IT'S BETTER TO BE THE DEVELOPER IN AN HOA-part 1

When it comes to Florida Statute 720, there’s no question that you would rather be the developer than the homeowner.

At least The Florida Condominium Act has a drop-dead seven year deadline where the developer must turn over majority control of the Board of Directors to the unit owners.  If you’re an HOA however, here is what the law says:

 

(1) Members other than the developer are entitled to elect at least a majority of the members of the board of directors of the homeowners’ association when the earlier of the following events occurs:

(a) Three months after 90 percent of the parcels in all phases of the community that will ultimately be operated by the homeowners’ association have been conveyed to members;

(b) Such other percentage of the parcels has been conveyed to members, or such other date or event has occurred, as is set forth in the governing documents in order to comply with the requirements of any governmentally chartered entity with regard to the mortgage financing of parcels;

(c) Upon the developer abandoning or deserting its responsibility to maintain and complete the amenities or infrastructure as disclosed in the governing documents. There is a rebuttable presumption that the developer has abandoned and deserted the property if the developer has unpaid assessments or guaranteed amounts under s. 720.308 for a period of more than 2 years;

(d) Upon the developer filing a petition seeking protection under chapter 7 of the federal Bankruptcy Code;

(e) Upon the developer losing title to the property through a foreclosure action or the transfer of a deed in lieu of foreclosure, unless the successor owner has accepted an assignment of developer rights and responsibilities first arising after the date of such assignment; or

(f) Upon a receiver for the developer being appointed by a circuit court and not being discharged within 30 days after such appointment, unless the court determines within 30 days after such appointment that transfer of control would be detrimental to the association or its members.

Let me make this simple for you.  If the developer never gets to 90% of the parcels sold, keeps title to the property, doesn’t go bankrupt and builds what they were supposed to build – turnover may never occur.  That’s why we hear horror stories of the same developer in control for decades.  But if you’re in an HOA, wait, it gets worse.

If you live in a Florida condominium, at turnover you get certain warranties from the developer regarding the condition of the property.  Structural, electrical, plumbing all must be safe and sound.  In an HOA, you get nothing.  A few years ago the 5th District Court of Appeals decided that if The Florida Legislature won’t address warranties for HOAs, they would, and held there was a warranty for certain improvements.  Immediately, The Florida Legislature took those warranties away, because “it would create uncertainty in the state’s fragile real estate and construction industry.”  Can you imagine? Somehow giving homeowners a warranty would create uncertainty in the real east and construction industry.  I think I would argue in the reverse.  Perhaps not giving a warranty would create uncertainty.

But wait.  It gets worse……..But you’ll have to read next week’s blog to find out why

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