Developer is also a resident

Started by DavidW38 • 27 replies • 410 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

DavidW38 (Delaware)
Posts: 8

Posted:

Our Developer is also a resident with a home in the community. He passed control of the development to the HOA to the Community some time ago. However, the HOA Board has continued to appoint him to the Architectual Control Committee and continues to reappoint him annually. There is a requirement that members cannot serve more than three years consecutively so most recently they made him a "non-voting" member so he could continue to participate. After a year in this capacity this year they are again planning to appoint him as a full voting member. As best I can tell this has been going on since the transition of control from Developer to Community. Wondering if this is legal and if so, is it ethical? Is there a potential conflict of interest here given his role as the Developer? We have plenty on homeowners who have expressed an interest in the committee, but he is reappointed repeatedly.

AugustinD
Posts: 1,027

Posted:

-- I do not think anything being done here crosses the line to illegal.

-- I think arguing ethics does not have value except maybe during campaign season.

-- If this developer (no longer in control of the HOA as a whole) is approving applications he has made for the lots he still owns, then some care needs to be taken that the developer is complying with the covenants. I would not think much of this developer for weighing in on his own architectural applications. As well, I would not think much of the board for letting him do so.

-- Delaware statutes may very well have some verbiage on the subject of conflicts of interest. What is your competence level in looking up the Delaware HOA/COA and nonprofit corporation statutes? (About zero I bet. Sorry.)

-- If owners do not like xyz, then they are free to elect new directors at the next annual election, or even try to formally recall the current directors before the annual election.

KerryL1 (California)
Posts: 14,550

Posted:

Are you on the Board, DavidW? When you write that the developer is a "resident," " I assume you mean he's an owner, right?

Can you cite the exact wording on the 3 years limit to serve on the ARC? What document is that in?

Our CC&Rs made our developer basically a non-voting member of our ARC for 10 years. Since they have a permanent seat on our Board, the developers rep never bothered with actually reviewing ARC apps so far as I know. But I can see where a developer would want to make sure that his product is dealt with by an ARC in ways that protect its structural integrity, aesthetics, etc.

In what ways do you think his service might be unethical? Or a "conflict of interest?"

If permitted, one way to slow more owners to serve is to increase the size of the Committee. Our CC&Rs require an ARC of 3. Do yours have any such requirement?

KerryL1 (California)
Posts: 14,550

Posted:

I see Aug & I crossed. Does the developer own more homes or lots than just the home you mentioned, DavidW?

LetA (Nevada)
Posts: 2,679

Posted:

Again the ARC is just an advisory, The BOD has the ultimate and final say.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Acc is a committee not a board position...Time served is not on committee but on board limits.

Former HOA President

MichaelS56 (Minnesota)
Posts: 859

Posted:

Again, I ask why non-elected volunteers are allowed to make final decisions that are the responsibility of the board of directors. A common practice but a poor practice to have.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By MichaelS56 on 11/08/2022 12:49 PM
Again, I ask why non-elected volunteers are allowed to make final decisions that are the responsibility of the board of directors. A common practice but a poor practice to have.

I agree. A committee should only recommend action to the BOD. The BOD makes the final decision.

DavidW38 (Delaware)
Posts: 8

Posted:

Not on Board, on ACC. Was told history and 3 year rule by our Board member; may be the Board’s policy. Covenants say minimum 3 members, one of which must be a Board member. Term of 1 year and no limits on reappointment. We are well beyond our transition from Developer to association control. Some past ACC members have expressed concerns and felt that the owner / developer had undue influence on the committees decisions.

DavidW38 (Delaware)
Posts: 8

Posted:

Nowhere did I indicate that the ACC makes final decisions. ACC is advisory to Board and that is not in question. The awkwardness is separating the developers long term continuing role in governance as an property owner and resident from their past role as declarant. Just because a committee does not make final decisions does not mean it does not have influence.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 1:35 PM
Nowhere did I indicate that the ACC makes final decisions. ACC is advisory to Board and that is not in question. The awkwardness is separating the developers long term continuing role in governance as an property owner and resident from their past role as declarant. Just because a committee does not make final decisions does not mean it does not have influence.

He's no longer the developer and according to you he hasn't been for some time. What's the issue? Can you give one example of potential conflict considering he is not the developer anymore?

DavidW38 (Delaware)
Posts: 8

Posted:

I dont know that it accurate to say they are no longer the developer. The reason given for continuing to appoint them to this committee is in fact that they developed the property and that they are a resource for information. So they are in fact not being appointed as a homeowner but rather because of their role in the construction. They are the developer but as the developer they no longer have control of the HOA which has transitioned to residents. Some concerns have been raised that he is being treated preferentially and given more input than other homeowners thru this perpetual appointment.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 1:54 PM
I dont know that it accurate to say they are no longer the developer. The reason given for continuing to appoint them to this committee is in fact that they developed the property and that they are a resource for information. So they are in fact not being appointed as a homeowner but rather because of their role in the construction. They are the developer but as the developer they no longer have control of the HOA which has transitioned to residents. Some concerns have been raised that he is being treated preferentially and given more input than other homeowners thru this perpetual appointment.

