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RayC4 (Virginia)
Posts: 173
Posted:
It is common for a developer at the beginning stages of a subdivision to absorb costs related to the 'common areas' (e.g. landscaping, insurance, walking trail maintenance, retention basin maintenance, etc). These items of course all become the responsibility of the homeowners (thru the HOA) after the 'Period of Declarant Control.' (And the 'new' homeowner officers experience the proverbial 'shock and awe' when creating their first budget and see that significant assessment increases are necessary.)

My question is: what is to prevent the Declarant/Developer from imposing these costs directly onto the few initial homeowners immediately -- during the Period of Declarant Control? I realize this may be unsound for the Developer's own marketing reasons (i.e. the higher assessments would turn off prospective purchasers). But please ignore that aspect of it. I'm asking what authority normally addresses these costs and who must bear them during these two very different time frames (before and after Declarant transition to homeowner members).

DavidW5 (North Carolina)
Posts: 565
Posted:
Ray,

Review the provisions of your CCR's. I expect that you have the same provision as we do since we are also a Virginia association.

Our CCR's specify that the declarant can elect to either: pay the assessments on all unsold lots OR pay the shortage for each fiscal year.

The budget should reflect all anticipated expenses regardless of the source of the income.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Ray,

It will depend on the language in your governing documents, and, if like in Frederick County VA, any specific HOA county codes.

Once the common area property is transferred to the Association, typically by quick claim deeds, maintenance of that property becomes the responsibility of the Association. This transfer may occur as phases are completed, as the amenity is completed or all at once when control is transferred to the membership.

JohnC46 (South Carolina)
Posts: 14,265
Posted:
Ray

Good question.

I say there is nothing really preventing a developer/declarant from dumping all expenses on a few owners. I believe in cases where the developer goes under, it is quite common. Most Covenants give the Declarant enough rights/votes that while under their control it could be owners, bend over and grab your ankles.

Now in real life, the more stable the developer and the more they want to sell homes, the lees the chance of it happening.

Many on this chat advocate never buy while under Declarant control. I am not that Draconian. I do advise to buy toward the end of the development (say 80% built out) when the financials are more real life then promises and/or be sure the developer has deep pockets (Del Webb/Pulte as an example) to see it through.

Hope this helps.

RayC4 (Virginia)
Posts: 173
Posted:
John, thanks; it does. Our CCR's don't reflect any timeframe difference, so we may have to grin and bear it. Fortunately, there are not much in the way of capital 'amenities' in the development.

And, yes, it was a big mistake for us to buy into the community so early. Never again....

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