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Subject: Developers Rights and Abilities Post Turnover
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DanN3
(Florida)

Posts:91


04/08/2017 5:16 AM  
In Declarations of HOA's, operating under Fla. Ch 720, where there is reference to Developer rights and abilities, do these rights and abilities survive and have force after turnover? By way of example, 'Developer appoints one member to the Board of Directors'. After turnover does the developer continue appointing a board member and if so, forever? In summary, what developer rights and abilities survive turnover and which kinds do not?
JohnC46
(South Carolina)

Posts:7053


04/08/2017 6:38 AM  
Dan

Typically all developer/declarant rights end at turnover.
DanN3
(Florida)

Posts:91


04/08/2017 8:25 AM  
Thanks for your input. One source said same except for certain warranties and guarantees.
KerryL1
(California)

Posts:4458


04/08/2017 11:05 AM  
We're a high rise condo and the only "right" or "ability" the developer retained after turnover was to have a voice in architectural change approvals for 10 years from first occupancy. I believe he wanted this because he owns our commercial spaces--about 4% of the entire project. I was on the board during the last few years of that right and he never exercised it.

I'm not sure how warranties or guarantees are rights or abilities, but, rather, they seem like obligations.
GenoS
(Florida)

Posts:1691


04/08/2017 12:28 PM  
That sort of happened in my HOA back in 1994. The original developer wanted to bail out after completing only half of the planned 100 homes. After a 2-year building hiatus, the original developer found a local homebuilder willing to buy the remaining 50 lots. In a 3-way agreement, the original developer agreed to turn over the HOA to the owners and sell the 50 lots to the new builder. The new builder paid $10,000 per lot to the original developer. In return, the HOA's new owner-controlled board agreed to settle all claims and disputes it had with the developer in return for a $1,000 per lot contribution from the new builder. The new builder was to be a "builder" only without assuming the role of "developer". They were also given a seat on the board and the power to veto any amendment to the documents that they decided, in their sole judgment, was against their interests. This arrangement held until all 50 of the remaining lots were built out and sold.

So turnover had already happened and the board was (almost) completely controlled by the homeowners for a period of about 4 years.

The 1994 agreement turned out to be a bad deal in retrospect, but that's another story. FS 720 didn't come into being until around 2000, I think, and I don't know if such an arrangement would be legal today.
DanN3
(Florida)

Posts:91


04/08/2017 1:42 PM  
Agree with your 2nd paragraph. It sounds like in your case the developer retained ability was deemed with standing or did you discover that it was really without force and thus became a historical note?
DanN3
(Florida)

Posts:91


04/08/2017 1:53 PM  
Based on today's version of FS 720 there are several obstacles that would have prevented that arrangement. Thanks for your story. Good it worked out for you.
GenoS
(Florida)

Posts:1691


04/08/2017 3:46 PM  
Posted By DanN3 on 04/08/2017 1:42 PM
Agree with your 2nd paragraph. It sounds like in your case the developer retained ability was deemed with standing or did you discover that it was really without force and thus became a historical note?

The owners at the time knew what they were signing up for. At least that's the impression one gets from reading the documents that survive from that time (a few sets of minutes from those years along with a copy of the actual 3-way agreement that all parties signed off on). Any claims against the original developer were disclaimed and since the new builder wasn't the successor of "the developer" any claims against him were between him and the home buyer only. The association was left holding the bag when he decided to ignore the grading plan that had been approved by the county and the Water Management District 6 years earlier. Before turnover, the original developer got an engineer to sign off on a statement that the as-built grading was in conformance to the original plan. That was only true for the original 50 lots. The new builder never graded according to that plan, the homeowner-controlled board never held them accountable for that oversight and we have had severe drainage problems on those lots ever since.
JanetB2
(Colorado)

Posts:3735


04/08/2017 9:28 PM  
Posted By DanN3 on 04/08/2017 5:16 AM
In Declarations of HOA's, operating under Fla. Ch 720, where there is reference to Developer rights and abilities, do these rights and abilities survive and have force after turnover? By way of example, 'Developer appoints one member to the Board of Directors'. After turnover does the developer continue appointing a board member and if so, forever? In summary, what developer rights and abilities survive turnover and which kinds do not?


