HOA Board likely not legitimate

Our Texas HOA transitioned to association control this year and we elected our own Board and I was appointed to our Architectural Committee. However, in reading our CC&Rs it became clear to me that the Declarant did not officially end the Development Period which is required in order for the membership to have the authority to elect our own Board. The Management Company has consistently demonstrated that it doesn't understand our specific HOA Governing Documents and wants to treat all managed HOAs the same to make their operation easier. I'm guessing since it is often the case with HOAs that once 100% of the Lots have been transferred that the transition can occur that they just assumed this was this case with our HOA. In my research I've found numerous HOAs in the area with the same/similar CC&Rs (same developers within a company umbrella) and can find no evidence of instruments Recorded with the County ending a development period. I expect this company will not be happy to be dealing with this either.

So, my concern is that our Board is not legitimate and that anyone willing to pursue legal action would prove this out (e.g. someone receiving a Violation/Fines could rightfully claim the Board has no legal authority and win their case).

Does anyone have experience with this or know of any case law for such situations?

I've been trying for 2 months to get action on this from our Management Company and Board but they have been dragging their feet (no surprise since both stand to lose favor if this comes to light). I believe it is in the best interest of the community to get the official sign-off from the Declarant and start over again by electing a new Board. Likely to be messy but likely less so than continuing on and having to deal with it later.

Before I go find a lawyer for advice I thought I'd ask here for any words of wisdom...

CC&Rs References:

[In a highlight box and the only reference mentioning an end based on 100% lots rather than signed instrument]
Declarant enjoys special rights and privileges to help protect its investment in the
Property. These special rights are described in this Declaration. Many of these rights
do not terminate until either Declarant: (i) has conveyed all Lots which may be
created out of the Property; or (ii) voluntarily terminates these rights by a Recorded written instrument.

[Definition of Development Period immediately following above that contradicts (i) above]
“Development Period” means the period of time beginning on the date when this Declaration has been Recorded, and ending twenty (20) years thereafter, unless earlier terminated by a Recorded written instrument executed by the Declarant. Declarant may terminate the Development Period by an instrument executed by Declarant and Recorded. The Development Period is the period in which Declarant reserves the right to facilitate the development, construction, and marketing of the Property, and the right to direct the size, shape and composition of the Property. The Development Period is for a term of years and does not require that Declarant own any portion of the Property.

[section on Governance]
Declarant shall continue to have the sole right to appoint and remove two-thirds of the Board from and after the Initial Member Election Meeting until expiration or termination of the Development Period.

The Texas Property Code calls for the election of 1/3 of Board after 75% Lots sold but I have not found nor am aware of any state-level requirement for a hand-off at 100% sold.

Also, does your HOA have an attorney? if so, that would be the person to direct your questions to.

Re: the management company, it's not unusual for these companies to standardize their operations. Most of what they do involves handling assessments, paying bills, producing the monthly financial reports, developing the budget (which the board should be involved in), and maybe presiding at meetings if the board chooses to delegate that. The kinds of things that do require tailoring to individual communities are things that the board will be involved in (dealing with violations since the details of "due process" may vary among communities). It's also in a community's best interests for this to happen. It saves money and reduces the possibility for the kinds of errors that occur if everything is an exception.

Could this be a problem? Maybe - but I need details. There is certainly variety among communities, but the routine stuff is pretty standard. You don't want innovation when it comes to handling the money.

are 100% of the lots sold? if so what they heck are you complaining about? the formality of a peice of paper being sent to someone? really?

Depends on how important the piece of paper is if legally challenged which is what I specifically asked about.

Some where in the declaration there should be a section on voting rights and who may serve on the board. If all the lots are sold, the declaration t has no ownership interest or voting rights - he is done.

Where's the beef?

It's just incredulous to me that the Declarant who created the Governing Documents in the first place fails to read or follow them. Why add all these specific rules in the CC&Rs related to "signed, Recorded instrument" for ending the Development Period if they are not going to follow through with that?

Likewise with the management company who is a paid consultant and supposedly the reliable experts -- is it too much to ask that they actually read and follow these rules when guiding our HOA through this process?

Maybe I'm just the old cranky guy who expects too much by wanting people to do their jobs?

Another anecdote from a cranky old guy...

So when we were looking over the Deed prior to buying our home in this HOA I discovered that the Restrictions section included a reference to an ENTIRELY DIFFERENT HOA. At this point they had sold close to 200 homes and all of them had this mistake in their Deeds. This could legally hold those homeowners to following the rules for that other HOA and potentially even require them to pay assessments to that other HOA.

Now would you have a beef with that or disregard it because it's just a "piece of paper"?

The parts in bold would seem to be contradictory, because "declaration" is a commonly used synonym for "CC&Rs". In the context of an HOA, the CC&Rs or Declaration is the document that creates an HOA as a legal entity.

It also seems odd to say that an Architectural Committee exists independently from an HOA. There would be no need for such a committee without some kind of association with standards that should be enforced.

Just out of curiosity, where are the standards which this committee is supposed to enforce written down? And do Texas purchase contracts contain language stating that that the buyer will be subject to two bodies with the right to enforce covenants and restrictions? And who appoints the committee members? Or they elected by the membership at a meeting separate from the annual meeting? Do owners have the right to remove and replace committee members, as they do with HOA board members? What guardrails are in place to prevent committee members from establishing their own little dictatorship? (We've all heard the stories.)

Seems like a good way to create problems, as if HOAs don't have enough...

No Mine Isn't

Our buddy AI says:

Articles of incorporation and declarations are different documents with different purposes.

Articles of incorporation:

A legal document filed with the state to create a corporation. The articles of incorporation establish the corporation's name, type, legal status, and main purpose. They also define the corporation's initial board of directors.

Declaration:

A document used in court proceedings to authenticate evidence, lock in a witness, or provide relevant evidence. In the context of an association, the declaration is a governing document that carries the most legal weight and is often called the association's "constitution". The declaration is also known as the Covenants, Conditions, and Restrictions (CC&Rs).

In the context of an association, the articles of incorporation, declaration, and bylaws are the three main governing documents. The hierarchy of these documents is:

Declaration: The priority document
Articles of incorporation: Next in the hierarchy
Bylaws: Last in the hierarchy

I remain puzzled as to how an ACC can exist independent of an HOA and have independent authority over activity within the HOA.

I think you're still getting tripped up over the terminology difference between the HOA overall and it's establishment as a non-profit organization. The ACC is definitely part of the former just not the latter.