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BernieJ (Virginia)
Posts: 31
Posted:
In Chesterfield County Virginia our covenants clearly state the Developer is a Class B member. When he lost control of the development after exceeding 80% of the lots being sold, the membership attained rights to elect three Board members, the Developer will always retain one seat and be able to appoint one additional Board member. This became contentious two years ago when the first Board of Directors was voted on and the developer used his proxy powers to elect the Board he wanted. The covenants state the following under voting rights and membership:
Type "A"" The Type "A" Members shall be all owners of the Residential Lots which a member owns and shall be entitled to one (1) vote for each residential lot a member owns.
Type "B": The Type "B" Member shall be the Developer.

Under Governance it reads that the Association shall be governed by a Board of Directors consisting of five (5) Members.
Under Election of the BOD it reads, Until the 80% of the development is sold, the Developer shall have the sole absolute right to appoint all members of the BOD. It further elaborates:
1. Each type "A" Member may cast one vote for each vacancy to be filled by a Class 1 Director (cumulative voting is not allowed). The type "B" Member (developer) shall elect the Class 11 Directors. The majority of the Board shall be Class 1 Directors and elected by the Type "A" Members. The remaining directors shall be Class 11 Directors and elected by hte Type "B" members. The majority of the Board of the Directors fifty one percent (51%) of the total number of Directors shall be elected by the Type "A" Members.

(This is redundant in the covenants and is repeated in three different sections)

In 2020 we were duped out of being able to elect the Board of Directors that the community wanted and were told that the developer is a class "A" member AND a class "B" member. This entitled him to use his proxy power for each lot he still owns. Which is what he did. So, he selected the three class "A" members who were the existing appointed Board members who were up for election to be placed on the ballot, alongside 4 other Type "A" members who never served on the Board. The Developer divvied his proxies among the three buddies he appointed in prior years to basically reseat the same Board. He would not have been able to do this if he was recognized as a Type "B" member which limited him to only appointing one Board member.

The association attorney is the one who made the call that every lot owner in the development was a class "A" member including the developer. Do you agree with this? It is complete nonsense to have pages and paragraphs that go into great detail about how the Board is to be elected and balanced "AFTER" the developer exceeds 80% of lots owned to not lend any favor to the 82% of the residents who own property in the development, far more than the developer does.
Any input on this would be greatly appreciated.
AugustinD
Posts: 1,027
Posted:
BernieJ,

My first blush impression is that the following suggests an inconsistency within the Declaration:

Type "A"" The Type "A" Members shall be all owners of the Residential Lots which a member owns and shall be entitled to one (1) vote for each residential lot a member owns.

If such and such corporation owns a residential lot, then to me, the above indicates this corporation is a Type A member.

I feel like we (you and I and maybe others) are missing something here.

Any chance you can attach the relevant pages from your Declaration, redacting identifying information?

This site allows attachments up to 200 kbytes in size.
BernieJ (Virginia)
Posts: 31
Posted:
Here ya go!
📎 Attachments (1):

⏸ Downloads temporarily unavailable

📄11028285880171.pdf(306 KB)
AugustinD
Posts: 1,027
Posted:
Quote:
Posted By BernieJ on 10/28/2022 12:04 PM

In 2020 we were duped out of being able to elect the Board of Directors that the community wanted and were told that the developer is a class "A" member AND a class "B" member. This entitled him to use his proxy power for each lot he still owns. Which is what he did.
You said the above happened after turnover, meaning 80+% of the lots were sold, right?

If 80+% of the lots were not owned by the developer, and these non-developer owned lots had the rights to elect Class 1 directors, then these 80+% non-developer owners had the voting power to elect people they wanted, didn't they? Why did the non-developer owners not do this?

Is it possible that the developer, who owned less than 20% of the lots, simply gathered more proxies, while the non-developer owners did not strategize and gather enough proxies?
KerryL1 (California)
Posts: 14,550
Posted:
The language is confusing. What is a Class 1 and a Class 2 director?? I do get that the res. owners are Class A voters and the developer is a Class B voter.

Our HOA was set up the same way. and for a short time, since the developer did own a residential unit, he was Both a Class A & Class B member. And members of his firm served in 2 of the hen-5 directors seats, But after a certain date, when all units had been sold, his Class B status disappeared. Do your Bylaws give the developer Class B status forever????

I have almost no understanding of proxies. If he collected a bunch of proxies from the res. Owners, don't the residential owners have to do a better job of collecting such proxies?

(Per our Bylaws, Our developer also has a permanent seat on our Board of 7 because he owns our 2 commercial lots--about 5% of our property. The Commercial Owner[s] has one permanent seat on the Board.)
AugustinD
Posts: 1,027
Posted:
Quote:
Posted By BernieJ on 10/28/2022 12:28 PM
Here ya go!
Thank you.

