The documents governing homeowner associations and condominiums, including the declarations of restrictive covenants that are recorded in the public records, are an integral component of the overall success of residential developments and mixed-use projects. This documentation can be very straight forward when there is only one association governing an entire development or project. However, the documentation becomes increasingly complicated when projects and developments are subdivided and as layers of associations or different uses are added to the development scheme. Of importance is the consistency among the various documents governing the overall development and the subdivisions within the development, including consistency in expense allocations and maintenance responsibilities.
Whether a development is a master planned community (or PUD) made up of various neighborhoods or subdivisions (each governed by their own association) with a master association governing the entire development, or a vertical subdivision of a single or multiple buildings, the documentation governing multiple associations must be fair and consistent. Due to market conditions, requirements of applicable governmental entities, or recorded covenants that a development or project may be subject to, maintenance responsibilities between the various associations need to be addressed to ensure that the proper association is responsible for the applicable obligations and responsibilities and there is no overlap in responsibility. For example, if a master association is responsible for maintaining all landscaping in a development, even if the landscaping is in a neighborhood or subdivision that is governed by a sub- association, then the governing documents need to specify that responsibility and the documentation must provide that the master association has the right to collect assessments to pay for it. In addition, responsibility for the maintenance and repair of the shared infrastructure and facilities in a vertically-subdivided building should be delegated to the master association even if such shared facilities are located entirely within a single vertically-subdivided parcel, with expenses for such maintenance and repair fairly allocated to the various vertically-subdivided parcels. Ideally, the developer’s sales and marketing teams will provide input into this process as these teams understand the expectation of the market. Expense allocation between the various neighborhoods or parcels and the master associations must be fair and based on a reasonably justifiable formula. Additionally, declarations must provide easements in favor of the various associations so they can comply with their maintenance obligations.
In a mixed-use project made up of residential, commercial, and/or hotel elements, the non-residential primary user will likely control the maintenance responsibilities of the development to ensure overall consistency and upkeep. The documentation should provide the non-residential primary user with control over the maintenance and repair of all shared facilities. It is essential that expenses related to such maintenance and repairs be allocated in an easily justifiable formula. For example, such allocations can be based on square footage, acreage, or number of users.
In short, while not a “sexy” component of the development process, the governing documentation for any development that contains a residential component is vital to the overall success of the development; the governing documents must be consistent, fair, and reasonably account for and delegate maintenance responsibilities and other obligations, and contain reasonable shared expense allocations.