When does a developer have to give up control of a master-planned community's homeowners association board and let homeowners elect their own representatives?

Plain-English summary

Senator Craig Brandt asked when a developer has to give up control of a homeowners association (HOA) board in a master-planned community, and pointed to Mariposa subdivision in Rio Rancho, where residents reportedly had no voice on their HOA board. The AG laid out the rules in NMSA § 47-16-8, which is part of the New Mexico Homeowners Association Act.

The transition from developer control to homeowner control happens in stages, all triggered by what percentage of lots have been sold to people other than the developer. While the developer still owns more than 75% of the lots, the developer can run the entire board. Once 25% of the lots are owned by non-developer buyers, residents must be allowed to elect at least one board member (or at least 25% of the seats, whichever is more). Once 50% are owned by non-developer buyers, residents must elect at least 33% of the board. When the period of declarant control ends, residents elect at least three board members and a majority must be lot owners.

Importantly, "lots" includes lots the developer still owns and lots that may be added to the development later. So the 25% calculation is not "25% of currently sold lots" but "25% of all the lots, present and anticipated, are owned by buyers other than the developer."

The AG declined to do the actual percentage calculation for Mariposa because it lacked the underlying lot data, but said clearly that if residents are right that 25% of lots have transferred away from the developer, Mariposa is out of compliance and must allow elections under the statute.

What this means for you

If you live in a master-planned community with an HOA you don't control

The HOAA gives you statutory rights to elect board members once your community hits the ownership thresholds. Step one is to find out the total lot count for the community (look at the recorded subdivision plat and the declaration), and how many lots are still owned by the developer. If 25% or more have transferred to other owners, you have a right to elect at least one board member, and the developer has 60 days from crossing that threshold to allow the election. If the HOA refuses, the New Mexico Department of Justice can investigate, and you can pursue a civil claim for declaratory and injunctive relief.

If you're a developer of a master-planned community

The HOAA is mandatory; subsections C through G of § 47-16-8 say so directly. You can voluntarily cede board control before the statutory triggers, but you cannot extend exclusive control past them. Once 25% of lots are owned by others, you have 60 days to facilitate an election for at least one board seat. Plan your transition strategy now, including documenting lot ownership, scheduling elections, and updating bylaws. The opinion treats noncompliance as a real legal exposure.

If you serve on an HOA board (developer-appointed or elected)

You should know which transition stage your community is in. If you are a developer-appointed director and your community is past the 25% threshold, you have a duty to facilitate elections; sitting tight is not an option under the statute. If you are an elected director, you should know how many seats are entitled to be elected at your stage and push for the proper composition.

If you're an HOA attorney

The opinion's lot-counting methodology is worth pulling out: lots include those still owned by the developer and "any additional lot that may be added to the development." Many transition disputes turn on this calculation. The opinion also points to a prior unpublished AG opinion (Aug. 17, 2021) as a worked example of the calculation.

Common questions

My HOA board is all developer-appointed. Is that legal?

Only while the developer still owns more than 75% of the lots in the community. Once 25% of lots have been transferred to other owners, the HOAA requires that at least one board member (or 25% of the board, whichever is more) be elected by the lot owners.

How is the 25% calculated?

Total lots includes all lots owned by the developer plus all lots that may be added to the development. The numerator is the number of lots that have been transferred to owners "other than the declarant" (i.e., not the developer). So if the development is planned to have 1,000 lots eventually, and 250 have been sold to buyers, you have hit the 25% trigger.

What if the developer refuses to allow elections?

The HOAA is mandatory. If the developer is past the trigger and refuses to hold an election, residents can file complaints with the New Mexico Department of Justice and can pursue a private civil action for declaratory or injunctive relief. The AG opinion makes clear that this office views compliance as required.

What happens at 50% transfer?

At least 33% of the board must be elected by lot owners other than the declarant. The election must happen within 60 days of crossing the threshold.

What happens at the end of declarant control?

The lot owners elect a board of at least three members, with at least a majority being lot owners. The board then elects officers. The developer can no longer appoint or remove directors.

Can the developer voluntarily give up control before the thresholds?

Yes. Section 47-16-8(D) allows the declarant to "voluntarily terminate the right to appoint and remove officers and members of the board before termination of the period of declarant control." This is sometimes done to streamline transition or for other strategic reasons.

Where is the Mariposa subdivision and what triggered this opinion?

Mariposa is a master-planned subdivision in Rio Rancho, New Mexico. According to the opinion, residents reported "there is no representation of homeowners on the HOA board" despite the 25% threshold appearing to have been met. The AG declined to calculate the exact percentage but used the case to lay out the legal framework, and "urge[d] Mariposa to follow state law."

