A recent case in Florida (MacKenzie v. Centext Homes, 208 So.3d.790 (2016)) was not bashful about holding a developer to the same rules as other property owners in a Homeowners’ Association (“HOA”). The HOA in this case was still largely under developer’s control during the period in question. The developer controlled Board included a reserve line item in its budget and collected reserve funds from its members. Despite initially contributing $32,000.00 to the Association, the developer, Centext, ceased contributing to the operating expenses and assessments, instead opting to fund operating deficits (when assessment income failed to exceed operating expenses).

The Court held that under state law, once a reserve account is established, the funding must continue or be maintained unless and until the funding requirement ends as allowed by statute (e.g. by a vote of the board members). Since the funding requirement was not waived, Centex was required to pay the reserve line item assessment the same as all other property owners.

Lesson. Developers will select whatever options are available to them to reduce their potential liability, including electing to fund shortfalls versus paying monthly assessments.  As a result, your Association needs to make sure that it understands the issues, its options, and when a developer crosses the line.

If you have any questions, please feel free to contact us.