Termination of Declarant Contracts

An association board of directors may take over operation of a planned community and discover that the declarant or declarant-controlled board entered into contracts that the board wishes to end. N.C. Gen. Stat. § 47F-3-105 provides that an association’s contract that began while the declarant controlled the association can be terminated without penalty.

The contract must not be a bona fide contract or it must be unconscionable to the lot owners at the time the contact began.  The board must give at least 90 days’ notice before terminating the contract.

If your association has had discussions with your declarant regarding a turnover of the association to an elected board, it is important to have a properly prepared document spelling out the terms of the turnover and addressing the issue of outstanding contracts. Our firm has experience in preparing turnover documents addressing issues that may arise and we are happy to discuss the process with your association.