Most homeowners are completely unaware of how Declarant Control (i.e. developer control) of an HOA works or how long a developer will retain the ability to appoint the majority of directors- arguably all directors (see NRS 116.31032)- responsible for governing an HOA. Nevada (as with most states) does not require pre-sale disclosure of the communities' control status. Buyers have no idea when, if ever, their community governance will be democratic. If you own a unit in a community where a developer has not relinquished "control", the board is not required and likely does not provide owners an estimate as to when the developer control could terminate. 

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The untold secret is developer control can effectively be indefinite. The control termination threshold is calculated by dividing units conveyed to other than a declarant and annexed into the HOA by the maximum units allowed. The maximum units should be set in the CC&Rs- a document written by the developer. Developers can set most any maximum unit number it wishes. And/or, the "statement" required by law (NRS 116.2105(1)(d)) makes it almost impossible to definitive establish where control terminates.

 

There is no regulatory oversight or statutory requirement a developer actually be able to provide the units he/she establishes as the maximum units in the CC&Rs. As such, developers make "conservative" [overstate] maximum unit projections. Doing so can significantly delay reaching the termination threshold and "could effectively mean that the association might never transition"-even at build out. (NRED Administrator, Nevada Senate Committee on Judiciary hearing on AB370(2013), May 30, 2013)     

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Our Nevada regulators do not track the declarant control threshold. Nor do they require owners be given the threshold numbers. The "system" relies solely on the association's unelected board acting appropriately when the developer termination threshold is reached.  

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In 2015 the developer community lobbied Nevada legislators to increase to 90% the no later than threshold a declarant may end control. Prior to 2015, declarants were prohibited from setting a threshold above 75%. Unchanged, the statute, NRS 116.31032, provides an association's CC&Rs can establish a lessor threshold.

 

The 2015 legislation did not change existing language, specifically "the declaration may provide for a period of declarant's control..." In effect, the statute continues to allow CC&Rs to reflect a period of control- as is the case for SHCA that may be less than 90%. It provides that "regardless...no later than the earliest of" 90%. In the case the of SHCA, 75% contracted via the CC&Rs is earlier than the 90% ceiling of the statute. NRED seeks to ignore existing language in the statute.

 

Had the legislators intended to impact/change existing CC&Rs they would have removed the above language in 2015. Review of the legislative history finds no intent legislators wanted to change existing contracts/CC&Rs. Doing so would bring into play the Contract Clause of the US Constitution.  

 

What the legislature intended (and enacted for what I see as flawed reasons) was the ability of developers to contract with HOA owners (CC&Rs) for a longer period of control. Prior to the 2015 change any ability to contract for greater than 75% would have violated NRS on its face and be unenforceable. Developers writing new CC&Rs post 2015 now routinely contract for 90%.

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