What Does Having a Developer-Controlled HOA Mean?

It can be exciting moving into a newly developed community. You’re the first one to own your home, you get to choose your lot, and you often have a say in what your new home looks like. Being an early buyer can have its perks. However, this also means that, chances are, you will have to wait longer until the homeowners govern the neighborhood.

As new developments are being constructed, the developer holds the power. They are the one that establishes the initial HOA, governing documents, reserve fund, annual dues, and so forth. They also appoint the first board members, which often includes themselves or their employees.

Each state varies when it comes to requirements for developer-controlled HOAs and how involved they must be with homeowners. Some developers choose to be more engaged than others, including homeowners early on, while others are more distanced. They typically are not required to hold regular meetings or even elicit homeowner input. Plus, the developer holds multiple votes per lot, whereas homeowners only have one.

When Does Control Transition to Homeowners?

The transition of power to an owner-controlled board will depend on the established declaration, bylaws, or articles of incorporation. They generally specify when the control period ends, whether that is when a certain percentage of homes in the development are sold (which could be 50%, 75%, 90% or another percentage), after a certain amount of time has passed (say five years or seven years), or a combination of both.

Once this requirement is met, the homeowners can elect their own board. At this point, they can review the contracts and agreements that the developer has in place and make changes with the proper notification.

What Can Homeowners Do in the Meantime?

While homeowners are limited in their authority while the community is under developer control, they can make an effort to be more involved. For instance, recommending the creation of a homeowner advisory committee. Homeowners can also attend any open meetings or annual meetings that are held in order to gain a better understanding of how the association is being run, how the development is progressing, and what to expect moving forward.

The developer is not required to follow homeowner input, but it makes sense for them to try to build a positive relationship in order to drive sales of remaining lots and attract interest to the community. If current owners provide negative feedback to potential buyers, it can pose a challenge. The developer may also form a partnership with a HOA management company to help facilitate operations, and they may be able to help create a more peaceable environment.

If you live in a developer-controlled HOA, start preparing early on for the transition to owner control. Make sure you have copies of the governing documents and understand the basics of how the HOA operates. Plan ahead to find individuals who are interested in running for the board once it is time to elect new leadership.

Kuester Management Group works with builders, developers, HOA boards, and community associations to create efficient, effective operations and communications that are in the best interest of everyone involved. Partnering with a quality HOA community manager can benefit developers and homeowners alike, especially during transitional periods. If you are located in Charlotte, NC or Myrtle Beach, SC areas please get in touch for your HOA management needs.

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Bryan Kuester

Bryan Kuester

Bryan is the CEO of Kuester Management Group. He has over 15 years of managing community associations throughout North and South Carolina.

His specialties include Community Association Management - maintenance, budgeting for operational and reserve funding, long-range planning, covenant enforcement, amenity management, onsite management, large scale management.