After conducting due diligence, obtaining the necessary entitlements, and acquiring the land, setting up the homeowners’ or condominium owners’ association can sometimes be an afterthought. However, for developers of residential, commercial, and mixed-use condominiums and planned communities, the considered creation of a governance structure is essential to the success of the development. This is equally true for both developers of new communities and developers and builders purchasing property in an existing development or redeveloping a property subject to recorded restrictions.
Consider, for example, the developer of a master-planned community that wishes to create a multi-phased development wherein the developer may sell phases or portions of phases to builders or develop those phases itself. The project documents for that community will need to allow the developer to retain sufficient control of the community for a number of years and plan for the annexation and inclusion of the remaining phases of the development during such time, all without subjecting the developer and builders to unnecessary assessments and superfluous liability. These documents can be even more complex in the case of a community with one or more golf courses and other resort-style amenities for which the community association may have some level of maintenance responsibility, shared or otherwise.
Similarly, the developer or builder purchasing finished lots in an existing community, taking an assignment of Declarant’s rights in a partially developed community, or redeveloping a community will also need to make sure that the project documents do not prevent their intended development from taking shape, and that the developer or builder fully understands the fees, turnover requirements, capacity for annexation, dispute resolution provisions, and amendment requirements in the documents. Most often these issues are not plain to see from a cursory review of the CC&Rs; they are usually buried in the documents and the amendments, tract declarations, and supplemental declarations that equally affect the development of the land.
For these reasons, CC&Rs and other project documents need to be carefully thought out and planned with counsel, considering the many outcomes over the years that may affect the developer’s, and its designated builders’, ability to construct and sell a successful subdivision, condominium, or master-planned development. Equally, a comprehensive review of the community documents should be conducted by counsel during the due diligence period in each and every acquisition so that red flags and other issues can be identified and dealt with prior to the expiration of the feasibility period. In short, boilerplate documents, whether used in a new development or discovered during due diligence in an existing development, are quite often the cause of major issues down the line.
The experienced real estate attorneys at Titus Brueckner & Levine PLC can help you navigate the complexities of Arizona law. For more information, or for assistance with your real estate matter, contact Jason F. Wood at firstname.lastname@example.org or (480) 483-9600.