Developer/HOA

Started by CraigZ1 • 11 replies • 1806 views

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CraigZ1 (Pennsylvania)
Posts: 5

Posted:

I live in a complex with approx. 50 units. I'd say 4-5 are still owned by the developer.

The developer is the president of the HOA, as well as employs his company to be the management group. He has not held meetings even though there is a date for the annual meeting in the HOA declaration. I asked about it and they danced around the issue. I'm concerned that if the developer meets financial trouble, he'll just cut himself a check from the HOA reserve fund.

Any advice?

GlenL (Ohio)
Posts: 5,491

Posted:

I'd start by reading the CC&R's. Somewhere in there should be when transition from Declarant to Homeowner control happens, typically after X number of years or when a specific percentage of units are sold.

Studies show that 5 out of 4 people have problems with fractions

CraigZ1 (Pennsylvania)
Posts: 5

Posted:

Yep. Here's the part about that:

Declarant may retain control of the Executive Board for five (5) years following creation of the Condominium or until seventy-five percent (75%) of the Units are sold and settled, whichever occurs earlier. After termination of Declarant’s control of the Executive Board, Members will be elected by the Unit Owners.

That should have occured last September. He employs all the support staff for the building(and his other buildings)...so I guess he's just trying to keep the contract.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Craig

According to what you wrote, the declarant should have turned control over to the homeowners when he sold the 38th out of 50 units.

I know some associations that are happy with the way the declarant runs things and never want it turned over to their neighborhood idiots.....LOL

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Craig

The declarant cutting himself a check and or spending reserves for their own use is a potential and real issue.

You say there have been no meetings/information but yet you imply there is a budget as you say there is money to "steal". How do you know this?

If others want to take control and they can (based on what you have said), I would suggest you get a group of interested homeowners together (maybe private, in your home)to discuss if they wish to take control. If enough want to take control, then hire an attorney (with proven HOA experience) to help guide you but also to lock up the reserve ASAP so no one can spend it prior to the turnover.

Hope this helps.

CraigZ1 (Pennsylvania)
Posts: 5

Posted:

I got a copy of an older budget(from when I purchased the unit).

Looks like 20k to the reserve fund each year...

Also 20k to his own management company(that is already in place and managing other buildings), and money to maintenance people employed by him.

My question is, since the declaration says:

Declarant may retain control of the Executive Board for five (5) years following creation of the Condominium or until seventy-five percent (75%) of the Units are sold and settled, whichever occurs earlier. After termination of Declarant’s control of the Executive Board, Members will be elected by the Unit Owners.

Is he still the HOA president? Is there essentially no HOA right now?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By CraigZ1 on 05/10/2012 8:44 AM

My question is, since the declaration says:

Declarant may retain control of the Executive Board for five (5) years following creation of the Condominium or until seventy-five percent (75%) of the Units are sold and settled, whichever occurs earlier. After termination of Declarant’s control of the Executive Board, Members will be elected by the Unit Owners.

Is he still the HOA president? Is there essentially no HOA right now?

Craig,

Once the turn over from developer to the membership occurs, who serves as President will depend on who is elected to the board and the decisions of that board. Perhaps you can submit your name to serve on the board.

Typically, when electing directors, each member has one vote per unit. However, most governing documents give more than one vote per unit to the developer (if they still own units or have unsold units). This often still allows the developer to have control (by virtue of controlling the votes) even if the Association has been turned over.

This uneven voting would only be for Directors. Once elected, Directors only have one vote each and board decisions are made by majority vote. Therefore, if there are concerns with the developer, it's important to get as many homeowners elected to the board as possible. This of course will depend on how many are willing run to serve on the board and how the votes are cast.

If the Developer is unwilling to follow the CC&Rs to transition control to the membership, then the members will have to seek legal action to force the developer to comply. This will cost time, energy and money and you will need to consult with a local attorney to see what the members options are.

If the developer is willing, then it's just a matter of holding an annual election. Then the real work begins, the actual transition. This will require a lot of hard work from the Board but will be worth the effort. here is a link to a discussion on this site about what should be done during a transition:

Subject: Developer handing over HOA to homeowners

I would start, as others have suggested, with a letter to the developer asking when the annual meeting will take place. If there is an unsatisfactory response, then start a petition within the development to call for a special meeting of the general membership for the purpose of electing Directors. Perhaps, once the developer sees the membership is organized, they will agree to hold the meeting.

