Tennessee - Declarant won't give up control

Is there any way to force declarant/developer to give up control. CCRs say "when the last lot is sold". He'll never sell it, therefore, according to him he never has to give up his total control.

On a somewhat related note, do property owners have to pay dues during the development period. Seems like it should be the developers responsibility to pay maintenance and upkeep during development.

So what do you think your dues goes to when you own the place? Isn't the Developer currently collecting dues. Those dues go for maintenance and operation costs of the HOA whether or not the Developer is paying out of their pocket. Doesn't seem fair the Developer pays for everything out of their pocket if you think about it now does it?

MelissaP1 - there's two sides of this story. The developer only owns well less than 5% of this development, the rest is owned by individual property owners. Yet, while only owning <5% he remains in 100% total control and is acting in his self interest instead of that of the property owners; and so, many of us want him out of here. Of course dues are necessary to maintain roads and common areas and we don't mind paying them, but we do mind paying them to him to control when he's not acting in our best interest and at this point has very little skin in the game. We're searching for any way possible to get him out of here without having to go through a long court process. If we could legally stop paying dues, that might do it.

Your right.

It appears to have died in committee.

I didn't notice the year as I came to it from another site.
Sorry about that.

Time to contact representatives and see if it can be resurrected.

Not for second do I agree a court would deem the declarant's control here, practiced according to the covenants, unconscionable.

You and the other owners knew what the covenants said when you bought. A deal's a deal.

Where you might get legal traction is in demonstrating that the Declarant is not complying with bylaws and covenants pertaining to budgeting. Especially since you appear to believe ripping off owners via the annual assessment is the sole raison d'etre for the Declarant continuing to own the one lot.

People here know how to read covenants and bylaws quickly, for meaning. Consider removing all identifying information from these documents, and posting them here. Attachments yere are limited to 200 kilobytes each, so you might have to break up the governing documents.

Othwerwise, to get anywhere, you in particular will need to hire an attorney.

"Especially since you appear to believe ripping off owners via the annual assessment is the sole raison d'etre for the Declarant continuing to own the one lot."

Without even discussing the particulars of whether he's acting as a proper fiduciary on behalf of the property owners, let see:
he doesn't live here
he never plans to live here (it would be very much below his standard of living)
he has nothing substantial to gain or lose if property value goes up or down
it's an upper income development with several successful individuals owning properties who'd be more than capable of managing this property via a BOD

Can you come up with another, as you say, raison d'etre, for him insisting on maintaining full control.

Thanks Tim, I'll give it some thought. It's a big development with an extremely wealthy developer and a few people who've bucked him have suffered retribution; so obviously, I have concerns about sharing too much and being outed.

I was hoping against hope that someone here might have a magic wand (solution). I expect that ElleN is correct in that we'll need to bite the bullet and slog through the court system.

Everyone knows that dues are necessary and dues at the moment are fair. And honestly, none of the homeowners are complaining about dues or the amount we pay; the problem is that the developer is taking actions that benefit him now but will result in large special assessments 5, 10, and maybe even 20 years from now.

Bottom line, Tennessee HOA law or lack of it is a mess. Developers can maintain full control until a court orders them to give it up. In the meantime, they can make life hell for any property owner(s) filing suit by fining them under various covenants and regulations and they serve as judge and jury for assessing the fines. In other words, property owners really can't take any action against the developer without going to court while the developer can take numerous actions against a property owner without going to court. The SB 405 legislation that Tim referenced earlier would have disallowed developers from maintaining perpetual control. Most states have these type of rules in their code, Tennessee does not.

If I were in your position, I would ask myself "assuming nothing will change, do I want to continue owning property in this community, or are there other communities that don't have these issues and that I'd enjoy living in?"

Assuming that it will take legal action to oust the Declarant or at least modify his behavior, are you prepared for the possibility of years of costly litigation as well as the possibility that things won't go your way? Do you have enough allies among your neighbors to force this through, or would you be fighting mostly on your own?

If you were a knowledgeable buyer and you knew all of these things going in, would you choose to buy a home in your community or would you keep house hunting? Don't get trapped by the sunk cost fallacy - just because you've invested time and money in your community doesn't change the calculation on whether or not this is a smart move today.

Try to view this as a strictly financial calculation. Too many homeowners can throw away large amounts of money just because they're angry when it would be in their financial interest to cut their losses.

As I've mentioned in other threads, the solution to any HOA issue will boil down to live with it, fix it, or move.

You've ruled out moving, which is often the easiest and cheapest option.

Next is fixing it.

The cheaper way of fixing it is putting like-minded people on the board and possibly amending your governing documents. This takes time, can be hard work, and you need to have enough allies. The other option is litigation. Given that the Developer sounds like he'd be connected, finding willing and competent legal representation may be a challenge. The fact that retribution is likely will change the calculation on this and may make fixing the problem unwise even if you could succeed.

It doesn't like you're happy about living with it, and I don't blame you. But realistically it may be the least bad option - as long as you can zip lip, pay whatever assessments are necessary, and avoid working yourself into an ulcer or stroke.

