RealManage Insight

How Developer-Controlled Communities Work

by Kimberly Sutherland on Nov 16, 2021 9:58:00 AM

Many new communities getting built will often get referred to as a "Developer Controlled Community." These communities operate differently when you move in, and understanding how they work when you move in is essential when you are living in the community for the first time. Furthermore, as modifications get made, and the community is getting created, you will be required to adjust to rule and policy changes as an owner in the development.

What is a Developer Controlled Community?

A community in which the majority of the homes or units are still being built or are under construction. During this stage, the developer generally determines the community's rules and regulations. The company also made the community that appoints and places the board of directors to enforce these laws.

How Long Does the Developer Controlled Community Last?

The Developer Controlled Community status of a community will generally last until at least 75% of the homes in the community are built and sold to residents who will move into the community. In most traditional societies, the transition from the Director Controlled Community to a standard HOA gets assisted by an outside agency hired to help control the administrative and financial handling of the community (such as RealManage).  

Some Communities are Developer Controlled Communities for Longer Periods of Time:

However, some communities, such as luxury resort-style communities, retirement homes, and senior communities, may have a different setup to transition from a developer-controlled community to a traditional HOA-controlled community. Residents elect the Board of Directors rather than being appointed by the developer who built the community.

These periods are traditionally 7 to 10 years in length until the developer is not involved on the Board of Directors or HOA in any way. These models usually "phase out" the developer's representatives over a period specified by the developer until resident-elected representatives entirely run the HOA. 

Sometimes Developers Have Representation Permanently:

Another final scenario that you will sometimes see is a community with a Board of Directors or HOA with members on the board that the developer elects permanently. The scenario mentioned above is the most common when one person or a few people from the developer have invested a large amount of money into a community and have some ownership in the value of the community as a whole created. Their votes are generally equal to other members of the Board of Directors or HOA. Most representatives from the developer are "equal" to all other members on the board or in the HOA. Consequently, these members rarely have "weighted" votes or votes worth more than their peers' votes. 

As a Homebuyer, Feel Free to Ask Questions: 

If you are a potential homebuyer in a community with a setup such as the one above, you will need to understand the rules before you move in. You have every right to ask questions and understand the rules entirely and thoroughly before closing on your new home. You will also usually have to sign a legally-binding document that states you agree with the rules set in place and will follow them. Understanding what you sign is key to being happy in your new home and not getting any "surprises" later on when you find rules in place that you didn't understand or expect to have when you initially moved into your new home. 

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