Road Maintenance Turnover

Started by TimA2 • 19 replies • 259 views

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TimA2 (North Carolina)
Posts: 8

Posted:

The developer of our neighborhood is also the declarant. *let the issues ensue*
When the neighborhood was initially built, the roads were public and county taxes were paid on them.
In 2022, the developer "sold" the roads to the Homeowner's Association. This happened at the same time that the community was complaining that the roads were in bad shape and needed to be repaired.
At the next community meeting, which was postponed as we later found out according to the dates, so that he could make the change, the Developer/Declarant informed everyone that he was no longer responsible for road repair because the Association owns them now.
Looking back at records, after 2022, county taxes were no longer paid or required on the road, and in GIS, they were in fact listed as private. The road are valued for tax purposes around $5800, and the Deed paperwork that we were shown should that the roads were sold to the Association for $10, yes TEN dollars.
My question is this...
What is the legality of this road "sale" if the individual that did it was acting as both the Developer, and Declarant at the same time in order to turn them over. The community was unaware of the events, there was never a vote, and now we are stuck with thousands of dollars in repairs that need to be done.

TimA2 (North Carolina)
Posts: 8

Posted:

forgot to mention, this is in North Carolina.

CathyA3 (Ohio)
Posts: 6,299

Posted:

How did the declarant "sell" county roads to the HOA?

It's not unusual for local municipalities to require concessions of some sort in order to allow development to take place. But this makes no sense. Either he purchased the roads from the county and then sold them, or he didn't actually own them and there were some other legal agreements somewhere. Or something...

We need more information to know what actually happened here.

CathyA3 (Ohio)
Posts: 6,299

Posted:

In the meantime, you might take a look at your county recorder's website (If it has one) and search for documents with your HOA's name attached to them. A purchase of public land should involve public records, and it may give you an idea of what happened.

TimA2 (North Carolina)
Posts: 8

Posted:

That’s part of what we are trying to figure out. Were they truly his to sell? We’re in contact with register of deeds to find out where the actual ownership lies.

ElleN (Idaho)
Posts: 1,338

Posted:

Quote:

Posted By TimA2 on 01/24/2025 11:11 AM
the Deed paperwork that we were shown should that the roads were sold to the Association for $10, yes TEN dollars.

Do understand that selling land for $1 or $10 is a lawful way to ensure the contract withstands the legal test for "consideration." It happens a lot when people aim to lawfully transfer title to real estate at no expense to the buyer.

I hope your focus is more on this:

Quote:

Posted By TimA2 on 01/24/2025 11:11 AM
My question is this...
What is the legality of this road "sale" if the individual that did it was acting as both the Developer, and Declarant at the same time in order to turn them over. The community was unaware of the events, there was never a vote, and now we are stuck with thousands of dollars in repairs that need to be done.

To get intelligent answers, you would have to start by quoting at length, word for word, what your HOA's declaration says on the subject of the HOA buying land, before and after Declarant control.

If an attorney got asked these questions, she would ask for all the governing documents, including plats; review them all intensely; and get back to you in a few weeks.

I would also take a look at North Carolina's HOA statute to see if it has restrictions on such transfers.

Your question is intensely legal. Maybe this forum's responses can help prepare you for a meeting with an attorney. Maybe not.

TimA2 (North Carolina)
Posts: 8

Posted:

That’s all great info. We have an attorney on hand. Wanted to check here to make sure we can provide all the necessary info and get some ideas of what we might be looking at

ElleN (Idaho)
Posts: 1,338

Posted:

TimA2, I think I would keep my eye on the ball here, re expenses. It is possible that per the terms of the Declaration; regardless of the sale of these roads; and regardless of whether the Declarant is in control, the owners would legally be responsible for paying for the roads' repair.

Until I was clear on these points, I would not pay an attorney.

TimA2 (North Carolina)
Posts: 8

Posted:

The covenants state that the responsibility of the roads and maintenance fall to the declarant until such time as a public entity (DOT) takes over, or the Association takes responsibility with an 80% vote. In either case, an inspection must take place.
They had issues when they were unknowingly turned over. As of right now, the association would be responsible. But with the roads being turned over without the knowledge of the association, no record of any inspection, and no vote, we question the legality of the individual acting as both the developer and the declarant in the transaction.

TimB4 (Tennessee)
Posts: 21,062

Posted:

It is typical for a developer/declarant to turn common areas over to the Association.

It is also typical for this to be done while the developer/declarant controls the Board (hence, controlling the Association).

If the developer is still in the picture, there may be a Surety Bond posted with the city/county.
If this is the case, the Association might be able to make a claim against it for the repair of the roads.

Something to ask the attorney about.

CathyA3 (Ohio)
Posts: 6,299

Posted:

If the roads were public, it's not unusual for the municipality to approve the developer's plan in exchange for the developer assuming ownership and maintenance costs of the roads. I'd bet that something like this did happen.

