COLUMN: Director questions property transfer request

Q. I am a board member of a small association that recently took control from the developer. We are in the complete-and-restore phase, although the necessary construction has not begun.

To complete the project, the developer wants to take back several real property elements that were attached to our declaration. He also wants to carve out a small portion of adjacent property that he owns and include it in ours. Those who are involved in the negotiations agree with making these property transfers.

I think that to comply with state law and with our covenants, we should have a vote of the entire association and also submit the question of the property transfers to the first mortgagees for approval. The developer said this is unnecessary and that he can make the changes in the plats because the property has not yet been deeded the owners.

Our property manager is an employee of the developer so we have no independent party to advise us. Do we need an attorney?

A. Your association should not enter into any agreement with the developer without the advice of legal counsel, who will review all of your governing documents.

In most covenants, the board of directors does not have the authority to separate and to sell or trade the common elements to a third party without the vote of the homeowners. In addition, under the section of amendments, this separation would be considered a material change to the association, and material changes need the approval of lenders.

In the proposed change, the association would acquire additional land and a wall which it would have to maintain. If the cost to maintain this new section would cause an increase in dues, the homeowners would have the right to accept or reject the additional land. The board should consider selling the land to the developer and adding these funds to the association's reserve account.

As for the developer's claim to be able to make changes in the plats because the property has not been deeded to the association, NRS 116.2101 states a common interest community may be created only by recording a declaration executed in the same manner as a deed. Since the common elements that the developer wants to take back are recorded parts of the declaration, according to this section of the law, the common elements are part of the association.

In addition, NRS 116.2105.1.i states that the declaration must include a statement if any developmental right may be exercised with respect to different parcels of real estate at different times. You are under the impression that the developer has no further developmental rights. Review your covenants to determine whether they include any sections that pertain to the removal of common elements by the developer.

Finally, NRS 116.211.4 states that if the declaration provides that all or a portion of the real estate is subject to a right of withdrawal and the declaration does not separate portions of real estate subject to that right, none of the real estate may be withdrawn after a unit -- even one --has been conveyed to a purchaser. Since all of the units have been conveyed, it would appear that the developer no longer has such a right, assuming it was ever in the declaration in the first place.

If the board does not seek independent counsel, it could face a lawsuit. Also, since the property manager is an employee of the developer, he or she should not give any legal advice to the board.

Questions for Barbara Holland may be sent to Association Q. & A., P.O. Box 7440, Las Vegas, NV 89125. Her fax number is 385-3759.

Barbara Holland, Certified Property Manager, is president and co-owner of H&L Realty and Management Co. She is a member of the Institute of Real Estate Management and is the author of two books on the subject. Holland is a past president of the Greater Las Vegas Association of Realtors.

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