Developer rights to vote and run for board after transition

What are the qualifications for a director, if any, in your Bylaws, Rick. What are the qualifications, if any, for a director in a NV a non-profit corp. (if that's what your HOA is) in NV? Why does he not pay dues on his HOA home? Is he, in fact, delinquent?

He would qualify in CA where directors in HOAs must be owners.

By "interest" in a vendor, do you mean he's an investor or part owner??

If he is legally permitted to run for the board, those who are concerned about possible conflicts of interest, etc., especially, say, possible construction defects that might appear, should campaign against him.

So far as I know, but I'm not in any legal field, a member is an owner of a home or unit in the HOA. An owner, so far as I know, is on the recorded title with the county in which the HOA is located.

If the home/unit to which the developer has title is on a plat or Condo Plan as a part of your HOA, and is not in some sort of sub-association or separate legal entity, why are he/his home's occupants not permitted to use the common area amenities? Where is that wording in your governing documents? What does it exactly say?

The Bylaw that you cite does not say he may not serve on the Board if he has a potential or real conflict of interest. It does state that he must try to disclose it/them. And those who believe that's not good for your HOA would campaign against him. And they wouldn't vote for them.

Meanwhile, aren't the "transition issues" being handled before transition is complete?

In my opinion, one should know the relevant statute section like the back of her or his hand here, so there can be no doubt about why this person cannot be on the board. Or at least, I do not how the developer can serve on the board, given the following:

NRS 116.31185 Prohibition against certain personnel soliciting or accepting compensation, gratuity or remuneration under certain circumstances.

1.  Except as otherwise provided in subsection 2, a member of an executive board... shall not solicit or accept any form of compensation, gratuity or other remuneration that:

(a) Would improperly influence or would appear to a reasonable person to improperly influence the decisions made by those persons; or

(b) Would result or would appear to a reasonable person to result in a conflict of interest for those persons.

2.  Notwithstanding the provisions of subsection 1, a member of an executive board... shall not accept, directly or indirectly, any gifts, incentives, gratuities, rewards or other items of value from:

(a)... [A] vendor, or any person working directly or indirectly for the... vendor, which total more than the amount established by the Commission by regulation, not to exceed $100 per year per such... vendor; or

(b) A declarant, an affiliate of a declarant or any person responsible for the construction of the applicable community or association which total more than the amount established by the Commission by regulation, not to exceed $100 per year per such declarant, affiliate or person.

3.  ... [A] vendor, or any person working directly or indirectly for the... vendor, shall not provide, directly or indirectly, any gifts, incentives, gratuities, rewards or other items of value to a member of the executive board... which total more than the amount established by the Commission by regulation, not to exceed $100 per year per such member, officer, community manager or person.

See https://www.leg.state.nv.us/nrs/nrs-116.html

Since transition has not taken place, I expect the Declarant still exists. (After transition, arguably the developer owning one or more homes is no longer the Declarant.)

You say the developer has an "interest in one of the vendors." If, for one, you mean the developer makes over $100 each year from the vendor's work for the HOA, then I agree: You have the developer in a noose. And so on.

This should be pointed out to the developer. Then in complete seriousness, brace for a target being placed on your back, with harassment being possible-to-likely.

Well, even get them "absolutely" straight : )

I would think there are ways to mitigate the conflicts of interest especially if the board is composed of majority of homeowners. As a director, the developer employee would still have a fiduciary responsibility to the Association. There is a lot to learn when you decide to become a board member and not many in the HOA will have that experience. I am not sure if it would be great to just turn over transition to the HOA to all homeowners that have little idea of what to do next. The below article goes a little bit into the things to watch out for and how to reduce those colnflicts of interest.

https://cl.cobar.org/features/owner-association-board-member-duties-and-liabilities-part-3/

Certainly the developer has an interest to sell the remaining 25% of homes. If the Board does not do their fiduciary duties due to lack of experience and the community appeal declines rapidly, it reflects largely on developer. Why would a homeowner want to join the board? They have interest in the community as well. Certainly they are not joining for praise and accolades. If the community, as you say, has years of experience that is willing to join the board, you should have no problem with the election.

A letter as Elle suggests makes sense, but I would insist on the written opinion of an HOA attorney, who is not the current HOA attorney, who was hired by the developer.

Everything else that Rick writes is speculation and guesses and misstatements, e.g., the Bylaws citation. It's clear that Rick has no experience in HOA governance or, perhaps, he has never served on a board of directors in a non-profit. He doesn't answer questions, but I'll try this one: What size is the Board, Rick?

As Mark correctly notes, the developer has an obvious interest in HOA-beneficial policies and the decisions that the Board makes. In addition, he knows the ins & outs of the project and can answer numerous questions that the Board may have. He has an interest, as does any owner, in forming strong contracts with various vendors.

In real life, a developer on its board does not cause chaos. That's merely Rick's uninformed guess. So is his incorrect assumption that the retired "professional" Owners will somehow automatically be effective board members. From real-life experience with 33 fellow HOA directors over 14 years, most of whom possessed that background: such a background meant nothing. What matters is board members' desires and willingness to learn the HOA's governing docs, and to "learn" the project. Among the 33, only three (one is a current director) knew anything about construction, the trades & crafts, how to assess work product quality, two others knew how to write an RFP for additional Board-required work, etc.

In general, those with the "professional" backgrounds, you see, were/are so intelligent and accomplished that they only need to use reason and logic to draw accurate conclusions and make decisions. After all, being a director of an HOA is not rocket science. If graded on their ability, in general, to learn something new, the overall average would be a D.

