What is the appropriate Developer Financial Contribution?

Started by TimM8 • 6 replies • 1270 views

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TimM8 (North Carolina)
Posts: 1

Posted:

In a HOA where the Developer stills owns most of the lots, what is the appropriate amount of money the Developer should contribute? Legally, must it match the number of lots the Developer owns times the amount the association charges all other lots owners?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Hi Tim and welcome to the forum.

Typically, developer owned lots are not subject to assessments. To see if this is the case for your developement you will need to read the governing documents. These would include:

The CC&Rs - also known as the Declaration of Covenants, Conditions and Restrictions or the Master Deed. These are restrictions attached to your deed.

The Articles of Incorporation - which establish the Association as a legal entity (a corporation).

The Bylaws - which are typically the procedures for how the Association will be managed.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Tim in NC

Based on the developer still owning the majority of lots, we can assume your association is Declarant Controlled. About all they have to do is have a Yearly Owners Meeting and maybe, maybe give a limited financial statement.

Owners are usually at the mercy of the Declarant. In some case this is not a bad thing. Especially if one does not want the inmates running the asylum.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Tim M.,

Check your CC&R's. Mine said the developer could contribute whatever he wished to.

My HOA is a rural development of large parcels connected by 300 miles of dirt roads. Because he wanted to sell his parcels, the developer kept the roads in far better shape that the owners did after control passed to them.

You may find that your developer is contributing to or subsidising those features that help sell lots/homes. As John said, this is not necessarily a bad thing.

DaveD3 (Michigan)
Posts: 796

Posted:

It sounds like the HOA has been turned over to the members while the developer still owns a majority of the units. This is a bit unusual since the developer typically retains control and solely runs the HOA until some majority of the units are sold, at which time he may or may not become a special class of unit owner.

Your documents will tell whether the developer is a special class or not after control is given to the membership. If he's not, then his units should be treated just like every other unit.

RayC4 (Virginia)
Posts: 173

Posted:

I think what Tim is asking here is, for example, in a 100 lot development with spacious common space, is the first occupied dwelling (99 lots yet unsold) responsible for the landscaping costs of the entire common space? Why not? The CC&R's are going to stipulate that 'landscaping' is covered in regular assessments. Who pays for the lifeguard and pool maintenance when there are two occupied lots? The two homeowners?

This is an issue in our community after six years and we still don't know the answer! A great question.

AnnH5 (Florida)
Posts: 304

Posted:

In my HOA, the developer (or lot owner such as a builder) was responsible for paying the assessment for each lot. The annual budget is based on number of lots, regardless of whether it is an empty lot or has a house built on the lot. If the lot owner did not pay the assessment, the HOA would have the right to place a lien against the property and potentially foreclose on the lien.

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