Developer Disclosure - Who enforces?

Started by TammyL2 • 12 replies • 318 views

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TammyL2 (New Mexico)
Posts: 26

Posted:

Hello all,

New Mexico Subdivision - 144 lots
I am revisiting a previous 'outparcel' sale issue I posted previously.

Our Developer Disclosure, filed in 2000, was approved by the Board of Commissioners of our New Mexico County. It is unsigned and gives no allowance for amendment.
144 parcels. 2 Community Outparcels.

Articles of Incorporation 'gives all powers, privileges, all duties and obligations of the association as set forth in the Plat and in the Declarations of CCRs. It does not give any authority over the Developer Disclosure. The plat shows the outparcels, but does not reference them.

Disclosure states: 144 lots - 2 outparcels. Smallest lot 5 acres. Sold outparcel is 2 acres and building a home on it makes 145 parcels.
While one might want to blame the buyers for not reading their documents. One could also argue the outparcel should NEVER have been offered for sale by the developer in violation of their Disclosure.

Question: When the Developer violates the Developer Disclosure ... who is responsible for enforcing it?

Is this a matter to be taken up by the Board of Commissioners (that approved the plat)? The county attorney? Individual homeowner? Board of Directors?

I sure could use some guidance. What a mess!
Thank you very much.
Tammy

CathyA3 (Ohio)
Posts: 6,299

Posted:

Disclosure documents usually aren't amended unless there was a mis-statement in them that must be corrected.

They are different from covenants, conditions, and restrictions (CC&Rs) that essentially describe the terms under which a community association will operate. These can be amended and often have to be as state laws change and society evolves in ways that can make some provisions of the CC&Rs unworkable.

For more context, I've spent the last 17 years working for a new home builder. During the Great Recession/Housing Market collapse, a number of developers ran into financial trouble or went out of business altogether. It wasn't unusual for communities that began development prior to that to end up looking different from the original plan. Selling off some or all of the so-far undeveloped parcels, or changing what happened to the parcel (ie. zoning changes), were pretty typical measures used by developers to stay afloat financially. These steps were perfectly legal unless some other weirdness was going on.

Enforcing legal agreements generally involves lawyering up and suing somebody. This is expensive and time-consuming. Civil disputes can also get ugly, and at some point the adversaries can be more interested in harming each other than in coming to an equitable settlement. This is how litigants end up spending far more on lawyers than any financial harm they had experienced as a result of the original complaint. Which brings me to my last point: lawsuits generally make no sense unless you can quantify the harm that has been done as a result of someone else's actions. If you can't put fairly accurate numbers on it, the lawsuit is unlikely to provide the relief you want.

I suggest talking to an experienced real estate attorney in your area to see what options you have and which of them are realistic.

TammyL2 (New Mexico)
Posts: 26

Posted:

Thank you, Cathy.

The Association BoD agrees that action must be taken, and legal remedy must be sought. There is also agreement that 'relief' is difficult to quantify. This was discussed at the last board meeting! What is the 'damage'? A Director pointed out that 'speeding' on the highway doesn't = damage, and those who create the speed limits also enforce the speed limits and collect the fines. The BoD didn't create the 'speed limit', the County did.

The BoD is exploring this position:
The Plat & outparcels were approved by the County Board of Commissioners.
The sale of the outparcel was a violation of the Commissioners approved Plat Map agreement.contract between the Developer and the County.
The Articles give no authority to the BoD re: Developer Disclosure.
The Commissioners are incumbent to pursue the violation of contract obligations at the County level.
The BoD also considers that an injunction could be exercised while it's sorted out.

Take aim at their position and fire away.
Or throw a crumb their way!

Sincerest appreciation.

CathyA3 (Ohio)
Posts: 6,299

Posted:

You've raised one of my bigger concerns: does the HOA even have standing to sue if the agreement was between the developer and county? I can see both sides of it, and I can see why the HOA would have an interest in the outcome. I just don't know what steps you can take beyond complaining to the county, which probably won't accomplish much.

