Our developers won't say goodbye

I am a board member in a unique situation. Our former developers who in most cases are in place throughout the developement phase are class B members of the HOA. The developement is all but completed but these developers have
retained a few lots and 1 house for resale purposes. It is seemingly their intent to stay on a class B members with veto authority to hedge any activity, warranted or otherwise, against them. They also remain in a position to veto any election of rogue members to the board who might pursue the aforementioned activity.

There has been documentation presented claiming the dissolution of the developement company of record however it is the individuals themselves who remain. Any thoughts?

Joseph,

Your CCRs should spell out what the exact process is to transition the HOA to the members. You speak of the developer being a class B members, so I'm sure you know where to look for this info. Exactly what does it say about transition. Sometimes there is an "or" clause which says, "or when the developer chooses to transition" (or something to that effect).

If the development co has been dissolved then the developer may no longer be in control of the assn. If the co no longer exists then, IMO, his control is also gone. However, if he personally owns properties (class A membership)he would have one vote for each property owned. Since the HOA has not transitioned to the members the developer may have more than one vote for each unsold lot or home. However, if the corp has dissolved, the developer may no longer own those unsold lots/homes. Whoever the owner is would have the required number of votes.

I believe you need to find out who will be taking over development of the s/d, especially if transition should not have occurred yet according to your CCRs.

Hello Donna. Thanks for your reply. Yes, there is a BOD in place. I am part of that team. We volunteered with one or two volunteers rejected by the class B members. Hand-selected as it would appear to the other class A members.

To paraphrase the covenants, the association would be handed over to the class A members at such time as 80 (and then changed to almost 100) percent of the lots were built out. Now a considerable amount of the lots sold by the developer are now in the bank's hands as some builder's have become bankrupt. The developer has several lots of his own, for sale or build-on, plus has his eyes on these lots when the price is right.

The timeline for handover changes constantly and it appears their assurances of a class B to class A transition is just part of a stall tactic. They do want to remain in place for reasons I explained in my 1st letter and in this. There is money to be made here. The developer does many of the maintenance jobs in the neighborhood (mailbox post setting, landscaping etc. His is a value-based performance and the work is bid out. HIs happens to be a lower bid and quality work.

The developer has a history with many of the homeowners and hence the longing for his exit. But, with the economy as it is and no new developements on the horizon, he seems set in. He is beyond shame or understanding so that cannot be our ploy. Part of the history I alluded to involved litigation that was awarded in the developer's favor with legal fees, of course, used from our HOA account. These were recouped by court mandate from the defendant.

Also, the dissolution of the developing company supposedly passes on the rights of the BOD to the former members thereof.

As I said, we have a makeshift/interim board of directors with community members present. The class B members have veto authority so nothing passes,pay,changes without their final say.

Without going to court which is not in the communities interest as the class B have threatened to fight any litigation established to remove them. Their letter to the community referenced previous unsuccessful litigation.

Perhaps the only way out for us is the old AC/DC song... Dirty deeds done dirt cheap.

Thanks again for your reply.

Joseph,

I know what you are dealing with and this housing market sure has thrown a monkey wrench into the works. My developement near Chattanooga has a proposed 120 homes and after 2, 1/2 years, we have 10 homes built. This developer did some things right. He required any builder who was interested in building in here, to purchase 10 lots each. If they default, the lots return to his ownership and he will develope them. So far, all remain under each builder. Turnover will be at 75% built out so we are happy as a lark that we are not having to pay dues nor deal with any Board, developers appointed or homeownerselected. Ahhh, for the peace and quiet.

Not an issue of time, per se, with respect to a certain date. Perhaps by time you mean when, as in most PUDs, a certain number of lots are built out. Our changed, just before a timeline deadline by the way, from 80% to 95%. Only a few of the 120 lots are still owned by the developer. The other dozen or so empty lots are owned by builders who have gone bankrupt. (Please see story above.)

Thanks for your interest and reply. Hope things are well in your world.

Thanks, Glen

I will revisit the covenants to see if our situation has a term. I don't think so, though. The point about the government loan is an interesting one. I guess we would have to approach the community to see if anyone's mortgage applies. Thanks again.

I know you want to have him move along, but I hardly begrudge a developer trying to make as much money as he can, especially after the economic debacle over the last couple of years.

It is your "home," but it was his investment. He took the risk from day one and I, personally, don't have a problem with him trying to make it as profitable as possible, as long as he is not doing anything illegal or unethical.

Certainly changing the percent completion required for turnover is within his ability to do.

It's bound to be frustrating, but I can imagine the last few years have been frustrating for him as well.

Michelle,

I appreciate your response however your viewpoint differs from my particular experience.

Nothing wrong with letting an individual or company make an honest buck. I understand that as well as anyone. There is more to the picture here than you are deriving from my story. Some within the community are totally opposed to this developer, some are apathetic. Others don't know who he is. If you live in a subdivision with CCRs, you understand many individuals who are interested in living in a restricted environment except when the standards or restrictions have to do with them. Most people have difficulty being told what they can or can't do with their homes. This is part of the drama here and after almost 6 years in a moderately-sized subdivision, we are looking forward to being self-managed.

Hooray for the entrepreneurial builder and thanks again for your reply.

To answer the bolded above: No. and I wouldn't expect him to. He's already made a huge investment in the design of the development, the construction of the infrastructure, whatever capital needed to be injected, etc etc. What do I, as a homeowner, get out of his risk-taking and investment? The value of my lot and my home.

I realize that my perspective may not be a popular one. We often like to demonize or vilify developers, just as residents often try to demonize and vilify HOAs and/or HOA boards.

I didn't read the above issue as the homeowners being expected to "save his butt." But I did read that the developer is perhaps trying to reduce some of his loss, or grow some of what might have been stagnant for the last few years.

I can appreciate that the homeowners want to self-manage. I'm also thinking there is more to this story than we are being given.

But that's neither here nor there. Since I don't know this development, developer or poster, I'm just making a general statement that simply because the developer is not moving on doesn't necessarily mean it's because there is some sort of nefarious scandal going on.

For one thing, he cannot get his bonds back as long as there has been no turnover. So whatever is keeping him may well be worth more to him than that.

Joe,

Look very closely at the article describing the transition. Does it give the developer the right to change the transition time. My CCRs state at the end: "Such earlier time as the declarant shall designate in writing." If he does not have the authority to change the transition time, then an amendment would be required that the members would have to vote on.