Sorry I just can't understand where you are coming from. He's being treated preferentially because of his knowledge and I see no issue with this.

KerryL1 (California)
Posts: 14,550

Posted:

Thanks for the clarifications, DavidW. If no one can show you a written policy, Bylaw or other, there is no three-year deadline for service on the ARc.. Since there is a 3-person minimum for ARC members, the Board can vote to approve expanding the ARC to, say 5 members. (You do want an odd #.)

It's not surprising that the developer would have influence with Committee members & probably with the Board too. He knows the project better than anyone. This is a good thing. I still can't see how his expertise could negatively affect your association.

The only downside I can see is if he becomes aware of construction defects, which he could via his ARC work, and is able to persuade others that they aren't "really" a problem or are not "really defects," his outsize influence could be a problem. He, like any other ARC member, should not contribute to discussions or votes on his own ARC applications.

This did happen in my HOA with the developer's rep on our high rise Board (pr our Bylaws), who had excellent expertise as a PE & VP of the company, plus a fine personality. He did try to dissuade the then-board from pursuing construction defect investigations.

For MichaelS, LetA & JohnC: Whatever your opinion, in CA the ARC may be authorized by the board to make decisions; denied proposals can be appealeded to the Board. In our case, our CC&Rs require an ARC and give it such authority. This may be true in other states too. I do not know.

DavidW38 (Delaware)
Posts: 8

Posted:

So you are fine with a lifetime appointment to the ACC?

AugustinD
Posts: 1,027

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 2:03 PM
So you are fine with a lifetime appointment to the ACC?

It's not a lifetime appointment. It's a board-by-board appointment. If you do not like what the board is doing, get together people who feel as you do and attempt to win election to a majority of the board seats. Being on a HOA/COA board is heaps of fun, including not one cent of compensation for a lot of hard work, and with people always criticizing board decisions.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 2:03 PM
So you are fine with a lifetime appointment to the ACC?

Your own words clearly state its not a lifetime appointment:

"There is a requirement that members cannot serve more than three years consecutively so most recently they made him a "non-voting" member so he could continue to participate."

I find it disturbing that you have a problem with someone who's knowledge makes him an ideal ACC member. Most communities can't get volunteers so count your blessings. The Board has done nothing wrong and you have not given a single actual example of where there has been any conflict by him participating.

DavidW38 (Delaware)
Posts: 8

Posted:

What is your problem? Your responses are condensing and offensive and you are making MANY assumptions about my opinions. Not once have I stated an opinion or my position on this. I am raising questions to get advice and information because others have raised concerns with me. I find it disturbing that you post condensing comments even repeatedly make further comments even when I dont reply to your comments. Get a life buddy. This is supposed to be a respectful forum and you sir are anything but.

To those of you who have offered thoughtful input thank you.

To JohnT38… Get over yourself.

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 3:07 PM
What is your problem? Your responses are condensing and offensive and you are making MANY assumptions about my opinions. Not once have I stated an opinion or my position on this. I am raising questions to get advice and information because others have raised concerns with me. I find it disturbing that you post condensing comments even repeatedly make further comments even when I dont reply to your comments. Get a life buddy. This is supposed to be a respectful forum and you sir are anything but.

To those of you who have offered thoughtful input thank you.

To JohnT38… Get over yourself.

I stand behind what I've said. You chose to ignore the question regarding if any conflicts have come up and if so what were they? Knowing your answer may very well change the advice you get from me and others. You came asking if there is a potential conflict with someone who was once upon a time a developer. Based on your inability to articulate why it may be, I gave you my answer. No.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

David does not like the answers he has be\en given. David, what answer are you shopping for?

DavidW38 (Delaware)
Posts: 8

Posted:

I am not shopping for an answer. I am looking for honest assessments WITHOUT condensing and judgemental commentary. I dont object to his having a viewpoint, but to the many assumptions and condescending commentary implying I don’t understand and should be more appreciative. I repeat one more time, I have not stated an opinion on this and in fact have resisted reply to the question of what I think the conflict is because I don't have a firm opinion and am asking because concerns have been expressed and I was hoping to get other perspectives. Instead some are choosing to LECTURE and CRITICIZE. Twitter is more receptive than SOME of this commentary.

KerryL1 (California)
Posts: 14,550

Posted:

Good grief, Have I offended too, DavidW? I just don't see anything disrespectful that I wrote.

In HOAs that I've seen discussed here, Committees are one-year appointments. In my HOA, for instance, there's a very brief form to complete. committee members here are (re)appointed every year at the annual meeting. Perhaps along with expanding the ARC, your board can make a similar policy. That way different boards might choose different members each year.

