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Declarant Rights: Are Developers Leaving Money on the Table?

March 30, 2015

By: Gary M. Kaleita

When a residential subdivision is developed, it is common for the developer to record a Declaration of Covenants, Conditions, Easements and Restrictions along with the subdivision plat.  This Declaration addresses use restrictions that will govern the residents, as well as easements for their use and enjoyment of common areas such as ponds, private roads and amenities, and other matters relating to the homeowners’ association (HOA) that will govern the subdivision.  It is also customary for many Declarations to reserve various rights in favor of the developer (usually termed the “Declarant”) for so long as the Declarant is the owner of any Lot.  If the initial developer sells its interest in the project to a successor developer, the Declaration may provide that these Declarant rights can also be transferred.  These rights may be valuable, so the initial developer should consider addressing them as a separate component of the sale transaction.

Declarant rights may include the power to appoint Directors to the HOA Board, the power to amend the Declaration, the right to control the HOA’s architectural review committee, exemptions from HOA assessments, reservations of easements to use common areas for the developer’s sales activities, the right to grant easements to others, and the right to grant exemptions from HOA assessments to builders.  If these Declarant rights are assigned in connection with a sale of the project by the initial developer, the successor developer could receive a substantial benefit justifying an increased purchase price.

The Declaration typically dictates whether Declarant rights may be assigned to a successor developer, and how this must be accomplished.  If you are a developer selling your interest in a residential subdivision, you should be aware of exactly what rights you have as the Declarant under the Declaration, what value those rights may have to a successor developer, the extent to which they are assignable, and what procedures must be followed in order to assign them.  This will give you the ability to negotiate for a better purchase price.  If these points are left unaddressed, developers could be leaving money on the table.


Gary

With more than 30 years of experience in real estate law, including over 20 years as a Board-certified expert in the field, Gary Kaleita has acquired the ability to navigate the complexities of sophisticated real estate deals with relative ease.


Gary has a wide variety of experience in real estate development, finance and transactions, condominiums, property owners’ associations, commercial leasing, commercial lending, and title insurance.

Gary enjoys a reputation for anticipating and avoiding problems, rather than merely reacting to them. He has years of experience handling purchases, sales and financings of commercial and residential projects, including office, industrial, retail, multi-family, single-family, condominium, resort, hotel and golf course properties. Gary has prepared and negotiated contracts for sale and purchase, performed due diligence investigations, and handled all aspects of closings, including issuance of title insurance and legal opinions. He has also performed tax free exchanges (both forward and reverse) under Section 1031 of the Internal Revenue Code, and has handled closings for housing revenue bond financing transactions with the Florida Housing Finance Corporation and various local housing finance authorities.

In the area of real estate development, Gary has assisted developers in obtaining land use approvals, plat approvals and permits for various developments from a number of jurisdictions in Central Florida, including planned developments (PD’s) and Developments of Regional Impact (DRI’s). He has drafted and negotiated complex land use documents, including development agreements, cost-sharing agreements, declarations of covenants, conditions, restrictions and easements. He also has experience in mall and shopping center developments, including outparcels, and has assisted developers with the selection, formation and operation of business entities, including commercial and residential property owners associations. He has extensive experience with the formation and operation of both commercial and residential condominiums as well.

In addition, Gary has established somewhat of a boutique practice by acting as local counsel to help out-of-state lenders, investors and law firms navigate the complexities of Florida real estate law. He is frequently engaged by large national and international law firms needing assistance on a variety of issues for their clients doing business in Florida. Gary regularly provides advice on Florida law and custom pertaining to purchase and sale contracts as well as loan documents, addresses local due diligence issues, answers questions involving titles, surveys and title insurance, and provides Florida legal opinions.

Not just another real estate lawyer, before pursuing his career in law Gary served as a U.S. Naval officer on active duty for 4 years in the Mediterranean Sea, first with a patrol gunboat squadron in Italy and then at a communications station in Greece. During this period he traveled extensively throughout Europe, the Middle East and North Africa. He believes his military experience is the source of the practical approach he has developed to problem solving.

Gary also took the initiative, after a homeowner in his own neighborhood was mauled by a Florida black bear in 2013, of researching what his homeowners’ association could do to limit the likelihood of future attacks. In the process, he became an expert in the subject of “bear-wise” communities and drafted a policy that his own homeowners’ association adopted, thereby becoming the first residential community to be officially recognized as bear-wise by the Florida Fish and Wildlife Conservation Commission (FWC). He has since written and spoken extensively on this subject, serves on the FWC’s Central Bear Management Unit Stakeholder Group, and has become a resource for FWC to educate other communities on the importance of bear-wise practices in areas of Florida containing black bear habitat.

Gary focuses on finding pragmatic solutions to complex problems, recognizing that clients want sensible and realistic advice in a timely manner so they can go about their business.

Chambers USA (2015)* reports that Gary has substantial experience acting as lender’s counsel and is acclaimed by market sources as an “extremely responsive, very practical and reasonable” practitioner.


*We make no guarantees or promises that the reader will realize the same or similar results

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