Developer/ Board change CCR's - Oklahoma

After 6 years our HOA is finally being handed over from the Developer. As stated in the CCR the Developer can appoint the Board.

My family and I were the first in the neighborhood and have a copy of a CCR that apparently no one else has. I am told that the President worked with the Developer to re-write the CCR.

On top of that we just recieved an invoice for the first ever annual dues. There has been no posted meetings nor have we been supplied a copy of a budget. Five days ago I emailed all members of the appointed board requesting a copy of the budget and minutes from any meetings. As of yet I have gotten no response except my email read reciepts.

Questions
1.) Can the CCR be changed without any posted meeting?
2.) Does a budget need to be supplied prior to a required payment?
3.) Is there a requirment to make all meetings open and posted in advance?
4.) Is the board obligated to supply a copy of the minutes of any meeting?

Greg,

CC&R's usually have language within them as to how to amend their provisions. Normally, a certain percentage of property owners is required to approve an amendment. The percentage can range from as little as a simple majority to 100% and the amendment must be recorded.

One point of confusion is that the developer/declarant gives himself superior voting power so that he may control the board as long as he is still selling lots. The confusion is that developers may believe that their ability to control the board also allows them to amend the CC&R's at will.

My recommendation is that you examine your CC&R's thoroughly to learn how they may be amended.

Since you said that your CC&R's seem different than others, pay a visit to your county recorder and pull up all declarations recorded for your community. If the version that was tendered to you at the time of sale is not recorded or if the CC&R's have been amended without owner approval, you may have a cause of action against the developer.

WOW...thank you Tim.

All of the research I found also led me to believe that we must be filed as a Corporation. So Corporation Statutes are binding. In that case, as I read it, all meetings must be posted and open just as any Corporation with share holders.

I am surprised that laws regarding Corporations are used as the rules around HOA, but it does make sense. All members in our neighborhood do have a stake in a large investment.

The CC&R's are separate and distinct from articles of incorporation and bylaws.

The CC&R's are known by many names but are the deed restrictions on your property. Somewhere in them will be a provision that makes you a member of the association by virtue of owning property in that development. The CC&R's are typically recorded at a local level and would be filed at the same office where your deed is recorded. Your deed most likely contains wording to the effect that your property is subject to the restrictions recorded in book xxx, page yyy of the records of the zzz recorder. If CC&R's were not recorded prior to your purchase of the property, they do not apply as they cannot be tacked on after the fact.

The association, if incorporated, will be formed at the state level by filing articles of incorporation with whatever agency regulates corporations in your state. Ideally, this should be done before the developer sells his first lot but I have been unable to find any case law addressing this issue. My best guess at this time is that incorporating the association some time after sales have been made is not a fatal error.

Bylaws are essentially a statement of how the association will operate. They will typically address issues such as who may serve on the board of directors, number of directors, length of term, etc. There seems to be an endless variety of how corporations are formed, so your state's laws will address many issues including whether the bylaws get recorded anywhere.

I am very confused.

I understood the Covenance to be like the Constitution. It can be changed, but only by the vast majority of the HOA members. After all, it is a binding contractual agreement between the purchaser of a property and the Developer or Declarant. Contracts are normally mutually binding.

What I am reading is that the Covenance can be changed at will by the Declarant.

If this is correct, what protections do the average HOA member have?

Greg

Generally the Covenants are written so that they Declarant pretty much is in control until turnover to homeowners. Have you read yours to see how and when the declarant must turn over the association to the owners?

Look at it this way. If you were to undertake construction of say a 100 home HOA development, would you want a handful of owners controlling it early on? Were it me, I would want them out of my way until I was done then let them do as they jolly well wish to do.

The Contract (CC&Rs) can be amended (changed) according to the procedure outlined within the document.

We are saying that it is typical, when under declarant control, for the document to be written allowing the declarant to either change the document on their own.
OR
To have the voting power (by assigning 1 vote per lot for members and more than 1 vote per lot to the developer aka class a and b membership) to change the document irregardless of what the homeowners desire.

Why is it this way? It's this way because the declarant wrote the initial contract and typically the individual who wrote the contract will make it favor them. Once control of the membership is transferred to the members, it becomes fairer (as all members will typically only have 1 vote per lot).

Granted it's true that members typically have little say when the Association is under declarant control. However, the Association must still comply with the governing documents and applicable State laws (in your case, that would only be corporate laws and only if the association is incorporated). Even if the declarant controls the voting power, if an meeting is required to adopt/amend a document, a meeting must be held and any notice requirements met.

