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Condo | HOA Lawyers

Developer Control: When Does it End in Ohio Condominiums? By Magdalena E. Myers, Esq.

Every condominium association is initially created by a developer, who controls the association during the beginning of the development period.  During that time, the developer operates the association, but also is in the business of selling units.  Because the developer wants to protect its investment, the developer makes certain decisions with that interest in mind.  However, as more units are sold, the owners’ interests may start to conflict with the developer’s interests.  As an example, a developer may want to keep monthly assessments low to encourage buyers to buy even though it is in the owners’ best interests to increase assessments to build reserves.

To strike a balance between those interests during the initial stages of development, the Ohio Legislature established a timetable for the gradual transfer of control of the association from the developer to the owners.  Initially, the developer has the right to appoint members of the board and exercise the powers of the association.  However, according to Ohio Revised Code Section 5311.08(C), when at least 25 percent of the units are sold, the owners, other than the developer, must elect at least 25 percent of the board.  When at least 50 percent of the homes are sold, the owners, other than the developer, must elect at least 1/3 of the board.  During this time, however, the developer still appoints the remaining board members.

The developer’s control ends and the owners are entitled to elect the entire board either 5 years after the formation of the association (or 3 years if it is not an expandable condominium) or 60 days after 75 percent of the units are sold, whichever comes first.  At that time, the developer may no longer exercise the powers and responsibilities assigned by law or the governing documents to the owners association or to the board of directors.  Courts have determined that this restricts the developer from voting in the election of the board members.  As a result, once the owners are in control of the association, the developer may not vote in the board election, no matter how many units it still controls. Note, however, that a developer who still owns units in the community is still permitted to be elected by the other owners to the board.

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