying that your are in the process of a "turnover" to a member run HOA?

Otherwise, how can you "remove" them?

Hi Dan:

First of all I want to state that we are not attorneys and no advice or comments are “legal” as they are just based on information provided by a poster and our experiences.

Under Article IV Section 3 in the document you posted it makes the statement “At such time as all Lots in the Subdivision have been sold to Owners other than the Declarant, if the initial directors are still directors of the Association, then they shall tender to the Board their resignations as Directors, and their successors shall promptly be selected as above set forth.”

Also, it will be based on what is stated in your Declaration regarding Declarant Rights.

Do you know which State Statutes you fall under? In TX it sometimes can be based on whether you live in a City of X population or County of Y population. The state statutes can supersede the governing documents in some instances. Therefore, you need to be careful regarding what can be changed in any documents regarding said Declarant Rights.

Thanks for the dialogue on this.

As for the by-laws. We plan on amending the by-laws as well.Article XIII, Section 1 allows this with a majority vote of a quorum.

Our declaration is where the voting rights are defined and where a hard date was set. Which expired prior to the last annual meeting where the developer won the election by one vote. He now has half the votes he had then. He almost walked out of that meeting.

Article VII, Section 7.1 outlines the management by association.
Article VII, Section 7.4 defines voting classes and terms
We have passed the date and the percentage at this point...

http://www.pearlandfarmshoa.com/uploads/Pearland_Farms_HOA_Declaration_BCCID-2004064650.pdf

I understand no one here is a lawyer, etc. etc. I appreciate opinions.

Our developer has 3 failing communities that are all over 7 years old.
He has 78 properties that are not moving. I doubt he fights to hold control of our HOA.
I dont see how he can..

Hi Daniel:

Here is my personal opinion. The developer no longer has Class B votes and now has Class A voting privileges the same as all other homeowners. However, by not having Class B votes does not mean that he potentially no longer still has the other rights described in the governing documents. It just means he cannot exercise voting power above and beyond the owners as was previously allowed.

Article VI - Section 6.4 - States regarding the Architectural Control Committee:

“ … The duties, rights, powers and authority of the Architectural Control Committee shall, if not previously assigned to the Board of Directors automatically transfer to and be assumed by the Board of Directors of the Association once one hundred percent (100%) of all Lots under the jurisdiction of the Association have Residential Dwellings constructed thereon.”

This means potentially the Declarant still has control of the committee until 100% constructed.

Article VII - Section 7.1 - Has a sentence which potentially defers to State laws:

“… The business affairs of the Association shall be managed by its Board of Directors, unless otherwise reserved to the members by law, the terms of the Declaration, Articles of Incorporation, or Bylaws.”

By the statement “reserved to the members by law” I would question whether the State laws give any certain rights to the Developer / Declarant. Most state statutes do address and TX is sometimes difficult to review due to items I posted above. In my state the Declarant controls the association by law until one of three items take place and whichever occurs first. Therefore, a question will be does TX allow something similar?

Article VII - Section 7.4 - Here Declarant potentially just looses Class B votes (3 votes per Lot) after either (1) 75% of Lots are Deeded to Class A members or January 1, 2010. Again, potentially this just pertains to number of votes and not remove any Declarant Rights.

Article VIII - Section 8.11 - Reimbursement of Declarant

Personally if I had read this prior to purchase I may have stated to stuff it and not purchased. Reason being is that it states basically “ … without being liable for any claim made by any Member of the Association that the Directors’ fiduciary duty to the other Members of the Association has been breached … ” LOL … Fiduciary duty potentially would be the tort for which to be sued for making any payments to himself for any reimbursement claims.

Article X - Section 10.2 - This section gives the duration for the Declaration:

“This declaration shall remain in full force and effect until April 15, 2005, and shall be extended automatically for successive ten (10) year periods; provided however, that this Declaration may be amended any time, as set forth in Section 10.1”

It appears that you “automatically extended” as of April 15, 2005 and which extension shall be until April 15, 2015.

