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Voting for Control of Development

Started by MaureenM1 • 18 replies • 1606 views

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MaureenM1 (PA)
Posts: 344
Posted:
our builder is the President of our HOA as well as the President of the Corporation who is
the Declarant.

He privately owns 6 homes and his brother privately owns one (both in their names and their wives).

We are nearing 75% sold. Our CCR's states....

after 75% of the units which may be constructed on the Property and the Additional real estate have been conveyed
to Unit Owners other than the Declarant, all members of the Executive Board shall resign, and the Unit Owners
(INCLUDING DECLARANT TO THE EXTENT OF UNITS OWNED BY DECLARANT) shall elect a new five member Executive Board.

How many votes would the builder/declarant have? Would he be able to vote on his privately owned homes, as well as unsold lots? Not sure how many votes for each lot. Combed through the CCR's but it doesn't state anything about Class A, Class B, etc. (as I have read in others forums). Just states Declarant can vote to the extent of Units owned by Declarant). Does units mean lots? Don't know how we would get the answer to that question. We don't want to ask the PM since she was hired by the President/Builder/Declarant!!! We don't want to show our cards and risk the President/Declarant to use his power to amend the CCR's (which he has done in the past).

We now have two resident board members which I am one voted in last year. Would I and the other board member need to resign (our term was for three years) or just the declarant appointed board memebers?

We want control of our development, however, we don't want to force a vote until we know we have enough votes to get control, especially if we have to resign and the Declarant votes in five members of his own choosing. Our annual meeting is coming up in September. I

I attempted to make an appt. with an attorney in the area who specializes in HOA law. This was the answer I got...

"we will not be able to handle in light of our representation of associations (not individual owners) and our existing professional relationship with management. If you would like us to submit a proposal to the Board, we would be able to to that. Thank you."

Trying to understand all of this....any advice would be greatly appreciated. Also, if anyone has any suggestions on where I can obtain legal advice (so I am prepared) would be appreciated.

RogerB (Colorado)
Posts: 5,067
Posted:
You failed to include the total number of units (= lots). If there are 100 units and 25% are not sold, then he controls those 25 votes + 6 privately owned lots + his brother owns one. Assuming a quorum of 20% is required to hold a meeting to elect Board members unless you can get over 31 other members to vote and elect at least three other candidates he will still control. It is probable that he will be able to elect whomever he pleases unless there is a large majority of the other owners present and have their candidates on the ballot.
MaureenM1 (PA)
Posts: 344
Posted:
When complete there will be 40 townhomes. 28 are owned (7 by builder and his brother). 4 are being built (so far two are under
contract). There are eight lots still to be built on.
MaryA1 (Arizona)
Posts: 7,043
Posted:
Maureen,

There is no way the builder will have a controlling interest in the HOA once transition occurs. Even if there are class A & B memberships, at transition the builder becomes a class A member (same as all the other members) and only has one vote per unsold lot. At this point there are 21 members and 19 lots owned by the builder (7 of which he owns personally). Even if he personally buys all the unsold lots he still would not have a controlling interest. Of course this is just on paper, the determining factor is how many members will cast a vote -- the members only outnumber of builder by 2 votes!
MaureenM1 (PA)
Posts: 344
Posted:
It will be very close, but last time we voted I had meetings at my house to make certain the residents were
all on the same page.

the builder and his brother both ran for the two vacant seats (even though he builder is the President).

I went door to door and the residents all voted by proxy in case they didn't come to the meeting.

The residents meet four times a year on our own and are very close. All want to take control from the builder
when we are able to.

SusanW1 (Michigan)
Posts: 5,202
Posted:


You quote: "after 75% of the units which may be constructed on the Property and the Additional real estate have been conveyed to Unit Owners other than the Declarant, all members of the Executive Board shall resign, and the Unit Owners (INCLUDING DECLARANT TO THE EXTENT OF UNITS OWNED BY DECLARANT) shall elect a new five member Executive Board."

When 75% of the units are purchased, then a new election is to be held. All members will vote, including the builder (who is then a member) and who has 6 votes. (you say he personally owns these houses)

The bylaws says "including declarant to the extent of UNITS owned" so there is nothing about undeveloped lots.

Don't you have a definitions section at the beginning of your bylaws or CCRs that define terms like "units" and "Unit owner"?

Ask for a clarification from the PM on this paragraph.

PS How were you ELECTED at this time?

MaureenM1 (PA)
Posts: 344
Posted:
our CCR's state that after 25% sold, two unit owner's (other than declarant) must be elected to the Executive Board. Me and my neighbor were voted in last year.
AndreaW4 (Illinois)
Posts: 2
Posted:
As a manager in Illinois, I've handled developer turnover. What community concerns is the developer ignoring? This is an important issue, because you may need to tread lightly. After turnover, you'll be asking him for lots of things. Some issues will be valid, and others not. If you get his bad side, the first Board will be responsible for costs that he will walk away from.
You may want to start with talking to other associations in your area about who their management company is, so you can be ready to switch companies at turnover. You can also go to CAIOLINE.org and find documents specific to your State. There are official documents the developer has to give the association at turnover. Also find an attorney that your association can immediately put on retainer for the first year to two.
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Andrea,
How is the new association going to do any of these things , such as hiring a lawyer, if the developer still holds the votes? How can they dictate anything at turn-over if they don't have the votes?

