Developer to donate $10,000 – Help needed.

Last month our HOA transferred from developer to resident controlled as per our covenants. Everything went very well.

During our last developer controlled BOD meeting with the advisory committee the Developer suggested that the board elect write a letter to the developer (him) requesting funds to start a capital reserve fund.

After the election I was appointed and accepted the president position and wrote the letter. I got the response back with an agreement for the BOD members to sign.

Please read this and advise.

WHEREAS, the Declarant, *** and the elected directors of the Association have negotiated in good faith to: insure a smooth transition of the Association from partial Declarant control to complete owner control, and

WHERAS, without admitting liability, the parties have come to a mutually satisfactory resolution of this transition.

1.
Upon signing this Agreement, Declarant and *** shall pay the Association the sum of Ten Thousand ($10,000.00) Dollars as a one-time contribution to address the concerns of the Association regarding the initial establishment of reserve account for the Association.

2.

Association acknowledges and agrees that: a) these funds are being paid to the Association voluntarily and without admission of liability with respect to any matter brought to the attention of Declarant as part of the transition process and b) Declarant and *** specifically reserve the right to offset this payment against any future claim or claims the Association may assert against Declarant and J/N.

I've served on the advisory committee for over 2 years working with this developer. He has always been very honest business person. The agreement looks good but I know he has a business to run. Does signing this agreement release him completly of future claims? Thanks BruceD1

Thanks GeraldT4 - $0 balance in the reserve account. All assets are paid for (4 tennis courts, pool, clubhouse, and 3 different park playground equipment) and are no more than 4 years old. Budget accounts for reoccurring expenses. Clubhouse, tennis courts and pool.

My question does the signing of the agreement and receiving the check release the developer of liability incase something does show up in the "Transition Analysis Deficiency Report and Capital Reserve Replacement Study"?

BruceD1: I think it is commendable of the developer to retain $10,000 from the assessment fees collected from residents. This is really not a donation, it is your assessment fees money which he used to pay expenses, and he decided to return a portion of it back to you....

I question the wording ....Upon signing this Agreement, DECLARANT AND *** shall pay the Association the sum of Ten Thousand ($10,000.00) Dollars as a one-time contribution to address the concerns of the Association regarding the initial establishment of reserve account for the Association. Who is the "AND"? Is this the Declarant's company name or another person?

Check out what your official documents and the state's docs state on setting up a Fund, and whether this is part of his/Developer responsibility to leave the association with $x amount in the fund.

I also question this..."without admission of liability with respect to any matter brought to the attention of Declarant as part of the transition process and b) Declarant and *** specifically reserve the right to offset this payment against any future claim or claims the Association may assert against Declarant and J/N."

You want to be careful to know what the implication is--future claims from Association on what??? Review your docs for the capital reserve items the association is responsible to repair/maintain (streets, sidewalks, water drainage system, etc./any big-ticket items.

I would suggest you work with the local municipal officials to learn whether he 'posted a bond' affirming he would do/complete all he agreed to do when they signed off on his proposed plan. There are established codes and standards he needs to follow and if they (officials) have signed off and approved what he has completed, then that's what expected. Usually the process is that they will inspect what is done and alert him if he is required to redo within an alloted time period. You certainly don't want to sign off on anything until the authorities clear it and return his bond money.

This is perhaps what the developer wants to be assured about. But, don't jump the gun! You want to be assured that all has been completed correctly for now so that you have years to build up the Capital Reserve Fund (by portion of the assessment fees) for when the repair/maintenance is warranted in the future.

I'm not familiar with a document for signature such as the one you posted. It may be that you want to refer to an HOA attorney (not the developer's, certainly) for clarification and he can caution you if necessary. I have a problem with him being very 'loose' in his wording on not being liable for 'any future claims'.

There are professionals here who could speak directly to whether this is a common document for signature or not.

Yes Bruce, along with the items that Gloria has mentioned, we also had an engineering study done and found out that some of our infrastructure was in need of redoing. We have interconnecting lakes (retention ponds) which collect the rain runoff, and several of the concrete collars around the intake pipes were broken and poorly installed.In a heavy Florida rain, the water would have backed up. Items like sewers, condition of your roads and utilities need also to be considered before signing off on a developer. THEN, you can thank him for the $10,000

PaulM - BruceD1 stated early on to my reply that $0 has been transferred to the reserve fund. Read, or re-read the early posts. Your reply to BruceD1 is good because he's now heard at least twice to proceed carefully and that a portion of the maintenance should have been set aside to the reserves by the developer.