In the long run, while under declarant control, it's best to work with the developer (more flies with honey type of thing). Perhaps volunteer to serve on the Board or a committee. This way you can keep informed and provide input from a members perspective.

Unfortunately, if the membership doesn't become involved it is possible for an individual (or individuals), be they the declarant or owners, to cause problems for the Association. This can include bankruptcy.

As I said, the best defense against this is to become involved. This can be done by just attending meetings, serving on committees or running for the Board. Typically, issues can be minimized when most of the membership is involved.

Here is a concept...Maybe the board does NOT know what the budget will be? That may be the reason they have not responded. They aren't to release a budget until the first of the year when they take over. There are many factors they have to figure out first before they can even develop a budget or estimate on dues. Right now I am sure the dues are just a rough estimate and a trial run so to speak to get things going. You need money to make money or in the case of the HOA, to get money to run independently...

What people overlook in a HOA is that the developer experiences a different debt load than the owners will. The developer buys a partition of land for example 100 acres. They then clear it, break it up, and sell 100 1 acre lots. Their expenses are then tied up in building expenses such as building a clubhouse, installing a pool, or other amenities. However, when the owner's take over their expenses will be the MAINTENANCE and OPERATIONS costs of the HOA. It's much easier to estimate the cost of building a clubhouse than to estimate the long term costs of maintaining that clubhouse. The most expense of a HOA eventually falls onto the shoulders of all it's members once the declarant gets out.

So your HOA board has the job now of figuring out the costs of utilities, insurance, repairs, hiring contractors, legal services, establishing a reserves account, estimating daily costs of operations, and an abundance of other details to finally reach an equitable dues amount. Expect that amount to fluctuate until the real costs and not just estimates come into play.

It's like getting a new job and a new paycheck. How long before you figured out budgeting for your bills and expenses? Imagine 5 to 7 strangers on a board trying to do the same thing. There are going to be issues and there may not be necessarily all the openness you want. It doesn't matter if you know someone on the board or not. If you want to be involved then make it known you want to be involved. Find out when meetings will happen and when you can run for a board position after transition.

Melissa, perhaps you did not read the entire thread.

The Board has been meeting without notifying anyone. I have unsuccessfully, attempted to contact them since I found out the HOA is actively moving forward. The Board was hand picked by the Declarant and no volunteers have been requested.

I have never missed a meeting of which I was made aware. None of the Board Members will respond to my emails for information.

As far as the budget goes. The Declarant knows the cost of maintenance, utilitiies and insurance as he has been paying them for 6 years. We have no club house, pool or any other ammenities at this time. That is part of what concerns me.

The Developer/ Declarant has been making empty promises to potential residents for several years now. I am concerned that he will sign contracts and agreements that benefit his lot sales or the builders in the name of the HOA and then step out with the HOA holding the bill.

As a former HOA President, did you invoice for dues without supplying a copy of the budget to your members? Did you ask for input on the budget? If someone emailed you asking for bugetary numbers that you had not finalized, would you simply not respond?

Am I just being overly concerned about a huge investment that I have made?

A volunteer board ready to step is is a great idea. Of course the Developer put people in place that he knew would just go along.

What really scares me is that we really are not rid of the Developer until he has sold his last lot. He gets 1000 votes for every lot he still owns.

So am I stuck...just pay the invoice or can I demand to see a budget first??

The covenants (CC&R's) usually have a provision for amending them. I personally have never seen one where the declarant may unilaterally amend them at will. Some percentage of property owners must approve, although if the declarant still has a bunch of unsold lots he may have sufficient power to amend.

Some states have held that amendments are limited and that new requirements cannot be added. An Arizona case held that the CC&R's could not be amended to force owners to join a community club. The courts in Colorado do not share that view.

I would think that it would be difficult to obtain a mortgage in a community where the declarant could change everything at will.

One point of confusion is that while the declarant may not be able to amend the CC&R's by himself, he can take control of the association. Controlling the association and amending the CC&R's are two very different things.

Tim, Melissa thank you. You have been very helpful. Not what I was hoping to hear, but at least you didn't just defend the developer.

I cannot get past the fact that the covenance are a contract between the purchaser and the developer. I have been signing binding contracts for nearly 20 years and never have I heard of a binding contract that allows one party to completly steam roll the other. I read the covenance and did not see the giant loop hole, but I am not a lawyer.

We have several lawyers in the neighborhood and I guess I am surprised they would agree to this nightmare. Truth is, most of my neighbors eyes just gloss over when I explain the pitfalls of the way this business is being conducted.

I have been apart of 3 other HOA just not an HOA that had not been turned over. Never again.