Posted by Geoffrey Brooks
I just attended two classes run by the Community Associations Institute concerning HOA management, operation and finance. What did I learn? The Nevada law is being continuously improved to try to protect the homeowner, in spite of this, HOA’s are still a lawless jungle. Justice is not swift!
Blake Smith, even though he ceased to legally comply with the developer ownership and control criteria in 2009 (Somersett auditor’s report), is leaving by November 2012. He has transferred some residual Somersett Development property contiguous with the Somersett Country Club (SGCC) by quick claim deed, so that they have to pay the taxes and upkeep without ownership. This document shows that Somersett Development Ltd. is in the process of winding down, indicating that the declarant is not now an active participant in the community in the same way as when he originally developed Somersett.
Whereas the developer has a primary role of ensuring that his investment is protected, he also owes a fiduciary duty to the owners. The standard is just as high as a homeowner controlled board. The wise developer recognizes his legal responsibilities to the community and understands that the transition process (transferring community control to the owners) begins with the FIRST sale, the continuous education of new purchasers as to their rights and obligations, and finally, the transfer of HOA control from the developer to the homeowner. This is facilitated by the formation of an appointed “Transition Committee” comprised of homeowners.
At turnover, The Transition Committee has to ensure that the developer has provided the HOA with all documents pertaining to the creation and management of the Somersett PUD. This includes the following: 1) financial, legal and personnel records, 2) minutes of board and association meetings, 3) copy of the articles of incorporation, the declaration, the bylaws, the rules and regulations, the book of resolutions and the public offering statement, 4) a history of the development of the community along with all approved tract maps, building and landscape plans, 5) copies of all state and local approvals along with confirmation that all regulatory requirements have been accommodated, 6) all contracts signed by the developer and 7) the title and documentation for all properties transferred to the HOA has to be verified, along with schedule of expected life, maintenance, copies of bonds, warranties and a list of the manufacturers and contractors used.
The preceding is a daunting task with the objective that the Somersett homeowners are duly informed and can now control their own destiny.
It is the owners (not the existing or new board) who generally have the power to amend the declaration, particular provisions of the bylaws (CC&Rs), assessments, and to approve significant expenditures regarding leases, contracts and use of surplus funds. This is done by a vote of a specified percentage of owners for consent.
The new homeowner board will have the same fiduciary duty to the community as the current developer controlled board. This is an umbrella term which includes a duty of loyalty and a duty of ordinary care. Specifically prohibited is having board members take unfair advantage of the HOA. Board members breach the duty of loyalty if they sign a contract with a company in which they have a material interest in and the contract could be considered unfair to the association. In the case of Somersett, as there is an arm’s length arrangement between the private equity owned SGCC residents and the HOA (it is in our CC&R’s) they would be considered conflicted if they decided to run for the board as they would not be able to fulfill their fiduciary duty to all 2400+ unit owners of Somersett.
I urge all homeowners to overcome their apathy, take a time to understand what is happening in Somersett. Stand up, attend transition and board meetings, exercise your obligations to everyone else in our community. We ALL signed the purchase documents for our “Somersett unit” dream location where we acknowledged the community rules and obligations. We need to hear from you, and we need you to vote for the future!