On any committee or Board, there's a chance that one or two members will be very influential. Expertise; personality; ability to sell ideas; sense of humor. It depends on what the groupvalues. The developer happens to deserve to be listened to. I may be naive, but, again, what do the critics see as harm he could do to your assn.?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I do not see an issue with the former developer being on board or on the ACC. It sounds like could be a positive to me
Considering the board has final say what is the issue again? Is it to make an issue when there is not one?

Former HOA President

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 11:36 AM
Our Developer is also a resident with a home in the community. He passed control of the development to the HOA to the Community some time ago. However, the HOA Board has continued to appoint him to the Architectual Control Committee and continues to reappoint him annually. There is a requirement that members cannot serve more than three years consecutively so most recently they made him a "non-voting" member so he could continue to participate. After a year in this capacity this year they are again planning to appoint him as a full voting member. As best I can tell this has been going on since the transition of control from Developer to Community. Wondering if this is legal and if so, is it ethical? Is there a potential conflict of interest here given his role as the Developer? We have plenty on homeowners who have expressed an interest in the committee, but he is reappointed repeatedly.

I don’t see anything illegal or unethical, and other than the caveat that he should abstain of his own property has a request before the committee I cannot see a conflict of interest. If others want to be on the committee you all might want to discuss it with the board at your next meeting.

MichaelT21 (Arkansas)
Posts: 462

Posted:

I understand the concern.

The house that I live in was built by a prominent developer in our town. If he chose to live in this community and was the sole member of the ACC, he may not appreciate a proposed remodel of the exterior of the house that he had designed and built. I happen to live on the signature street in my community, and perhaps he would not appreciate my ideas for house color or exterior architecture. Thus, he might disapprove a proposed alteration because he feels the house represents him and identify, and thus, he wants veto rights of what I do with the house that I own.

While I recognize the concern as presented above, I also recognize there is nothing illegal or unethical about the situation as presented above. The homoewners have a choice to request the board find additional people to serve on the ACC or replace this particular person.

DavidW38 (Delaware)
Posts: 8

Posted:

Thanks Kerry

No, your comments are not offensive and are appreciated.

Members of all committees are appointed each year. But this individual is the only committee member who continues to serve on ANY HOA committee on an ongoing basis. There have also been members of the ACC Committee in the past who have expressed concerns that they felt they were unduly influenced or pressured by this individual's participation. While appointments are made every year and yes some members are always more influential than others, the repeating cycle of many years of continuous reappointments (I think dating all the way back to when the community was Developer controlled) may give the impression of favoritism, especially given the negative feedback of prior committee members.

Thier business also still builds additions in the neighborhood, and they have a vote on proposals from their competitors. One would hope they would recuse themselves on projects they submit though to my knowledge that has not occurred (at least not since control was transferred to residents). I should clarify that I misspoke when I said the ACC does not have decision power. It is more nuanced here. The ACC has the authority to approve or deny any requests from homeowners. The decision goes directly from ACC to the homeowner who then may appeal the decision to the Board. So, while the Board can override an ACC decision on appeal it is not routinely involved in its decisions. The ACC does develop policies, which must be approved by the Board.

Hope that helps. Thanks for your input.

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

Posted By DavidW38 on 11/08/2022 11:48 PM
Thanks Kerry

No, your comments are not offensive and are appreciated.

Members of all committees are appointed each year. But this individual is the only committee member who continues to serve on ANY HOA committee on an ongoing basis. There have also been members of the ACC Committee in the past who have expressed concerns that they felt they were unduly influenced or pressured by this individual's participation. While appointments are made every year and yes some members are always more influential than others, the repeating cycle of many years of continuous reappointments (I think dating all the way back to when the community was Developer controlled) may give the impression of favoritism, especially given the negative feedback of prior committee members.

Thier business also still builds additions in the neighborhood, and they have a vote on proposals from their competitors. One would hope they would recuse themselves on projects they submit though to my knowledge that has not occurred (at least not since control was transferred to residents). I should clarify that I misspoke when I said the ACC does not have decision power. It is more nuanced here. The ACC has the authority to approve or deny any requests from homeowners. The decision goes directly from ACC to the homeowner who then may appeal the decision to the Board. So, while the Board can override an ACC decision on appeal it is not routinely involved in its decisions. The ACC does develop policies, which must be approved by the Board.

Hope that helps. Thanks for your input.

You seem to have come here looking for a reason you could bring back to your board stating this arrangement is either illegal or unethical. However, it simply is not.

That said, I can certainly see that ANY individual who routinely steamrolls others can be a net negative. I think your argument to the board is simply that through force of personality this person is essentially a one-person ACC, and you think this is not good for the community. It doesn’t matter that they were the original developer, the issue is that others are deferring to him on everything.

You should volunteer for the ACC and use the force of your own personality when you disagree. Or try to elect a new board that will handle things in a way you prefer. But your argument deals with his actions, not his previous status.

DavidG45 (Delaware)
Posts: 994

Posted:

Quote:

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here