In some states, almost every new construction within a community development comes with a homeowners association (particularly those in 'planned communities').
According to a Denver Post blog article (2018) (In Colorado) "Nearly 60 percent of the state’s population lives under HOA governance in the more than 8,000 HOAs operating in every county in the state..."
You may have thought that home owner's associations (HOA's) are only for condominium developments, but often developments/communities of single family residences also have HOA's.
When a developer begins development of a housing area/site/community, the developer will often create an HOA. The developer, depending upon state statues, can control the HOA until a certain number of properties/sites within the development are sold/transferred. This is commonly known as the pre transition stage of the HOA. For example, if there is a development of 100 single family homes to be constructed, the developer could control the HOA until a certain percentage of the lots or properties have been sold. It is not unusual for sites to remain vacant/unsold/not transferred for many years in a new development.
Each state has their own regulation of developer HOAs. One regulation (Florida) is that the HOA is turned over to the property owners 90 days after 90% of all units are conveyed. There are exceptions to this ruling. (Note: this is a simplified explanation - it is beyond the scope of this article to detail all aspect of regulation)
For the purpose of this article not every aspect of new HOAs can be covered. It is suggested that individuals acquaint themselves about the details of their state Statutes governing HOAs and in particular new HOAs in new developments.
If in doubt, consult the advice of a real estate attorney in the state where the property is located.
Pre Transition Period (when developer controls the HOA)
Developer controls the board of directors and may assign people to the board at will. During this stage - Homeowners do not elect the board.
Portions of governing documents may be changed/revised
Governing documents may not include association minutes of any meetings
Meetings may not be open to all residents
In some cases, Only one mandatory annual meeting is held and may not be open to all homeowners
Turnover Period (preparation of transitioning from a developer controlled HOA/Board to Homeowner controlled HOA/Board)
Homeowners elect a Board for the HOA.
During the turnover, certain documents are turned over to the elected homeowner board. Documents can include all legal and financial.
Post transition Period - (when the developer has turned over control of the HOA Board to the homeowners)
Legal issues have occurred post transition, that is when the developer has turned over control of the HOA to homeowners. One issue has been the failure to fund reserves.
An excellent article titled: HOA Board Waiting for Developer Transition; 7 Tips to Handle Developer Control HOAleader.com (December 2014)
other related articles in the HOAleader.com
Buildout of Vacant HOA Lots: Does the Board Have Any Control?
Getting Your Delinquent HOA Developer to Pay Up
HOA Transition Tips: Moving from Developer to Owner Control
Other sites for information:
independentamericancommunities.com and
yourhub.denverpost.com/blog/2018/12/hoa-reform-2019 and
coloradohoaforum.com
As always, if you have questions about a contract or legal document, consult an attorney who specializes in the field of law.
Consult before you commit.
Note: If you have inherited a property that is part of a homeowners association, it is advisable to obtain all relevant documents from the HOA that govern the property.
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