Successful developers often have political skills and connections to county officials. I don't mean anything nefarious, just that this is how business gets done. And HOAs are big business, with both the developer and the county benefiting from their presence. I assume that the county would be unwilling to take actions that would cause financial harm to the developer unless something bad was going on (ie. the guy was straight up crooked, and all of the dirt was about to be made public).

I assume that's not the case here, but there are too many unknowns for me to offer useful advice besides talking to someone like an attorney who will have useful advice.

CathyA3 (Ohio)
Posts: 6,299

Posted:

I didn't mention it, but my impression is that the BOD knows what they're doing. Have they consulted with the HOA attorney? Anyway, that's a good sign.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TammyL2 on 12/01/2023 5:32 AM
The sale of the outparcel was a violation of the Commissioners approved Plat Map agreement.contract between the Developer and the County.
...
The Commissioners are [ElleN edit: obliged? Have the authority?] to pursue the violation of contract obligations at the County level.

TammyL2, I am just exploring here.

What exactly does the Plat Map agreement say about selling outparcels?

I see that in general, outparcels can be sold.

I see that the New Mexico Subdivision Act (a statute) and a County's Subdivision Ordinance are often used as the authority for issuing violations of plats. I would be studying these laws.

I see that the County Commission and New Mexico Attorney General enforce these laws, during and after a subdivision is built.

If you share your county, I will snoop around some more, seeking information about violating specifically plat agreements.

TammyL2 (New Mexico)
Posts: 26

Posted:

Thank you SO much.

The Plat shows the "Community Outparcels" however, the Plat does not speak to these outparcels. I'm going to attempt to upload cropped image of Plat Map - Community Outparcel B for reference.

Outparcels can be sold. Agreed. However, when the word "Community" is combined with word "Outparcel", is a new definition/intent created? A strip mall could create an outparcel in their parking lot, designated for sale or lease to a fast-food restaurant. And it seems prudent that somewhere in the application process of build the strip mall, the intent of the outparcel would be noted.

County Subdivision Regulations were sent. 280-page pdf, with search option that yielded no results for 'outparcel' or 'out parcel'. Board has NM Subdivision Act in hand.

Nothing in our documents speaks to the outparcels. The County Clerk that recorded and signed the Plat in 2000 is STILL the County Clerk! I spoke to her yesterday! I told her I was calling about her signature on 25-year-old paperwork! She recommended my questions be directed to 'Adrian' (the County attorney). She was unable to clearly define what a 'community outparcel' was, but suggested the intent might be stated in the original submissions by the developer.

Any information you can provide, any light you can shed would be immensely helpful. I am beginning to compose a letter to the County Attorney. I'd like to submit it to the BoD as soon as possible.

Catron County, NM.
Pie Town, unincorporated
I can also direct you to a website where the entire Plat is available for review.

Deepest appreciation,
Tammy

TammyL2 (New Mexico)
Posts: 26

Posted:

Plat map

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📄1121521053071.pdf(159 KB)

ElleN (Idaho)
Posts: 4,420

Posted:

Below are my meanderings.

Quote:

Posted By TammyL2 on 12/01/2023 8:32 AM
The Plat shows the "Community Outparcels" however, the Plat does not speak to these outparcels. I'm going to attempt to upload cropped image of Plat Map - Community Outparcel B for reference.

Your other thread on this attached the plat map. Interested readers can go to https://www.hoatalk.com/Search/ForumSearch/tabid/87/forumid/1/postid/358717/view/topic/Default.aspx

Quote:

Posted By TammyL2 on 12/01/2023 8:32 AM
Outparcels can be sold. Agreed. However, when the word "Community" is combined with word "Outparcel", is a new definition/intent created?

I would call this "thinking like an attorney."

The following comment on the net seems to back up the validity of your question:

As others have written, [an outparcel] is excess land available for development, usually on a main thoroughfare. It is worth noting that outparcels are often subject to a “common area agreement” that makes the outparcel, in effect, part of a condominium with cross easements, common area maintenance agreements covering lighting, parking sharing, pavement, etc.