You are in Florida ... Florida unfortunately gives excessive control to a developer. Your answers will be in your State Laws and some you will need to dig and find in various areas such as:

720.3075 Prohibited clauses in association documents.—
(1) It is declared that the public policy of this state prohibits the inclusion or enforcement of certain types of clauses in homeowners’ association documents, including declaration of covenants, articles of incorporation, bylaws, or any other document of the association which binds members of the association, which either have the effect of or provide that:
(a) A developer has the unilateral ability and right to make changes to the homeowners’ association documents after the transition of homeowners’ association control in a community from the developer to the nondeveloper members, as set forth in s. 720.307, has occurred.
(b) A homeowners’ association is prohibited or restricted from filing a lawsuit against the developer, or the homeowners’ association is otherwise effectively prohibited or restricted from bringing a lawsuit against the developer.
(c) After the transition of homeowners’ association control in a community from the developer to the nondeveloper members, as set forth in s. 720.307, has occurred, a developer is entitled to cast votes in an amount that exceeds one vote per residential lot.
Such clauses are declared null and void as against the public policy of this state.

DanN3
(Florida)

Posts:91


04/09/2017 5:27 AM  
We are aware of 720.3075. However in our case the amenities, swimming pool, night clubs, tennis courts, etc. are owned by the developer in a separate corporation known as the club. Every unit owner is required by the governing documents to be a member of the club. The governing documents give the club owner(s) the right to cancel the membership of anyone for any reason that is not in violation of state and federal law. Having used this cancellation ability in the past, board members will not not challenge the club on anything for fear of cancelled membership. Note: Club dues are still due the club by unit owners even when membership is cancelled. Unlike Condominiums in Fla, there is no where to go to get quick cheap relief except through the courts. It could take years and a lot of $ to get relief, assuming you don't get a bad judge.

Although this is a tough long dangerous haul the first step is to see if developer rights and abilities survive after turnover, in the first place.

Another feature is to rule by developer covenant, thus being outside, perhaps, of 720 and 718 requirements. This is also the case here.

To make matters worse the statute of limitations, 5 years, may also make legal challenges against the governing docs null and void.

A smart attorney once told me that if you want to put in a provision in the condominium docs that is a violation of CH 718 but not a violation in CH 720 then put that provision in the Ch 720, Master Association. If the provision would be illegal in both then have the developer create a separate external covenant and put the desired provision there and just make sure that it is mentioned in both the Condominium and HOA docs requiring adherence to the external covenant and that the external covenant is the most superior. Make sure the external document cannot be amended by those you do want to have doing so. Thus the person or persons can change the exterior document at will and without the joinder of membership and such changes are immediately effective upon the memberships after proper recording. This was referred to as a "Rule by Covenant', after turnover. In this way a developer can turnover over an association and still retain control over it legally, at least so far.

Thanks for your comments.
JanetB2
(Colorado)

Posts:3735


04/11/2017 8:51 PM  
I have heard of Developers in FL retaining that type of control especially in 55+ Communities with many amenities. Some are raking people over the coals being able to charge large fees and pocketing profit. When my mom was looking to buy in FL I told her not to buy if developer controlled ANYTHING. She wanted something newer 10-15 years or less and could not find anything without developer. Instead of buying in FL she bought in NV.

What it potentially may come down to is if you want amenities then you are stuck paying the Developer's Club Corporation until potentially the Legislators in the future pass laws against this type action. The alternative would be to Amend CCR's to NOT participate in the Club if that is possible and/or desired. That could put the hurt on the developer as his Club would then be looking for members and may need to lower membership cost to obtain members. In which case individual homeowners could then "choose" whether or not to participate and pay their own separate fees to the Club.