They better start looking for some common ground and go from there.

I think I understand you are saying the association is at a disadvantage in the best of times and this sounds like double trouble.
MaryA1 (Arizona)
Posts: 7,043
Posted:
Robert,

I think you may be confused about the developers votes. After turnover he will not be a board member, therefore he won't be in control of the assn. The only thing he can control is perhaps the outcome of a vote of the members. With the extra votes he has, depending upon how many members choose to vote, he may have the majority vote.
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Mary,
I thought that is what I said and it seems that way from Andreas explanation.

Also Mary, if he controls votes after turn-over, he can get himself elected to the Board. I seem to remember that exact thing happening somewhere in NC.

I also think there may be some more of this coming down the line because of the economy. If the developer can have turn over and control the association there are some pockets waiting to be picked,or at least an attractive pool of steady cash. I can see a developer turning over property, tying his management company into the deal, selecting his PM, electing himeself to the Board and selecting his Board members.

MaryA1 (Arizona)
Posts: 7,043
Posted:
Robert,

Frankly I don't see to what benefit it would be to the developer. As I said, if he has a controlling vote it would only be a vote on issues that come b/4 the members. If he uses that majority vote to get himself elected to the board he will only have one vote on the BOD. How could he run the board with only one vote?
RobertR1 (South Carolina)
Posts: 5,164
Posted:
Mary,
All you say is true.

But.......If he wants he can select who he wants on the board if he has the votes.

You know how disinterested in general associations are, and let him get a selected Board and it's damn near automatic they get re- elected, especially if he can get enough proxies. It does not take many friends to put three people on a five person board.

Personally and I had my druthers, I would like to see the developer gone. There are probably exception to that also.

MaryA1 (Arizona)
Posts: 7,043
Posted:
As it stands now the members have the majority of votes but it's real close -- 21-19. After declarant control the builder will only have 7 votes. So, it could only happen IF enough members chose not to vote. And if that happened then I wouldn't feel sorry for them. If you can't be bothered to exercise your right to vote then you can't complain about what you get! Right?
GloriaM (North Carolina)
Posts: 829
Posted:
Maureen:

Usually there are class A and class B lots. Class A have only 1 vote and Class B have 3 votes per lot. If your CCR's state after a certain percentage all Lots revert to Class A then the Declarant has only 1 vote per lot.
MaureenM1 (PA)
Posts: 344
Posted:
the CCR's does not have class or class b wording in the document.
RobertR1 (South Carolina)
Posts: 5,164
Posted:
To all,
Doesn't this boil down to that as long as the developer holds his own unit plus any lots that have a voting right, this is not the best situation for the association?

Can they do anything about it? For starters, do the documents say what is the maximum numbers of votes for the association? Does it say anywhere that multiple votes by one owner is not allowed.

Does any of this violate any state laws or statutes?

It appears there is too much in Limbo right at this time, maybe time will require change. In short I don't know, but it is a concern.

MaryA1 (Arizona)
Posts: 7,043
Posted:
Robert,

Usually transition occurs after the developer no longer has controlling interest in the assn. So, even if there are some lots still unsold at transition, the number of votes the developer has would not make up a majority. If the developer independently owns one or two units he is legally an owner/member and entitled to a vote for each one just the same as any other owner/member of the assn. Remember, the votes we're talking about are only member votes which would be mainly voting for board members and perhaps ratifying the budget. The developer would have no seat on the BOD after transition so, no matter how many votes he may still have, he will not have any more say in what actions the BOD takes than any other member of the assn.

The documents will spell out the number of votes each owner is entitled to. Mostly it is one vote for each lot owned; however, I have heard of some docs that only allow one vote per member no matter how many lots are owned. Also, I have heard of some docs that allow a vote for each owner of record meaning if a property is owned by both husband & wife they each get a vote. This should all be spelled out in the bylaws or CCRs.

I would be surprised if there are any states that address this issue in HOA statutes. But if there are, in most instances the state law would prevail.

RobertR1 (South Carolina)
Posts: 5,164
Posted:
Mary,
As usual we have to talk from limited information and I think I am on the same page except that at transition the developer loses control. I seem to remember a post here where the developer granted himself a seat of the new Board, and maintained a whole bunch of votes with undeveloped lots. Correct me if I am wrong. I think the advice we gave was more or less to question the legality of this type control.

I still think it is dangerous for the developer to actually live in the association if he can control significant numbers of the vote, however he does it.

I can look at the History of our island and 20 years ago the developer had a disproportionate share of the power of the island POA. Now he didn't want to pay taxes on undeveloped land so that land didn't carry vote but there was enough power built into the First Master Deed and agreements that conveyed this power that he pretty much ran the show. Then over the years the demographic change and the power held by the developer becomes less and the power of the POA becomes more. Now the developers relies on ownership of amenities, real estate sales, on Island builder, rental program, cleaning service and other entities. The POA has grown and control nearly everything, except as noted, and of course have taken on more responsibilities. Example is the recent take over of the ARB. The ARB has become a pain to the developer with not much new to control and so the POA and developer hammered (and that's the word) out an agreement to assume control of ARB.

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