Home Buying in Mission Bay>Question Details

Emerald, Home Buyer in San Francisco, CA

Is it strange that a developer sets it self up to be in charge of an HOA, with the majority of Board members?

Asked by Emerald, San Francisco, CA Sun Jul 6, 2008

and their attorney on the Board? This seems like a conflict of interest...

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5
Emerald,
In the beginning it isn't a conflict. As others have stated the developer is the primary owner and it would be natural to be on the HOA. Having the attorney there assures the HOA of starting it's function correctly. As a board member, if you decide to be one, you have responsibilities and liabilities. In the beginning it would be foolish to assume that there will be a pool of ready, responsible leaders in the first pool of purchasers.
2 votes Thank Flag Link Mon Jul 7, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
MVP'08
Contact
I don't know the particulars of the situation. However, it's very common for a new development to have a Board composed of representatives of the developer. Generally--and this depends on the HOA's bylaws--there's a provision that when x% (like 70%) of the units are sold, or x% of the interest in the property, then new elections will be held.

A developer (understandably) wants to protect his interests at the beginning...especially when there aren't enough owners to even make up a Board. It's not a conflict of interest; the developer still owns all, then most, of the development. However, once the developer is pretty much done, control generally is turned over to the owners.

A real estate lawyer in San Francisco would be able to better comment on the circumstances, read your HOA documents, and advise you.

Hope that helps.
1 vote Thank Flag Link Sun Jul 6, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
Until there are new owners, especially ones willing to serve as volunteers, the HOA of necessity must begin this way. Ask to read the by-laws and CCR's to see how long their terms as board members are set to be.
1 vote Thank Flag Link Sun Jul 6, 2008
Emerald, Developers are often on the Board of the HOA when a development is started, but there are provisions in the HOA documents that would allow them to give up that control over a period of time. I think your concern regarding the developer's attorney being on the board is a valid one. As I am not an attorney and cannot give legal advise, I suggest you check with a real estate attorney regarding this practice.
1 vote Thank Flag Link Sun Jul 6, 2008
It happens all the time, and I believe it usually is a conflict. Sometimes things end up unpleasantly and sometimes the developer is very responsible.

If you elect a strong board, everything will work out in the end.

Paul Hwang
Your SoMa / South Beach Super Broker
Skybox Realty
415.216.8746
Web Reference: http://www.paulhwang.com
0 votes Thank Flag Link Tue Jan 5, 2010
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