When It All Falls Apart: Disputes with the Declarant

So far in our series we have outlined the general nature of those rights and how long they can last, the requirements of transferring those rights from one person or company to another, and what happens when your declarant’s lender forecloses.  In our last part of the series, we discuss what you can do when disputes arise between the declarant and the owners.

An association and its members under the control of the declarant have few options to resist a declarant who is abusing control.  Board members have a fiduciary duty to the association and this fiduciary duty must be met even if it conflicts with the desires of the declarant who appoints board members.  If the board ignores its fiduciary duty and acts improperly, members of the association may bring a derivative suit against the board asking the court to require the board to take or refrain from certain action. Such suits are difficult to win but can be used when the stakes are high.

A declarant must also abide by the declarations.  In the event the declarant uses special declarant powers to record unreasonable amendments to the declarations or impairs vested property rights of lot owners in a manner not permitted by the declarations, the association and/or members may seek declaratory relief from the court. See Armstrong v. The Ledges Homeowners Assoc., Inc., 360 N.C. 547, 633 S.E.2d 78 (2006).

Conflict between the association and the declarant can be reduced when the declarant and the board develop a sense of trust and maintain good communications.  The declarant usually has a significant investment in the community and is reassured when the association is aware of that investment.  However, property owners have an even greater stake in the community and it is important for developers to manage the community during the period of declarant control in cooperation with the lot owners.

If you or other lot owners need legal assistance to resolve a dispute with your developer, please contact Bill Cannon to schedule a one-on-one consultation.