The way I read this declaration section, any lot owner (developer or not) gets to vote for the three people said owner wants as directors to fill the 51% of the five person board (meaning three seats) that will be Class I directors.

As long as the developer still has unsold lots, then the developer gets to pick the two Class II directors.

At this point the developer owns fewer than 20% of the lots. How did the developer get enough votes to determine who fills the three Class I seats? It sounds to me this could only happen because of voter apathy on the part of non-developer lot owners.

Do you think I misread something?
BernieJ (Virginia)
Posts: 31
Posted:
Thank you all for your input on this.
The developer owns 77 lots that can be permitted today. They are in the name of the Developer LLC. Each lot he owns entitles him to a proxy (one vote each). This comes in handy if additional proxies are needed to achieve quorum. It did not come in handy when the developer had more than 80% of the lots because he could use his proxy powers to vote for all special assessments and even changing the declarations in the covenants. Which he did frequently. He also had the right to appoint all of the Board members.
Since he lost developer control, he lost his right to appoint the Board members. Three of them have to be elected by the Type "A" members who can elect the directors who will be named as Class 1 directors. The Developer is identified as a Type "B" member and will elect the Class 11 directors. This amounts to him retaining one seat on the Board and appointing one other member.

I hope this helps.

I really would appreciate any insight on whether or not the association attorney was wrong and bullied the membership into believing that the developer is both a Type "A and "B" member. Doing so to only to intimidate the membership by appeasing the developer that I will tell them this and let the burden fall on the membership to sue you for it later, after the election.

All the additional instructions written in Sections 3 and 4 under Governance and Elections didn't need to be mentioned at all if it doesn't have any influence over composition of the BOD.
📎 Attachments (1):

⏸ Downloads temporarily unavailable

📄11028552064054.pdf(306 KB)
BernieJ (Virginia)
Posts: 31
Posted:
There are 338 sold lots that do not belong to the developer.
AugustinD
Posts: 1,027
Posted:
Quote:
Posted By BernieJ on 10/28/2022 12:55 PM
I really would appreciate any insight on whether or not the association attorney was wrong and bullied the membership into believing that the developer is both a Type "A and "B" member.
By my reading the developer is both a Type "A" member and a Type "B" member.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Bernie

It appears AUG hit the nail on the head with:

At this point the developer owns fewer than 20% of the lots. How did the developer get enough votes to determine who fills the three Class I seats? It sounds to me this could only happen because of voter apathy on the part of non-developer lot owners.

It appears the developer had enough votes, his own and proxies from other lot owners, to control the election. Sounds legal to me.
AugustinD
Posts: 1,027
Posted:
Quote:
Posted By BernieJ on 10/28/2022 12:58 PM
There are 338 sold lots that do not belong to the developer.
Nationwide, any non-developer owner who knew there were 338 potential votes out there for which the non-developer owner could gather proxies, and failed to do so, has only him/herself to blame.

Proxy gathering is a well-established, lawful tradition at HOAs/COAs. One often has to beat the pavement to thwart undesirable directors being elected. Yes, it's a lot easier for a single entity that owns 77 lots to throw his/her weight around. Said entity does not have to walk from door to door to ask for proxies, for one. But it is lawful.

Keep reading at this forum, and you will see that HOAs can be tough places to live, largely due to the apathy of owners. I think practically no one who buys into a HOA realizes that, for effective HOA operations, massive volunteer hours by himself or others are vital. Said volunteers also generally have to be highly skilled (or learn on the job, for which they may not be paid one cent).
KerryL1 (California)
Posts: 14,550
Posted:
Thanks for the attachment. I stick with my thoughts way above, which I think crossed with Aug's, that yes, per the attorney, the developer has one vote for every lot he owns. He also has every right o collect proxies from owners of other lots.
BernieJ (Virginia)
Posts: 31
Posted:
A For Sale sign would look better in my front yard than green grass.

Thank you for validating what the association attorney stated in 2020. I appreciate each of you taking the time to add more insight to this rotten mess 338 lot owners are in.

DavidG45 (Delaware)
Posts: 994
Posted:
Quote:
Posted By BernieJ on 10/28/2022 5:10 PM
A For Sale sign would look better in my front yard than green grass.

Thank you for validating what the association attorney stated in 2020. I appreciate each of you taking the time to add more insight to this rotten mess 338 lot owners are in.


I am still not clear on what happened. Was there an election? Did the developer simply cast 77 votes for his candidates and emerge victorious cause less than 77 of the 338 homeowners voted?

Details, please.

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