New subdivision restrictions... advice from agents (and others) needed (Austin: appointed, for sale)

[Austin-Willy]

So after looking over the restrictions for a new subdivision where we were thinking of buying a home or lot, we have basically decided to look elsewhere even though we were otherwise very enthusiastic. The restrictions, characterized by the developer as being "very reasonable," give the developer full architectural control until whenever the developer decides that it's time to turn over control to the association. There are numerous other "smaller" issues with the restrictions (such as prohibiting any signs -- For Sale signs? -- unless a variance is granted by the developer), but the lack of a specific date or mechanism (e.g. 80% of lots sold) for turning control over to the association is just too much.

My question is, can any agents or others provide any anecdotes of negotiating with a small developer, whether successfully or unsuccessfully, to get problematic restrictive covenants amended? Keep in mind that this particular subdivision only has about 45 lots total.

[centralaustinite]

It sounds pretty standard. Generally, you want the developer to maintain architectural control, that maintains the look of the development (and then remember, that there will be an architectural control committee of the HOA that may determine the look and design of fences, sheds, paint, additions etc.) Say the the development calls for carports, you buy and live in a house with a carport expecting that is the standard for the development, then some rich buyer tells the builder that he wants a garage and will pay extra, a subdivision agreement and CC&Rs should enable you to prevent that change which would disadvantage your property.

Prohibiting signs is boilerplate language and I think outdated. The Texas leg passed a law specifically allowing political signs (as free speech) that overrides such provisions. Basically, the developer wants to control the signage while he is building and selling the lots. So you can't put up a sign that says "builder X is a jerk".

80% of lots sold to turn over the association is also typical.

Bottom line: what kind of guy is this builder? Have you asked for and talk to references? Did you do a background check? Google? Talk to him. I was the first to buy in a small subdivision and didn't like some of the CC&Rs, the builder kept telling he would make me HOA president. Well, after the association was turned over, I did become HOA president and we did tweak some of the CC&Rs (allowing outside speakers, cars to park on the street overnight, eliminating the language about signs). But is it a risk. Other people may buy into the subdivision specifically because of the restrictions against large dogs, purple paint, signage etc.

good luck!
s

[Austin-Willy]

Thanks for your reply Centralaustinite. I'm very familiar with the structure of, and understand the purpose of having, restrictive covenants in general, and specifically architectural control. I don't think it is necessarily a bad thing, so long as it is done correctly.

However, as you point out, the Association usually has architectural review powers. Even if the developer starts off with this control, "good" restrictions would require control to be assigned to the Association at a certain time (either by X date, by the time Y% of lots are sold, or some similarly reasonable and objective point -- NOT whenever the developer decides to give up control). At the end of the day, the idea is to have a set of regulations that the homeowners enforce, not a developer who may no longer have a vested interest in the subdivision.

The specific "major" problems with these restrictions are that (a) the developer doesn't ever have to give up control, and (b) if it ever decides to give up control, it doesn't have to assign it to the Association.

I understand your point about signage, which is why I called that a "smaller" issue. There are numerous others like that one. But as long as an Association Board (which is governed by the HO) was in charge of administering the restrictions, I could get comfortable with those smaller issues. But that is not necessarily the case with these restrictions.

It sounds like you were successful in getting your restrictions amended, but not until after you were elected (or appointed) to the Board. In this case, that's not a feasible plan since the Board doesn't have the power that it should.

Any others with experience with this type of negotiation?

[centralaustinite]

Ah, I understand now. There is not a mechanism for the developer to yield control. I thought that you didn't like waiting til 80% of the lots sold but the issue is that the restriction do not have any point for the developer to give up control specified.

That is a problem!

And yes, I was elected to the board after the developer turned over the association. We made some small changes to the restrictions and developed our own by-laws and procedures and set the tone for the architectural restrictions (we are strict about fences, lax about paint colors).

Generally, since the restrictions are in place (has the subdivision been accepted by the City? If it is in the city limits) the developer has already spent the money for a lawyer, and I'd bet he doesn't want to negotiate changes. You could have a real estate attorney look them over and maybe write a letter to the developer asking for specific changes. Are you the first buyer? Have you talked to the other buyers? Perhaps a united front with a non-confrontational manner (we want you to make these changes in order to appeal to more buyers) would work, but I'd guess it will be a long shot.

good luck

s

[Austin-Willy]

We've had a real estate attorney (me ) look them over, so we're confident we know where the problems are, and we're reasonable enough (just ask us ) to not sweat the small stuff. And I don't mind opening a dialogue myself with the developer. I just don't want to go through a lot of trouble just to have the developer refuse to do anything, and was hoping to hear more anecdotes of others doing the same thing.

We wouldn't be the first buyers, so I'm sure I would hear the ole "everyone else agreed to it without a problem." We're also looking at buying from a builder who bought a single lot from the developer and already built a home, so from that standpoint, the developer has even less incentive to work with us. But we're also considering a vacant lot, so maybe we can approach it from that standpoint.

I think I'm going to tee this up with the listing agent and see what he can do. But frankly I'm not very optimistic.

[angielt]

Originally Posted by Austin-Willy

Thanks for your reply Centralaustinite. I'm very familiar with the structure of, and understand the purpose of having, restrictive covenants in general, and specifically architectural control. I don't think it is necessarily a bad thing, so long as it is done correctly.

However, as you point out, the Association usually has architectural review powers. Even if the developer starts off with this control, "good" restrictions would require control to be assigned to the Association at a certain time (either by X date, by the time Y% of lots are sold, or some similarly reasonable and objective point -- NOT whenever the developer decides to give up control). At the end of the day, the idea is to have a set of regulations that the homeowners enforce, not a developer who may no longer have a vested interest in the subdivision.

The specific "major" problems with these restrictions are that (a) the developer doesn't ever have to give up control, and (b) if it ever decides to give up control, it doesn't have to assign it to the Association.

I understand your point about signage, which is why I called that a "smaller" issue. There are numerous others like that one. But as long as an Association Board (which is governed by the HO) was in charge of administering the restrictions, I could get comfortable with those smaller issues. But that is not necessarily the case with these restrictions.

It sounds like you were successful in getting your restrictions amended, but not until after you were elected (or appointed) to the Board. In this case, that's not a feasible plan since the Board doesn't have the power that it should.

Any others with experience with this type of negotiation?

You have to ask yourself why in the world would the developer want to remain responsible for the control of hoa once he has sold out the lots....i would see if there is something in wording that has to do with the developer being the majority owner in the neighborhood which then gives them the power of overseeing the architectural review. Obviously, if you don't like the restrictions, you should not buy in the neighborhood. I live in a neighborhood where no real estate signs are allowed which is a bit of a pain when someone is trying sell their home. I would recommend that you talk with a real estate attorney if you want to purchase but have concerns