Usually outparcel land is leased or only the wall-to-wall footprint of the building is sold, leaving the parking part of the “common area” owned by the condominium group. In the photo below, Target and Lowe’s are the “anchors” with a constellation of outparcels above them.

Someone who says he is an "Owner and Commercial Real Estate Professional (1997–present)" posted the above on quora.

But then there is this comment on the same quora page:

An outparcel is a building lot separated or separable from a commercial development which could be sold separately which could provide liquidity for the developer. They could sell it to another developer or business owner who could build a restaurant, bank, etc. on the lot.

Posted by someone who says he has been a real estate broker since 1977.

Quote:

Posted By TammyL2 on 12/01/2023 8:32 AM
A strip mall could create an outparcel in their parking lot, designated for sale or lease to a fast-food restaurant. And it seems prudent that somewhere in the application process of build the strip mall, the intent of the outparcel would be noted.

Yes, it does seem prudent. But so far, nothing has been turned up that looks like it prohibits the developer from selling the outparcel.

Have you located the deed to the outparcel? I see from your October thread that "Lot #126 has flipped at least one time in the past and the outparcel was not included in the sale (per County records)."

This would be my next step. If the deed shows the (former) developer owns the land on which the outparcel sits, and property tax records support the same, then it seems to me this weighs in favor of the (former) developer.

What exactly is the HOA Board's end goal here? To make sure the outparcel is subject to the HOA's covenants?

ElleN (Idaho)
Posts: 4,420

Posted:

Per justia.com's case law (which is quite reliable IMO), New Mexico case law nowhere uses the phrases "outparcel" or "out parcel." To confirm, google:

"outparcel" site:https://law.justia.com/cases/new-mexico/

If the (former) developer has been paying the property taxes on the outparcel, and the outparcel has never been used as common area, then I am leaning towards the HOA not being the owner of the outparcel. Just because it is called a "community outparcel," with no other verbiage on the plat about the outparcel's purpose, is not persuasive to me. If the outparcel's status is ambiguous, then I think the courts would say that whoever owns it can do as he pleases with it, granted with the question of whether the outparcel is subject to the HOA covenants still hanging.

CathyA3 (Ohio)
Posts: 6,299

Posted:

You may be able to find some indication of who actually owns the parcel and if taxes are current on your county's website. Google "property search YourCountyName YourState". The records typically include the sales history of the parcel, among other things.

TammyL2 (New Mexico)
Posts: 26

Posted:

Cathy,

Yes. The county is a great resource. I think your advice is spot on. Thank you!

Outparcel B activity: Changed hands from the Developer to a Real Estate company (owned by same developer) and then to the current owner. I don't remember asking the assessor the dates of these transfers; if I did, I didn't write them down. The dates are not available online. Monday can't get here fast enough! I'll share the dates after I make the call.

If the transfer to the real estate company and the transfer to the new owners happened within a year, I would have to ask "Why?". Why ... after 23 years ... did they transfer only 1 of the outparcels to a real estate company prior to a (pending?) sale? Is this standard and customary?

I hope the County Attorney thinks like you do and conducts a quick review.

Thank you again.
Tammy

CathyA3 (Ohio)
Posts: 6,299

Posted:

Developers often own their properties via LLCs or other corporate entities. This is to protect their other assets if something goes wrong with a property held by the LLC and they are sued over it. There can also be tax consequences of doing things this way, both good or bad depending. People who invest in rental property often own via LLCs for the same reason. And people who form their own businesses also usually incorporate.

So what the developer did in this case sounds like business as usual. On the other hand, if there would be some legal challenge to the sale by the real estate company to a private owner - ahem - and the private owner sues the real estate company over it, then the possible damages that could be awarded to the owner would almost certainly be limited to the assets owned by the company. They couldn't touch the developer's other assets unless there was some weirdness in how things were structured (I'm ignoring insurance here, because it can muddy the waters).

Was the developer expecting such trouble? Maybe - but since this is a normal business practice, we can't say without knowing more.

Usual disclaimer: I'm not a lawyer. The board at the HOA needs to talk to one. :-)

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