If you are wanting to make any challenges ... be sure to watch your statute of limitations. At least as you stated yours is potentially 5 years ... in my state it is 1 year.
DanN3
(Florida)

Posts:91


04/12/2017 5:05 AM  
I think good advice given. Developers that retain community amenities via a for profit corporation and bind all owners and renters to pay for the amenities plus a profit to the developer, via governing Docs, can easily be abused monetarily and otherwise. I have seen one instance where the governing Docs indicate the failure to pay the amenity dues will result in the foreclosure of the unit after lien.
JanetB2
(Colorado)

Posts:3735


04/13/2017 8:54 PM  
Posted By DanN3 on 04/12/2017 5:05 AM
I think good advice given. Developers that retain community amenities via a for profit corporation and bind all owners and renters to pay for the amenities plus a profit to the developer, via governing Docs, can easily be abused monetarily and otherwise. I have seen one instance where the governing Docs indicate the failure to pay the amenity dues will result in the foreclosure of the unit after lien.


I recommend some of you in FL provide information to your Legislators to hopefully obtain better property right protections. If enough people provide information showing potential where BOTH the Buyers and their Secured Creditors are being raked over the coals in this type manner and other ways you might make a difference. You can either sit back and continue to take it now and in future ... or citizens can fight for change.
GenoS
(Florida)

Posts:1691


04/13/2017 11:28 PM  
No citizens in Florida are able to put together a bag of cash big enough to compete with the developer lobby. Florida made its bones on shady land deals almost 100 years ago and although it has gotten better since then it's pretty amazing that they don't really even try to hide the corruption here.
DanN3
(Florida)

Posts:91


04/14/2017 5:30 AM  
Developers are just too powerful here in Fla. It is common knowledge about 'Rule by Covenant' and how to evade 718 and 720 requirements. Too few are impacted at any one time so to effectively put enough pressure on those in power to make change. In Fla, the only relief you have when 720 statute is violated is through the courts and that takes considerable funds and often a lot of time. With 718 entities, condos, at least you have an agency that you can complain to and at least feel like you will get justice at a reasonable cost and in a timely manner.

There was a movement here in Fla to combine and strengthen CH 718 and 720 into a single all encompassing statute and giving oversight an existing oversight agency we know as the DBPR. Effective lobbying worked hard against it, effectively stone walling the effort. Everyone legislator you talked to thought it was great......... but probably tomorrow. It withered on the vine. Like with Associations, if you ever want to kill a good idea that is tough to argue against then give it to a committee and provide poor leadership within the committee.
JanetB2
(Colorado)

Posts:3735


04/14/2017 9:05 PM  
It does not always take money. It takes perseverance!!! It takes people willing to stand up and fight.

One of our past Developers was a USDA Federal Grantee. When original owners talked to some Attorneys their attitude was the developer will have deep pockets and lots of money trying to talk us out of pursuing. Well ... that developer is now on their 3rd or 4th attorney and out of pocket a lot of money. Their attorneys would try to tell them they could get away with items which they could not. Last I heard they might have had their Federal Funding pulled, which would make my day.

When their "clients" started having issues with their homes and were told ... "it is what it is ... too bad .. so sad, if you do not like it you will have to sue us" knowing darn good and well they did not have money for lawsuits. My response to the owners ... get their response in writing and when they send you such a stupid and ignorant response ... here is USDA Secretary Vilsack's direct email address. When you respond be sure to copy Secretary Vilsack. Yep ... developer ended up being told where they could stuff their "too bad ... so sad" attitude.






DanN3
(Florida)

Posts:91


04/15/2017 8:00 AM  
Yes..... sometimes a lot of perseverance. Sometimes it is like a cartoon I once saw where 4 poorly armed guys, with sticks, are completely surrounded by fully armed soldiers three rows deep and one of the surrounded says to another 'I think we have a problem here' and the response was 'Don't worry because we have the cause !'.
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