Q: Our development was approved by the county planning department in late 2000, but didn’t actually break ground until 2003. Once the HOA was created, assessments were levied on individual lot owners, but the developer has never paid assessments for any of the undeveloped lots that it owns.
Further, the developer holds two of the three seats on our board of directors. Is the developer required to pay the assessments on the undeveloped lots that it owns? It still has about 100 unsold lots.
A: Under the N.C. Condominium Act, the developer of a condominium must pay all of the expenses of the HOA until it chooses to begin levying assessments against unit owners.
Once the developer begins assessments against owners, assessments must be paid at the full rate on all condo units, even those still owned by the developer.
However, since your question refers to “lots,” your community is probably governed instead by the N.C. Planned Community Act (PCA). There is not a similar requirement in the PCA.
Developers of single-family subdivisions will often put language in their Declarations that divides lots into two classes: those owned by homeowners, and those owned by the developer or a homebuilder.
The developer/homebuilder class will often be granted multiple votes on HOA matters for each lot, as opposed to the “one lot, one vote” for homeowner-owned lots.
The developer may also add provisions to the Declaration which apply a reduced assessment rate on developer- or homebuilder-owned lots from payment of assessments, or which exempt those lots completely from payment of assessments. All of this is perfectly legal.
However, the HOA’s board of directors still has a fiduciary duty to see that the HOA is properly funded. It is possible that the developer (or the HOA board members) might be liable to homeowners who suffer damages as a result of the HOA not being properly managed or funded.
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“Ask The Experts” Articles have been Reprinted with permission from the Charlotte Observer
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