Monday, March 4, 2013

Hanging on for far too long...developers' reservation of rights often pose long-term problems for association residents

Most new home buyers look at a potential community and rightfully spend quite a bit of time investigating the types of recreational and other amenities that make up the total package attached to that particular community's lifestyle. However, not nearly as many potential purchasers carefully review the association's governing documents to see just how long that developer will continue to play a role in the community both in terms of the use and maintenance of those amenities but the costs associated with them as well.

Typically known as a developer's reservation of rights, this lingering authority can greatly impact residents' enjoyment of their community depending on how it is exercised and over what community components or operational aspects. Developers can and do insert clauses in their documents that allow them to control items such as parking spaces, storage areas, boat docks and other common areas and limited common elements well beyond the time that owners have assumed responsibility of the board and the association's operations.
Many owners are shocked to learn that a developer can continue to exercise control over certain aspects of the community as long as the developer still owns a unit or units and the governing documents clearly spell out the developer's reservation of rights. A recent Florida Third District Court of Appeal case underscored a developer's rights in this regard. In the case of Courvoisier Courts LLC v. Courvoisier Courts Condominium Association, Inc, the 3rd DCA reversed the trial court and held that a developer could maintain control over unassigned parking and storage spaces even post transition since the declaration contained clear and unambiguous language allowing it to do so. In this case, the developer transferred a number of unassigned parking and storage spaces to a penthouse unit it still owned with the intent to sell these valuable commodities at a future date. If there had been any sort of ambiguity in the documents, presumably Florida case law would have continued to strictly construe such ambiguity against the developer. However, in the Courvoisier case, no such ambiguity existed.
What is the moral of the story? It is important for potential purchasers to not only understand how the community will operate at the time of purchase but also how it will operate months and years down the road. If a developer has taken far too many liberties in terms of its reservation of rights, a purchaser cannot assume that the developer will never exercise those rights nor can he or she assume that a court will not uphold them. In those instances, the best course of action may be to keep looking for that dream community.

1 comment:

  1. Another potential "gotcha" for homeowners: I have seen Declarations that state the developer may (but is not required) to fund operating losses for the HOA as long as necessary, but can treat those advances as a "loan" to the HOA, for which the developer can demand payment in full at any time.