Background and statutory framework

The Homeowners Association Act, NMSA §§ 47-16-1 to -16, was originally enacted in 2013 and amended through 2019. It provides a statutory framework for HOAs in New Mexico, replacing what was previously a patchwork of common-law and contract-based governance. Key definitions include:

• Declarant (§ 47-16-2(I)): the person or group designated in the declaration as such, generally the developer.
• Lot owner (§ 47-16-2(P)): person holding title to a lot, including the declarant.
• Lot (§ 47-16-2(O)): a parcel designated for separate ownership shown on a recorded subdivision plat or described in the declaration, other than a common area.
• Master-planned community (§ 47-16-2(Q)): a large-scale residential development phased over a long time period with comprehensive planning review and approval.

Section 47-16-3 requires all residential planned communities to organize as an association consisting of all lot owners. Section 47-16-4 authorizes the declarant to create the HOA initially. Section 47-16-8 is the transition statute. Subsections (C) through (G) apply specifically to master-planned communities, and the opinion is emphatic that they are "mandatory."

The transition stages under § 47-16-8 are:
- Initial period of declarant control: declarant appoints and removes board (subsection (A)).
- After 25% transfer: at least one member, and at least 25% of the board, elected by lot owners (subsection (E)).
- After 50% transfer: at least 33% of the board elected by lot owners (subsection (F)).
- Termination of declarant control: at least three-member board with majority lot owners, elected by lot owners (subsection (G)).

A 2021 unpublished AG opinion (Aug. 17, 2021) provides a worked example of the percentage calculation in another HOA dispute.

Citations

The Homeowners Association Act provisions are at NMSA §§ 47-16-1 to -16. The transition mechanics are governed by § 47-16-8, with subsections (C) through (G) applying specifically to master-planned communities. The AG also references the prior advisory letter dated August 17, 2021, which performed the percentage calculation in another case.

Source

• Landing page: https://nmdoj.gov/publication/opinion/2024-11-opinion-the-role-of-a-school-board-member-in-approving-checks/
• Original PDF: https://nmdoj.gov/wp-content/uploads/Attorney-General-Opinion-2024-13.pdf

Note on metadata: the New Mexico AG website's WordPress metadata for this PDF was inconsistent at the time of scraping, listing this PDF under a different post title. The PDF itself is Opinion No. 2024-13 about the Mariposa HOA and the New Mexico Homeowners Association Act, dated August 27, 2024, requested by Senator Craig W. Brandt.

Original opinion text

August 27, 2024
OPINION
OF
RAÚL TORREZ
Attorney General

Opinion No. 2024-13

To:

Senator Craig W. Brandt, New Mexico State Senate

Re:

Opinion Request – The Mariposa Homeowners Association and the New Mexico Homeowners Association Act

Question
When does New Mexico law terminate a housing developer's exclusive control over the composition of the board of a master-planned community's homeowners association (HOA) and require that lot owners elect board representation?

Answer
When a master-planned community transitions from developer ownership to resident ownership, the New Mexico Homeowners Association Act (HOAA), NMSA 1978, Section 47-16-8 (2013), governs the composition of the HOA's board. Although the developer may initially determine the composition of the board, once 25% of the lots in the development (including undeveloped lots) are owned by lot owners other than the developer, at least one member of the HOA board, or no less than one quarter of the board, must be elected by lot owners. As ownership continues to transition from developer to lot owners, additional statutory requirements governing HOA board composition are triggered.

Background

It has been brought to the attention of this Office that the Mariposa housing subdivision (Mariposa) located in Rio Rancho, New Mexico, "is currently facing a situation where there is no representation of homeowners on the HOA board." We review below the controlling provisions of the HOAA, and to the extent that Mariposa is out of compliance with these requirements, we would urge Mariposa to follow state law and allow the lot owners to elect representation to the board of the Mariposa HOA.

Analysis

Under the HOAA, NMSA 1978, Sections 47-16-1 to -16 (2013, as amended through 2019), all residential-planned communities must organize as an association exclusively consisting of all lot owners in the development. Section 47-16-3 (2013). The HOAA defines "lot owner" as the "person or group of persons holding title to a lot, including a declarant." Section 47-16-2(P) (2019). Further, "declarant" is defined as "the person or group of persons designated in a declaration as declarant or, if no declarant is designated, the person or group of persons who sign the declaration and their successors or assigns who may submit property to a declaration." Section 47-16-2(I) (2019). The declarant is generally the developer, i.e., the owner of the real property to be developed for a planned community.

The HOAA authorizes the declarant to initially create an HOA by declaration. Section 47-16-4 (2013). During this initial period of declarant control of the association, the declarant has the power to "appoint and remove the officers and members of the board." Section 47-16-8(A) (2013). Declarant control of the HOA is not, however, indefinite. The Act sets forth requirements for transitioning control of the association from the declarant to the lot owners. Section 47-16-8 governs this transition.

