Control from Developer

Our CCRs state that no later than seven year (after date of recording of the Declaration) of 180 days after 75%of the units which may be constructed and the property and additional real estate have been conveyed to unit owners "other than Declarant" we can elect
a new five member board. 7 years is 2011.

Right now the Declarant is our builder's corporation. He and his brother and their wives privately own 9 of the 40 homes. 8 lots are not built on and the Declarant owns them as well.

My question is this.....since the Declarant owns 9 privately does that count in the 75% of homes sold or does it even matter since he can vote on all the homes he owns and the lots that no homes are built on. Right now we have 19 homes owned by people other than the Declarant. We need 30 homes to be built to be at 75%. The builder/declarant is in the process completing four more homes and will be starting 4 more. He will be keeping four lots until the economy picks up. He is under pressure from the township to finish the development. We can't force a vote until 30 homes are sold to people "other than the declarant) that is 10 more homes.

Even with 20 homes owned by "other than the declarant" that is a 50/50 split. Hopefully more homes will be sold but I just don't see how the owners will get control away from our builder until at least 21 or more homes are owned by people "other than the Declarant".

Just when I think I am starting to understand all of this I realize , I'm NOT!!! I know I have to seek legal advice and am in the process of finding an HOA attorney to help me interpret this.

Thoughts?

Maureen,

I believe we've discussed this with you in other threads. However. . .

The 75% of homes means of all the homes in the s/d. The fact that the developer owns some of the homes means he is a homeowner just the same as you and all the other homeowners. With 40 homes in the s/d, turnover should occur when 30 homes are sold. If the declarant owns 9 homes and 19 homes are owned by others that equals 28 homes. Once 2 more homes are sold, whether to the declarant or someone else, transition may occur. As I've told you before he is allowed one vote per home owned,just the same as you or any other property owner. Right now he has 9 votes for the homes he owns plus whatever votes he has for the 11 unsold lots. Some docs give the developer 3 votes for each unsold lot; other only one. But, either way he has the majority votes. Once transition occurs he will only have 1 vote for each home he owns and will no longer have the majority vote of the members. However, those votes are only for issues that the members are voting on. Of more importance is whether or not he still has the majority vote of the BOD. Are there still just 2 h/o's on the BOD? If so he still has that majority vote.

Maureen,

I would think his goal is to complete the s/d and get out. Perhaps he's bought those homes with that goal in mind as his homes also add to the 75%. Some docs give the developer the option to determine when transition occurs. For example, mine say (among other things) "or such earlier time as the developer shall declare in writing".

Maureen,

He sounds like a real control freak! Your only hope is that those last 2 lots sell quickly which would cause him to transition to the owners. Hopefully he will do it IAW the gov docs. I have heard of developers who would not transition; let's hope he's not one of those.

Maureen,

It's the members who would have to vote to amend the CCRs which I believe is the doc that would have to be amended. He could very well propose an amendment to increase the % required to transition. I'm not sure how many member votes he has because I don't know what your CCRs say about Class B (declarant) votes. Many docs give the declarant more than one vote; mine give him 3 votes for each unsold lot. That's how the declarant maintains the majority member vote while in control. So, depending upon whether or not he has the controlling member vote an amendment may very well pass with no problem.

One thing you may want to research is what steps can be taken if he refuses to give up control after the 75% is reached. Is there a state or city/co dept that oversees the development of raw land? You could start with your city/co planning dept and go from there. Here in AZ a developer must first go through the Dept of Real Estate to obtain a public report for a proposed s/d.

Good advice. Thanks.