One director with a strong background in construction was an employee of our developer, a VP of "Development" of the sizable firm, who was a PE (Prof. Eng.) His knowledge of our new urban high rise twin towers was crucial during our Board's decision-making for about our first 10 years ('01-'11). Hs successor on the board was a construction sup for the developer. Our developer owns about 5% of our project--our "commercial" suites--and, per our Bylaws has a permanent seat on our Board of early-on 5, now 7, eff. '06.

As with any director, he had ONE VOTE. There was, I understand, no "transition issues." By the time I joined the Board, however, call it 1/07, we owners were concerned about construction defects. And, yes, this is where differences between the board majority and the developer's rep emerged. Our HOA, via the Board, filed construction defect actions against the developer. All high rises around us had to do the same with their developers.

Fast forward to two years later. The Association was awarded a large settlement. The PE was instrumental in helped the Board decide on which projects to do first, etc., etc. As their first project in this part of our state, he had a major interest in burnishing the reputation of the developer's firm. His successor, the construction sup, was instrumental in helping us understand the nuances of hiring a crane to install new cooling towers on our 25th story roofs to resolve a defect, or how/where to store the huge # of sf of granite cladding for a defective exterior, and many other related issues. etc.

If OR law as interpreted by an OR attorney prohibits the developer from being on the Board, fine. Otherwise, there can be far worse things including ignorant arrogant directors.

That simply was not the experience in my HOA for 10+ years, Terri.

While I am not saying the developer should be able to run for the BOD, and he would certainly have to recuse himself from may discussions/votes, his corporate knowledge could aid in a smooth transition.

The two worst BOD Members I have experienced were lawyers and teachers. Lawyers were afraid to do many things without legal advice. Teachers as they wanted to treat owners like children as in punish the whole class for the actions of one.

I expect RickJ6 had in mind the following from Nevada statutes:

NRS 116.31034  ... eligibility to be candidate for or member of executive board or officer of association; ...

10.  Except as otherwise provided in subsections 11 and 12, unless a person is appointed by the declarant:

(a) A person may not be a candidate for or member of the executive board or an officer of the association if:
.
.
.
(2) The person stands to gain any personal profit or compensation of any kind from a matter before the executive board of the association; or

(Subsections 11 and 12 do not appear to be applicable.)

NRS 116.31034 goes onto say:

13.  If a person is not eligible to be a candidate for or member of the executive board or an officer of the association pursuant to any provision of this chapter, the association:

(a) Must not place his or her name on the ballot; and

(b) Must prohibit such a person from serving as a member of the executive board or an officer of the association.

The Nevada state government has a great FAQ web site on this at https://red.nv.gov/Content/CIC/Program_Training/Frequently_Asked_Questions/Elections_and_Board_Member_Removal/

Nevada clearly IMO has cracked down on HOA boards to minimize conflicts of interest.

I'm sticking with my original advice: Imo, neither Rick nor Elle are qualified to write a legal opinion about this matter. I believe Elle has mentioned the problem of "misplaced authority" in the past. Get an opinion from a genuine NV HOA attorney, Rick.

On the surface, it does appear that Rick & Elle are correct. Statute seems to state the Association should not accept the developer as a candidate for the Board. I just don't feel as confident as they that the person --the developer--would "personally profit or gain compensation" because of his firm's PARENT company's relationship or even ownership of a HOA vendor's firm. This latter, btw, to me hasn't been expressed very clearly. Say, Rick, what service does this vendor provide to the HOA? With the smarty-pants Board Rick envisions, of course, they would immediately scrutinize all contracts and put some out to bid. We, however, don't know what size this HOA is- 50 homes? 500? Amenities? Kiddie playground? Golf Course?

The first action, the board in my 200 unit condo HOA did was to dismiss the major management management company hired by the developer, and hire one with no relationship to the developer's firm. Assuming the developer would be just one on a board of 5 - 7, it'd be easy to do. If a board of 3, I'd campaign against the developer's Board service if permitted to be on the Board.

I confess I wasn't part of the transition in my HOA, but I studied all of the early meeting minutes and saw that the transition work was complete before turnover to the Owners. There were punch lists, a committee of resident owners whom the developer approved while still in control was established to raise concerns, etc. After transition, there were warranties.

Rick, based on empty speculation, thinks there would automatically be contention between the developer & Board on these topics.

I didn't bring this up to start an argument Only to get some ideas that I might not have thought about. And in that regard this has been very helpful. As far as ideas that are off topic, or a bit rude, that comes with the territory when you are posting online. I expected a small % of that, and it does not bother me in the slightest.

Not everyone sees things the same. Everyone brings their own personal history into the equation, there are only a few that can objectively analyze and use critical thinking void of all personal bias.

So again, thanks to everyone for their input. It has helped me in formulating some ideas in addition to some that I had already.

Rick

The forum by definition is crowdsourced problem solving. Every person who posts here expects that answers offered will be subject to (hopefully constructive) criticism and further review. Otherwise posting here would have no point. From the hopper and mill into which questions are thrown, hopefully something useful comes out.

My opinion is that most large developers don't want to be involved in the HOA. Hence why they hire Management Companies to handle the HOA when they own it. My best suggestion is to look into hiring a new Management company or get everyone to understand the MC relationship to the HOA. It sounds like the members may be subject to wanting a Managment company in charge versus them being involved. It's what they are used to. Who can blame them?

However, I would let people know that an MC is a paid contractor to the HOA and the developer right now. Unless the developer actually owns property/house in that HOA, they are not most likely eligible. I believe they should be an owner to be in a HOA and thus board...