Based on the information provided to the NMDOJ, the Mariposa housing subdivision appears to fall under the statutory definition of a master-planned community:

[A] large-scale residential development that allows for a phasing of development that will take place over a long period of time, following comprehensive and coordinated planning review by a local government and approval of design and development standards beyond conventionally[-]platted subdivisions; provided that additional design and development standards approved by the local government shall be included in a site plan, area plan or master plan as required by the local government approving the development.

Section 47-16-2(Q) (2019). Accordingly, subsections C-G of Section 47-16-8 apply to the transition of control over the Mariposa HOA. These provisions are mandatory.

For a master-planned community such as Mariposa, the period of exclusive declarant control ends in one of two ways. The "declarant may voluntarily terminate the right to appoint and remove officers and members of the board before termination of the period of declarant control." Section 47-16-8(D) (2013). If the declarant does not voluntarily cede control, Section 47-16-8 provides for a stepwise transition away from exclusive declarant control to lot owner control.

First, once 25% of the lots in a master-planned community are no longer owned by the declarant, the Act requires that lot owners other than the declarant elect one HOA board member (or no less than one quarter of the board):

Not later than sixty days after conveyance of twenty-five percent of the lots that are part of the development, and any additional lots that may be added to the development, to lot owners other than a declarant, at least one member and not less than twenty-five percent of the members of the board shall be elected by lot owners.

Section 47-16-8(E) (2013). The declarant retains, for the time being, control over appointing and removing the remaining three quarters of the board. See id.

Then, once 50% of the lots are conveyed away from the declarant, the Act transfers additional control over the composition of the HOA board to lot owners, and requires that 33% of the board shall be elected by lot owners other than the declarant:

Not later than sixty days after conveyance of fifty percent of the lots that are part of the development, and any additional lot that may be added to the development, to lot owners other than the declarant, no less than thirty-three percent of the members of the board shall be elected by lot owners other than the declarant.

Section 47-16-8(F) (2013).

Finally, "not later than the termination of a period of declarant control, the lot owners shall elect a board of at least three members, at least a majority of whom shall be lot owners. The board shall elect the officers. The board members and officers shall take office upon election." Section 47-16-8(G) (2013). At this point, the transition from developer control to lot owner control is complete.

The request made of this Office states that "[t]he residents [of Mariposa] believe the 25% threshold mandating electing/appointing a resident to the board under the [HOAA] has been met." If the residents are correct in this regard, Mariposa appears to be out of compliance with the HOAA. Based on the limited information before us, we cannot formally calculate whether the 25% threshold is met in this case. Instead, we offer the following guidance with respect to the calculation of the thresholds set forth in Section 47-16-8.

The HOAA provides that, in order to calculate the percentage of lots owned by parties "other than the declarant," the total number of lots in the development must be taken into account. A "lot" is defined as "a parcel of land designated for separate ownership or occupancy shown on a recorded subdivision plat for a development or the boundaries of which are described in the declaration or in a recorded instrument referred to or expressly contemplated by the declaration, other than a common area." Section 47-16-2(O) (2019) (emphasis added). The total number of lots includes all lots owned by the declarant, § 47-16-2(P), and "any additional lot that may be added to the development," Sections 47-16-8(E)-(F).

Together, these provisions indicate the total number of parcels in the development, present and anticipated, including those owned by the declarant, that must be included in the calculation of what percent of lots are owned by non-declarants. To the extent that at least 25% of the Mariposa lots, calculated as above, have been transferred to lot owners other than the declarant, the requirements of Section 47-16-8 have been triggered and the lot owners are entitled to elect HOA board members in accordance with state law.

Conclusion

The declarant of the Mariposa housing development must follow state law, which mandates that once 25% of the lots in the development are owned by a party other than the declarant, the lot owners are entitled to elect one HOA board member (or no less than one quarter of the board). As such, not later than sixty days after conveyance of twenty-five percent of the lots, calculated as set forth in the HOAA, Mariposa must allow lot owners to vote on the election of one board member, or no less than one quarter of the board, in a manner consistent with the HOAA.

Please note that this opinion is a public document and is not protected by the attorney-client privilege. It will be published on our website and made available to the general public.

RAÚL TORREZ
ATTORNEY GENERAL

/s/ Seth C. McMillan
Seth C. McMillan
Deputy Solicitor General

Footnote 1: See NM Att'y Gen. (Aug. 17, 2021) (opinion regarding the end of exclusive declarant control under the HOAA and serving as a useful example of the statutory calculation being performed and applied to determine when the 25% threshold has been reached).