It's also not unusual for a developer to own a large plot of land and transfer ownership to the HOA in sections. Things like streets are often transferred toward the end of construction. Once the heavy equipment is no longer coming and going, the develop does final repairs and re-surfacing.

If this is what happened, it's on the up and up as long as the declaration includes all of this.

TimA2 (North Carolina)
Posts: 8

Posted:

The roads are still construction roads with equipment tracks in them. No curbs, and sunken asphalt. When we brought up the concern of the roads never being updated, that is when he turned them over/sold them to the association.

ElleN (Idaho)
Posts: 1,338

Posted:

Quote:

Posted By TimA2 on 01/24/2025 12:03 PM
The covenants state that the responsibility of the roads and maintenance fall to the declarant until such time as a public entity (DOT) takes over, or the Association takes responsibility with an 80% vote. In either case, an inspection must take place.
They had issues when they were unknowingly turned over. As of right now, the association would be responsible. But with the roads being turned over without the knowledge of the association, no record of any inspection, and no vote,

Assuming you interpreted the covenant correctly, I agree with the above concerns.

I would prefer to see the original wording. This is because I aim to be thorough, and because folks nearly always bring their bias to these discussions. An outsider's eye and opinion is a good idea.

Quote:

Posted By TimA2 on 01/24/2025 12:03 PM
we question the legality of the individual acting as both the developer and the declarant in the transaction.

I do not understand this part. You may have a point, I just cannot tell what it is.

TimA2 (North Carolina)
Posts: 8

Posted:

Here is some of the wording directly from the covenants:

Street Maintenance. The Declarant agrees that it will be responsible for maintaining
right of ways designated as ''PUBLIC ROW'' on the recorded plat until said right of ways are taken
over by the North Carolina Department of Transportation or transferred to the Association.

The second part you referenced is the concern that the Developer, and the Declarant of the covenants for the neighborhood HOA are the same person.
During the transfer of the deed to the roads over to the Association, he would have been acting as both the Grantor, and the Grantee at the same time.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By TimA2 on 01/24/2025 7:13 PM
Here is some of the wording directly from the covenants:

Street Maintenance. The Declarant agrees that it will be responsible for maintaining
right of ways designated as ''PUBLIC ROW'' on the recorded plat until said right of ways are taken
over by the North Carolina Department of Transportation or transferred to the Association.

The second part you referenced is the concern that the Developer, and the Declarant of the covenants for the neighborhood HOA are the same person.
During the transfer of the deed to the roads over to the Association, he would have been acting as both the Grantor, and the Grantee at the same time.

No, He's the grantor in this transaction, the association is the grantee.

This sort of transaction is very common, as the developer/declarant owns the property prior to selling it to the association. The fact that the declarant is acting for the association can be confusing, but it's how this stuff is done.

TerriS6 (California)
Posts: 3,284

Posted:

Quote:

Posted By TimA2 on 01/24/2025 4:20 PM
The roads are still construction roads with equipment tracks in them. No curbs, and sunken asphalt. When we brought up the concern of the roads never being updated, that is when he turned them over/sold them to the association.

I find it difficult to believe that a government agency would assume responsibility for roads that were not completely developed to its standards already. After that, it sounds like your membership would have had to vote on the transfer.

TerriS6 (California)
Posts: 3,284

Posted:

Sorry, my comment based on too hasty a reading.

ElleN (Idaho)
Posts: 1,338

Posted:

Quote:

Where is the part that says '80% of the owners have to vote for the transfer'?

TimA2 (North Carolina)
Posts: 8

Posted:

I misquoted on that. The 80% vote relates to the process dedicating the roads to DOT.

ElleN (Idaho)
Posts: 1,338

Posted:

Quote:

Posted By TimA2 on 01/25/2025 7:38 AM
I misquoted on that. The 80% vote relates to the process dedicating the roads to DOT.

Got it.

If I lived there, the next questions for me would be:

(1) Whether it's clear from the plats and declaration that one way or another, the roads were going to become a part of the association; and

(2) If the developer/declarant had not transferred the roads to the HOA at this point, could he assess owners for the roads' maintenance?; and

(3) To try to cut to the chase here: Who has been using these roads? Are the roads essential for access to the community? What I am getting at: When one uses something, the law actually says one is expected to pay, one way or another. (I forget the name of the legal principle.)

I am also skimming through the NC Planned Community Act at https://www.ncleg.gov/Laws/GeneralStatuteSections/Chapter47F. But this particular Declarant topic is not my forte. I may miss something.

CathyA3 is (or was) in the developer/declarant/build subdivisions business. I defer to her on this issue of the grantor and grantee eing the same. Google AI does have an explanation that makes sense to me:
In the context of real estate, a "developer" and a "declarant" are often considered the same entity, especially when discussing the creation of a condominium or planned community, as the developer typically acts as the "declarant" by establishing the governing documents and reserving certain rights over the property while developing it; essentially, the developer becomes the declarant when they create the legal framework for the community by filing a "declaration" document.

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