Post-o. Change this to "pocketing the difference".

Ditto.

Thank you all for your caring and informed responses. I've got a lot of thinking to do.

Tim, would you mind sharing with me what city or county you are physically located in Tennessee

I may have misunderstood, but I thought that the community did have a functioning board. It should.

In the communities I'm familiar with, even when the community is completely new and sales are just beginning, there will be a full board made up of employees of the developer who hold board meetings and make decisions. Homeowners gradually transition into board positions as sales targets are met, but the developer retains a board position until the final target is met (usually around 75% in my area, but the OP said that his CC&Rs say 100% sold which I haven't seen before). Even if the board is made up of the developer and four homeowners, he still may retain control by virtue of holding a different class of ownership - for example, he may have 10 votes vs. the other board members having only 1 vote each, so what he wants is what happens.

An ethical developer who is on the board should be making decisions for the benefit of the corporation, which has existed since the governing docs were recorded. Yes, they may opt to keep assessments low in order to encourage buyers. They also won't be 100% sure of what the final assessment level should be, since original plans for a community may change due to economic conditions (this happened a lot during the 2008-2012 housing market downturn). So that's not too worrisome.

But what the OP is describing doesn't sound right. Developers want to move on to their next project - they don't make money sitting on one lot and not turning over the community to the homeowners unless they're pocketing the assessments or some such. Even if something like that is going on, I can't imagine what the developer thinks the end game is. Does he believe that shenanigans won't come to light? Does he think that something like that wouldn't end his career? 'Tis a puzzle.

My CCRs say the same as MickJ's. When 100% of the lots are sold the community will be turned over to the homeowners. There is nothing about transitioning homeowners to the board or anything like that in the CCRs. I understand that these parameters could be changed. Always an education here on HOATalk.

Excuse my mistake for referring to MickJ as MaxJ.

Oh, and don't look in the CC&Rs, look in the bylaws - that's where this stuff is for my community.

I thought discussion of Declarant control and transition almost always (or always) appears in the Declaration. For one thing, the Declaration is usually harder for owners to amend. The latter is what Declarants want. For another thing, in the hierarchy of documents the Declaration is higher than the Bylaws. This is also what Declarants want. Some states' statutes even allude to the Declaration determining transition. E.g. from Washington state's statutes, RCW 64.90.415.

Thank you, ElleN. Obviously, you have a wealth of knowledge regarding these matters. In the short time that I've been a member of this forum I've learned a lot. While there doesn't seem to be an easy solution for our present issue I expect this forum with people like yourself will be a fantastic resource at some future time when we're actually able to form an owner elected HOA board.

If you wish to share an email address I'll share more info with you via an encrypted email account. For here, I'll just say he's not maintaining control simply for the dues, it's much much bigger.

This info won't identify your developer, Mick, since there are hundreds that are similar. Please tell us the number of directors your Board is supposed to contain per your Bylaws. Do your Bylaws say all must be developer-appointed until they no longer own any lots in your HOA? Or perhaps your declaration or Articles of Incorporation can help?

If a bunch of you owners can get together and hire an attorney to advise you, need the developer know about it? And even if the attorney were to mail some sort of request or demand to the developer, need your names be included? Or perhaps one one person may be willing to be identified and somehow the attorney would state that any retaliation against that person in the form of violation notices, fines, etc., will not be tolerated or some such? Could such a letter name the one person and add "and the owners of xx other lots," without identifying them?

Owners as a unified group CAN possibly launch a joint effort against the developer that might hurt their sales in your HOA or elsewhere. Give owners voice, etc.

Remember that declarations also give some powers to owners. For instance, owners usually can take action against violation of and covenants or rules.. If the developer IS in violation, perhaps a large group of you can file violation notice (or whoever it's done) demanding compliance. I think that worries about retaliation might lessen if there's large enough group of you

Here's a story I haven told here. Our young family of five rented an apt. unit in Bethlehem PA that had just finished construction with the pool area to be added "before June 10," in the lease, in time for kids' summer vacays. Well, though occupancy was very strong, the pool construction was barely started in April. What could we powerless renters do?

We had a "Turn It On" day. All water was paid for by the landlord. We group of 5 kid-laden couples passed out anonymous flyers to all apartments with a date and time period of 6 hours to turn on many or all of our faucets. We sent an anonymous notice to the developer/landlord asking to see much more rapid work done on the pool & locker area. Or else. We didn't hear from him. I don't know how many apartments participated, BUT about two weeks after "Turn It ON" day, big crews showed up and worked long & hard & met the date promised to us in our leases.

In owned communities, it's more difficult because owners worry that public action will hurt their own property values. But, you never can underestimate the power of unified joint action & ideas!

Damn, sorry for the double post. Had eyelid surgery yesterday so lotsa blur make me even sloppier than usual.

I want to assure Mick that Tim has been a long--time contributor always with careful, high-quality advice based partly on many years of service on a board of his previous HOA in a different state. He's fairly new to TN, but is learning a lot quickly. You can count on his trustworthiness, Mick.