Separation anxiety: developers, associations and the “oops” factor

As a young associate in the real estate department of a large law firm, I was taught that the job of the developer’s attorney, first and foremost, is to protect the developer — to give the developer as much power over the community as the law, and the buying public, will let him get away with. In the years since then, however, I have come to believe that enabling the formation of a truly democratic community is not only a noble ambition — it may, in the end, serve the developer as well. My path toward this conclusion began in 1987. I had left the law firm the year before and had begun representing Seaside, when it was not much more than Rosewalk, Bud and Alley’s and some graceful beach pavilions. I didn’t know the term traditional neighborhood development (TND) yet, but I had been asked to do homeowners’ association documents for some sand in Alabama which would be the next Duany Plater-Zyberk project — my first chance to frame, from the beginning, the private government for a TND. In my first meeting with Andres Duany, he outlined his philosophy for governing towns. The best places in the world, he said, were built by an autocrat with a vision. But once the place is built, he said, the people must have a democracy, a way to come together and make decisions. He considered the New England town meeting to be the ideal. It was my job to create the documents to accomplish that goal. As I have watched Seaside and the other projects I have been involved with grow and mature, I have refined the concepts, and my documents, to meet the needs of these special communities. However, the principles Duany stated then remain fundamental. In his thought-provoking December 14, 1997, New York Times Magazine article, writer Michael Pollan presents the flip side of this civic ideal by focusing on Celebration, a TND which gives permanent veto power to its creator, Disney. Pollan suggests this is antithetical to the TND concept: “... Disney seems to have set in motion two powerful forces that are bound sooner or later to collide. They have built a most impressive landscape of community — a place expressly designed to encourage neighbors to engage one another, to form associations and acquire the “civic virtues” — yet they have built it atop a subsoil of authoritarianism, which limits participation to only the most trivial matters of that community’s business.” So why do developers insist on retaining control — or at least a veto power — indefinitely? They are afraid, primarily, of the “oops” factor: that the owners, once in control, will take an action that the developer opposes, and the documents don’t specifically prohibit. A blanket veto gives the developer the right to fix the problem, but it comes at a cost. Because no lawyer, no matter how astute, can anticipate every situation which the community may face, I suggest giving the developer broad powers — but in a limited area. The exercise is to determine what is essential to the TND developer’s role and protect it. That analysis relies on the distinction between building the town and operating it. First, the developer needs to clearly state those principles essential to the vision of the community, and to protect them from intrusion. Uses for the common areas and for the various lot types must be described. Commercial portions need to be protected from unreasonable interference by the residential majority. Secondly, the developer needs to retain all rights essential to the construction phase, no matter how prolonged that might be: the rights to modify the master plan, to annex property, to build the infrastructure, and to market the property effectively. Certainly, architectural control should be retained by the developer until the project is virtually complete, and only then assigned to the association or to an independent architectural panel. Once the list is complete the developer prepares to let go of the town’s operation by giving it to the owner’s association. One approach is to create two separate governing documents, rather than a single declaration (frequently known as CC&Rs, for “covenants, conditions and restrictions”). First master deed restrictions are recorded, enumerating rights reserved to the developer. Only then does the developer record the declaration, establishing the owner’s association and governing the ongoing operation of the community. Dividing the provisions in this way not only helps clarify thinking, it may also have legal benefits. As more states adopt laws requiring turnover of associations to the owners after a certain point in development, rights reserved to the developer in master deed restrictions which are clearly separate from the association may be more likely to survive. Instinctively, the developer would like to retain control indefinitely. The developer has a vision of his town, and it has streets, and trees, and houses, but the people who will populate it are only primitive sketches. Real people are messy. They have ideas, they want input, and they would, perhaps, do things differently than the developer. The reality is that giving power to the people makes for better communities. u Doris S. Goldstein is an attorney representing traditional neighborhood developments. To submit a question or topic to be addressed in a future column, please contact her by telephone or fax at 904-730-2960, or email to NewTownLaw@aol.com.