Starting Up A New HOA

We are a new community of individual homes. We are about 50% built out and occupied. The HOA as of now is controlled by the builder and we have a Management Company hired by the builder that we are very much dissatisfied with. The information we are getting from the management company is that we as homeowners cannot take over the HOA until 80% of the homes are built and occupied. I was wondering if anyone out there has any experience in a new development and when the homeowners can legally take control of the HOA.

Ray

At settlement you should have receieved a set of documents that spelled out, among many other things, when residents can be elected to the Board. It may be a complete turnover at 80% but I would verify it with what is written. If you don't have such documents ask your management company to see them and for a copy.

Our documents called for a gradual approach, with one resident elected to a five person Board after 25% sales, two at 60%, and a majority at around 75%. A builder representative remained until near sell-out. It went very smoothly.

If your documents do specify complete turnover at 80% you might consider asking the Board to appoint a resident member immediately and a second at around 70% turnover. I believe our Builder/Developer found this to be very much to their advantage. Working with them from the inside we were able to get a number of concessions without confrontation and took early control of items such as the budget. They had the benefit of having us as an interface for resident complaints (HOA and not residence related) and someone to do a lot of the Board's administrative work.

Dave

Lance, I do not agree with you on the statement "once they sell and move on, the documents will need to change to eliminate that control." The documents do not change. The Developer's remaining Board members will resign and the homeowners elect members. The homeowner's Board may have the opportunity to change management companies depending on the conditions in the management agreement.

Also, even though the Developer's Board picks the management company, the association pays for the management company using association funds which are controlled by the Developer's Board. The Developer maintains control to protect their investment. The Declaration spells out when homeowners are allowed to become Board members and when the Developer relinqueshes contol.

Lance, I realize you are speaking based on your level of experience and much of what you stated is correct. However, some needs clarification.

"The Developer does assign the first years board. That's to get the homeowners to take charge and run things on their own the year after."
The Developer picks the Board members until such time as homeowners are selected by the homeowners. This can take several years and seldom is one year. The Developer maintains control to protect their investment.

"It is when full control is handed over to the homeowners that ALL references to the Developer should be removed from the documentation."
I agree it is best to clean up and remove references to the Developer when the Declaration needs to be amended. However, deleting references related to the Developer is not required. Many HOAs don't amend their Declaration and when they do amend it is often only for a specific item not to remove things like class B members.

"The developer is pretty much out of the loop once they appoint a new board of homeowners"
That depends, usually the Developer writes the Declaration to maintain control of the Architectural Committee independent of the Board until they have sold the last lot.

"They do NOT have to keep the developer's management company after the FIRST MEMBER elections are held."
Sometimes the homeowner Board members are elected to the Board in phases as percentage of the development are completed. Upon complete take over of the Board by the homeowners the association is still subject to the terms in the Management Agreement. The Board can decide to terminate the Agreement but it could involve an early termination fee.