Article XI - Section 11.7 – It now potentially appears that HUD / VA lien holder consents or prior approval is no longer required because there is no longer Class B member.

I still have not looked at the Statute link yet, but at this time it potentially appears the Developer still has certain rights unless the state law has any provision regarding release of control. And in many states this release is just for governing the business of the association and Declarants still retain other development rights as noted in the documents.

We understand he will control the ACC. We understand it will take a revision to the Declaration to remove him from it.
Our goal is to restore order to the HOA, as required by the ruling docs. We wish to run this very small HOA transparently.
We have very few records. Our facilities need maintenance and improving.
He is not willing to engage homeowners and most despise him anyway.
I don't see him fighting us. He has 18 lots left and it has taken 10 years for him to sell 60.
At a minimum, we have a goal to remove one of them. We are fighting to gain control to make the place nicer.
Everyone will not be willing to kick in more money until he is gone.

Is this not worth a shot?

Hi Daniel:

There is also these sections under the State statute you provided:

Sec. 209.00593. ELECTION OF BOARD MEMBERS.

(a) Notwithstanding any provision in a dedicatory instrument, any board member whose term has expired must be elected by owners who are members of the property owners' association. A board member may be appointed by the board only to fill a vacancy caused by a resignation, death, or disability. A board member appointed to fill a vacant position shall serve the unexpired term of the predecessor board member.
(b) The board of a property owners' association may amend the bylaws of the property owners' association to provide for elections to be held as required by Subsection (a).
(c) The appointment of a board member in violation of this section is void.
(d) This section does not apply to the appointment of a board member during a development period. In this subsection, "development period" means a period stated in a declaration during which a declarant reserves:
(1) a right to facilitate the development, construction, and marketing of the subdivision; and
(2) a right to direct the size, shape, and composition of the subdivision.

Sec. 209.013. AUTHORITY OF ASSOCIATION TO AMEND DEDICATORY INSTRUMENT. (a) A dedicatory instrument created by a developer of a residential subdivision or by a property owners' association in which the developer has a majority of the voting rights or that the developer otherwise controls under the terms of the dedicatory instrument may not be amended during the period between the time the developer loses the majority of the voting rights or other form of control of the property owners' association and the time a new board of directors of the association assumes office following the loss of the majority of the voting rights or other form of control.
(b) A provision in a dedicatory instrument that violates this section is void and unenforceable.

Over 75% of the Lots have been sold, the Declarant now has Class A votes, the owners can now potentially via member votes assume control of board, the sections discussing 100% of Lots sold make the statements “if the initial directors are still directors of the Association”, per 209.013 above after developer loses the majority of the voting rights and new board assumes control then amendments can be done.

LOL … I’m not an attorney, but I would be willing to take the shot if the Articles of Incorporation does not contain any snafu.

Hi Daniel:

Actually I would do it slightly different in that I would leave off your #4 and #5 at this time. Reason being is those items could make the situation end up in a potential court battle and which you want to avoid. The Bylaws allow in Article IV – Section 3 to remove a director by majority vote of the members; therefore, that is potentially legal and owners have majority with everyone having Class A votes. The owners then can vote into place their chosen directors and who will potentially be members of the association. Is the Nomination Committee set up yet per the Bylaws?

Now the Board is the overall power point in the association, so I would then patiently sit back and leave the developer the ARC Committee control until after he sells two more Lots. Reason being is it will make him feel more warm and fuzzy in only loosing Board control, he must build meeting the document guidelines anyway so what would it matter having this control, and it avoids issues potentially with the State statutes. You cannot amend anyway until after the new Board assumes office. After two more Lots are built and sold the 75% provision will also then have been met under the State statutes and you will have a better chance of succeeding with the other proposed changes, if needed later.

You do not want to get greedy … If you go after the other items and end up in a court battle it would possibly put up a red flag to a Judge. Just going after the Board positions would appear fair and potentially right under the documents and law.