Removing a "Class B Voter" (Developer) from the HOA Documents

I am a member of a Homeowner's Association in Alabama. The Homeowner's association was established in 2001 as a Non Profit Corporation in Alabama. The Articles of Incorporation and Bylaws both state that there are two classes of voters; Class A and Class B voters. Class A voters are regular members who own a lot, and get one vote. The developer is the Class B voter, and gets 3 votes for each lot that he owns.

Since at least 2007 or 2008, no further construction has been started in the neighborhood, although the Developer still owns lots in the neighborhood that were never sold or developed after the Real Estate crash around 2008. The majority of the lots in the neighborhood have been sold and built on, and the streets have recently been paved and turned over to the City (this was finally done a deal was worked out with the City, a nearby corporation, and the Developer, after the developer refuse to pave the roads). The City will not allow this particular developer any further permits to build in the City. So, essentially, this neighborhood is sufficiently complete so that I would think the developer would completely relinquish his Class B voting power, and turn over the HOA completely to the Class A members, even though he still technically owns some undeveloped lots.

However, this Developer continues to hold on, overriding the remainder of the residents with his 3 votes per lot, to put in place Officers to run the HOA that he controls. The developer and these Officers of the HOA state that the bylaws and articles cannot be amended, because they provide that amendments cannot be made without FHA or VA approval.

Alabama has no developed HOA law in the Alabama Code. My first question is, why would FHA or VA approval be needed to amend bylaws or the Articles now that construction in the neighbor is sufficiently complete? And secondly, can the members amend the Articles and bylaws without FHA or VA approval to remove the Class B voting block or the developer? Have any of you ever ran into a similar situation where a Developer did not want to relinquish control and turn over ownership to the HOA after the neighborhood was substantially completed?

I'm at a loss as to why the developer would want to remain effectively in control of the HOA when it's been 8 years or so since an construction was done in the neighborhood, and the neighborhood is substantially completed so that the City has taken over the roads.

Tim's suggestion is a good one but there is one other thing to look at before taking that step: Your declaration should have a provision for amending it. Sometimes it requires a vote by the association and sometimes it takes only a percentage of owners to record an amendment to make it happen. It would be helpful if you could quote that section word-for-word.

There are a couple of things to watch out for. If amendments to the declaration require FHA and VA approval, then going to court is your best route because neither the FHA nor the VA have any interest in running an HOA. Some declarations state that a certain percentage of owners must approve an amendment while others specify a certain percentage of voting power. If yours requires a percentage of the vote then you will not likely succeed in amending your documents without going to court.

If you do go to court your first argument should be that the developer is no longer a developer at all due to being stripped of that opportunity by the city; he's just a jerk with a bunch of vacant lots.

One other thing to check on: developers often do not own the land they are selling; a third party owns the real estate and there is a trust agreement in place to issue a deed for each lot as it has been sold. Check the deeds on those unsold lots to see if they even exist and whose name is on them. The developer may not own a single lot in spite of his claims to the contrary. Also check to see if the developer transferred any of the unsold lots to his friends or family, as this is not uncommon. If he has, then those lots are no longer unsold and they get only one vote each.

David the section you need to be looking for is for when turnover will occur, typically it is after X number of years or when X percentage of lots have been sold. If neither number have been reached then IMHO you are out of luck until they occur.

And as well, check your State Corporate Code and see if and how you can take out the developer via the Corporation aspect. Haven't we all heard those stories of corporate take overs? And I would guess some have actually experienced that as an employee or director.

It's not his business your after, just your incorporated HOA. The code is fairly easy to figure out with a little bit of time. It was a great learning curve for me personally!