Developer's Financial Contribution

I have never heard of a developer paying any assessment on undeveloped lots, but I believe, at least in some HOAs, developers must pay monthly association fees on completed, declared, unsold units. At least, ours requires this, although in practice it never happens because the community is single-family homes and construction does not start until there is a sales agreement in place, and the unit is declared at the time of closing.

I don't know what to tell you either.

In our area, the developers pay nothing on undeveloped lots, but full assessment on built-on lots.

The developer has already "paid into" the undeveloped lots by virtue of his creating and building all the infrastructure of the subdivision (such as the drainage basins, sewers, roads, underground utilities, etc etc). We do NOT have any "amenities" such as swimming pools, gates, etc. either, but the developer DID pay into the creation of and infrastructure of the development, so why would he be expected to have to double-dip and pay on the undeveloped lots as well?

BradP, as in my first post I stated the documents give no exceptions and, per the docs, he must pay full assessments on even empty lots. My thanks to you and all others who have tried to respond. Much research has led to the fact there is no industry standard. We will simply have to try to arrive at our own percentage during mediation or allow this to proceed to trial where the court will, undoubtedly, enforce the CC&Rs as written and he will pay full assessments. Another lesson for a builder who wishes to expand into the multi-unit development business without sound and experienced legal advice. Usually, the declarant (developer) has the docs written with great emphasis on protecting him - in this case it does just the opposite and it will ultimately cost him dearly if he doesn't come forth at mediation. 92% of Tennessee court cases have gone in favor of associations where there documents to uphold their case. Thanks again

Howie,

I have looked up my states statutes and they define "Unit" as, a portion of the condominium designated for separate ownership or occupancy. "Unit Owner" is defined as, a declarant or other person who owns a unit...

Sec. 33-1217 states, "The declaration shall allocate a fraction or percentage of undivided interests in the common elelments and in the common expenses of the association, and a portion of the votes in the association, to each unit and state the formulas used to establish those allocations. Except as otherwise provided in this chapter, the allocations shall not discriminate in favor of units owned by the declarant. Except for minor variations due to rounding, the sum of the undivided interests in the common elements and common expense liabilities allocated at any time to all the units must each equal one if stated as fractions or one hundred per cent if stated as percentages."

In practice, I have seen the association fees for all units that do or could benefit from the commone elements allocated a percentage of the association fees. This included the units unsold that are still owned by the developer as well as units still under development, as these are units owned by the developer. Although the developer was allocated their full % of the association fee for units they owned, the operating agreement stated that they would pay 25% of that allocation. Then IF, the operating expenses could not be met by the current association dues being collected, then the declarant would have to contribute more up to their full 100% share of their allocated amounts. If this still was not enough, then the board was given the right to increase the association fees for all members to meet the operating expenses, either as a special allocation or as a permanent increase.

The one thing you want to avoid is having the developer paying in a 100% of their units ownership allocations and for the association to end up with an operating surplus. This becomes taxable income to the association if the members have not elected to apply the surplus to next year, (effectively reducing next years budget), this is an IRS election that must be made yearly by the members, not the BOD.

For the comment made that it wasn't fair to make the developers pay any assessments as they had paid the costs for inputting the infrastructure; those costs are what they are in business for and if they know what they are doing, they make a profit when they sell each unit. Holding them responsible for a portion of the assessments on the units unsold gives them incentive to get them sold so they don't have to pay those assessment fees. Which is better for all.