See also Index, developer duties -generally.

The developer control period is known as the period of administrative control in the Act and is the period when the developer appoints the association board members.  The declaration may also authorize the developer to exercise powers and responsibilities otherwise assigned by the declaration and by the Condo Act to the association or board.  Note also that the developer is referred to as the declarant in the Act, as well as in an association's governing documents.

Length

The developer control period ends upon the first to occur of the following:
(i) expiration of the time limit set by the declaration, which may not exceed six years in the case of an expandable condominium, four years in the case of a condominium project containing any convertible land, or three years in the case of any other condominium project; or
(ii) after units to which three-fourths of the undivided interest in the common areas and facilities appertain have been conveyed, or after all additional land has been added to the project and all convertible land has been converted, whichever last occurs.

Utah Code Section 57-8-16.5.

A developer may always voluntarily surrender the right to appoint and remove board members before the end of the developer control period.

Turnover

The Board

When the developer control period ends, typically a meeting of the owners is held and the owners elect a new board.

Records

At turnover of control from the developer to the owners, all records of the HOA should be given to the board newly-elected by the owners. Those records of course differ from the records of the developer’s company in developing the project, building, selling, etc. But all of the HOA’s records should be turned over by the developer.  At a minimum, those records should include:

• Records of all contracts that currently are in effect, including insurance policies and the like,
• For financials, past budgets and the current budget, bank statements, receipts, ledgers, financial statements for current and past years, and all other accounting records of the HOA.
• For HOA administration, there should be a membership list, a record of assessments and payments by homeowners that shows who is current and who is past due and by how much, minutes of board meetings, records of action taken by the board without a meeting, and all written communications from the board to owners generally as owners.
• All governing documents, including the recorded plat and any rules or board resolutions (hopefully owners already have the recorded CC&Rs and bylaws, which are also governing documents).

If the developer has not already made the following disclosures to the owners, the owners should also require disclosure of:

• the amount by which the developer provided or subsidized services that the association is obligated to provide;
• all material facts and circumstances affecting the condition of the property that the association is responsible for maintaining; and
• all material facts and circumstances affecting the financial condition of the association, including the interest of the developer and the developer's affiliates in any contract, lease, or other agreement entered into by the association that is currently in effect.

A developer is required by law to make those disclosures to the owners (pursuant to the court case Davencourt at Pilgrims Landing Homeowners Ass'n v. Davencourt at Pilgrims Landing, LC, 2009 U.T. 65, 221 P.3d 234.)  The documents received should be documented/logged by the board in writing soon after receipt.  Additionally, during the period of developer control of the HOA, a developer is required by law to do certain things, so the board should document and log any facts, circumstances, documents or conditions relating to the duty of the developer, in addition to the disclosures required above, to:

• use reasonable care and prudence in managing and maintaining the common areas;
• establish “a sound fiscal basis” for the association by imposing and collecting assessments and establishing reserves for the maintenance and replacement of common areas;
• maintain records and account for the financial affairs of the association from the association's inception;
• comply with and enforce the terms of the declaration, including design controls, land-use restrictions, and the payment of assessments.
  (Davencourt at Pilgrims Landing.)

Contracts

The Condo Act states that no management contract, lease of recreational areas or facilities, or any other contract or lease designed to benefit the declarant which was executed by or on behalf of the association of unit owners or the unit owners as a group shall be binding after the period of declarant control unless then renewed or ratified by the consent of a majority of the votes in the association.  The statute further provides that, "This section shall be strictly construed to protect the rights of the unit owners."

Utah Code § 57-8-16.5.

Similarly, Section 57-8-39 states that when the developer control period ends, the board may terminate any contract for services, such as garbage collection, maintenance, lawn care, or snow removal, entered into by the developer or executed on behalf of the association during the developer control period, except for contracts for golf course and amenity management, utilities, cable services, and other similar services that require an investment of infrastructure or capital.  If not terminated by the board after turnover, the contract is binding on the HOA.

Lawsuits against the Developer

Before Turnover

In a lawsuit brought by one or more unit owners solely against the declarant before the end of the period of declarant control, a declarant may not use any funds paid by a unit owner to the association to pay for costs of the declarant's legal defense.  See Utah Code § 57-8-38.

After Turnover

1. An association may not, after the period of administrative control, bring a legal action for more than $75,000 against a declarant (developer), a board of directors, or an employee, an independent contractor, or the agent of the declarant or the previous board of directors related to the period of administrative control unless:
      (a) the legal action is approved in advance at a meeting where at least 51% of the owners are present,
      (b) the legal action is approved by either 75% of the owners present or more than 51% of the total owners, and
      (c) the association first notifies the person subject to the proposed legal action of the legal action and basis of the association’s claim and gives the person a reasonable opportunity to resolve the dispute.

2. Before the vote to approve the legal action, the association must provide each owner:
      (a) a written notice that the association is contemplating legal action; and
      (b) after the association consults with an attorney licensed to practice in the state, a written assessment of:
           (i) the likelihood that the legal action will succeed;
           (ii) the likely amount of money in controversy in the legal action;
           (iii) the likely cost of satisfactorily resolving the legal action; and
           (iv) the likely effect the legal action will have on an owner’s or prospective lot buyer’s ability to obtain financing for a lot while the legal action is pending.

3. Before the association commences the legal action, the association must:
     (a) allocate an amount equal to 10% of the cost estimated to resolve the legal action, not including attorney fees, and
     (b) place that amount in a trust that the association may only use to pay the costs to resolve the legal action.

See Utah Code § 57-8-38.