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Dealing with developers: HOA rights during the transition

On Behalf of | Feb 29, 2024 | HOA Law |

Homeowners’ associations (HOAs) help regulate a community’s shared areas, such as gardens, parks and parking lots. While they’re run by community members, HOAs don’t always start that way.

The real estate developer of a community is typically the first to establish an HOA. But control transitions to the community once the homeowners elect a board.

Transitioning from developer control to homeowner governance is a crucial phase for any HOA in Texas. Understanding the rights of the HOA during this period is essential for a smooth handover and the future well-being of the community.

Rights and expectations

The developers need to be transparent with homeowners and tell them about the state of the association’s finances, assets, and liabilities. Texas property law says the association needs to keep detailed records, so developers must comply.

Financial accountability

One of the most critical aspects of the transition is financial management. The developer must provide a detailed account of the HOA’s finances. This includes budgets, expenditures, and any debts incurred. State property law also says that a HOA should maintain an audit of its financial records.

Property and asset transfer

The developer must transfer physical assets and common properties to the HOA in good condition. If there are any pending amenities or developments, the developer should relay to the association when it can feasibly complete these projects.

Election integrity

The election of the first homeowner-controlled board is a significant event. The process should be fair and transparent, with all members allowed to participate.

Navigating the transition process can be complex. HOAs must also ensure that the developer fulfills their obligations during the transition. An attorney can guide HOAs by interpreting statutes, facilitating negotiations, and representing the HOA’s interests in legal proceedings if necessary.