Hope this helps,

Tim

KaushalV (New Jersey)
Posts: 25

Posted:

Craig,

I am in similar situation as you. Luckily for us, the management company did hold elections recently. I would suggest three actions:

1. Get as many homeowners together as you can. Draft a letter to developer and the property manager demanding the annual meeting plus elections. It would really help if you can read laws of your state and identify any particular statute (http://www.communityassociations.net/state_laws.html). Mention that statute in your letter. Get homeowners to sign the letter and send it to developer/management company by certified mail. This should get their attention.

2. Contact appropriate State department. In NJ, Department of Community Affairs can help on this particular topic. Get your state department to contact the developer.

3. Find an attorney experienced in community association laws
(http://www.caionline.org/info/provider/Pages/CAINationalServiceDirectory.aspx)
and be ready to use him/her in case item 1 and 2 don't get you the desired results.

Good luck,
Kaushal

CraigZ1 (Pennsylvania)
Posts: 5

Posted:

Update:

The developer has agreed to have the meeting. However, in the declaration it says:

Declarant may retain control of the Executive Board for five (5) years following creation of the Condominium or until seventy-five percent (75%) of the Units are sold and settled, whichever occurs earlier. After termination of Declarant’s control of the Executive Board, Members will be elected by the Unit Owners.

AND

Upon the first to occur of the following, all Board members shall resign, and a meeting of the Unit Owners shall be held to elect the all five members of the Board:
i) One hundred eighty (180) days from the date when seventy-five percent (75%) of Units have been conveyed by the Declarant; or
ii) five (5) years after the date of the Declaration.

I know we're not going to have a quorum...but theoretically the developer will need to resign right? If I'm understanding this right, no quorum means we can't elect the board.

JimB23 (Virginia)
Posts: 4

Posted:

Do the docs define the election process at all? If so, you should be permitted to get proxies signed before the meeting that count toward the quorum.

KaushalV (New Jersey)
Posts: 25

Posted:

Hi Craig,

Assuming that the deveoper wrote the Declaration, I hope that he will abide by it readily and provide the resignation letter.

If you see a risk of quorum, you can do 2 things:

(1) Invest some time to talk to your neighbours and encourage them to come to the meeting. It may feel like why do you have to do that when everybody has a stake in this. We won't be able to tackle that question a discussino format like this forum. You have to do what must be done to make the meeting happen.
(2) You can read your declaration if it says something about mailed votes counting toward establishing a quorum. In my association, people don't need to come to the meeting to establish quorum. They can mail their ballot form and it counts toward quorum. You can make them aware of this option.

By saying "not having a quorum". you seem to be implying that other people may not be as actively involved/concerned about this. That's the reality of situation. Pardon me for deviating.....it is the same public apathy that is allowing big banks/corporations to run amuck and ruin the long-term future of whole planet.

CraigZ1 (Pennsylvania)
Posts: 5

Posted:

So...if he resigns, and we don't have a quorum, what would happen?

No board?

Here's the election info:

3.3. Election and Term of Office. Executive Board members shall be elected as provided in Section 2.7 above and Section 9.2 of the Declaration. All Board Members shall either be Unit Owners or the Approving Party for a Unit Owner. The members of the Executive Board shall hold office for one year and until the earlier to occur of the election of their respective successors or their death, adjudication of incompetency, removal, resignation or closing of the sale of the Unit owned by such member, if such member owns only one Unit. An Executive Board member may serve an unlimited number of one year terms and may succeed himself or herself.

2.7. Voting The number of votes in the Association to which each Owner is entitled shall be the votes assigned to his Unit in the Declaration. The Person(s) entitled to cast the vote(s) shall be determined pursuant to the Declaration.
Except with respect to election of members of the Executive Board and except where a greater number is required by the Act, the Declaration or these Bylaws, the owners of Units holding a majority of the aggregate votes of those Unit Owners voting in person or by proxy at one time at a duly convened meeting at which a quorum is present is required to adopt decisions at any meeting of the Association. There shall be no cumulative voting except as expressly permitted under the Declaration or these Bylaws. Voting may be accomplished at the discretion of the Executive Board by written ballots to be deposited at such place and during such time (up to a maximum of 120 days) as determined by the Executive Board.
In Executive Board elections only, the Unit Owners owning Commercial Units and the Unit Owners owning Residential Units may each nominate an unlimited number of Unit Owners or Approving Persons to stand for election to the Executive Board. The Unit Owners owning Residential Units shall elect four (4) Executive Board members and the Unit Owners owning Commercial Units shall elect one (1) Executive Board members. Unit Owners may not cumulate their votes but may divide their votes among any number of nominees for the Executive Board.

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