Does a developer have to pay HOA dues on unsold lots?
By OurHOA · General information · Revised
Whether a developer pays HOA dues on unsold lots depends on the declaration - many excuse the builder in exchange for funding the association's budget deficit.
The starting point: a lot the developer owns is still a lot
Assessments attach to property, not to how long someone has held it, so a declarant sitting on forty unsold lots owns forty assessable lots and the default is that it pays on all of them. Before assessments begin at all the obligation is broader still. Under the Colorado Common Interest Ownership Act the declarant pays all common expenses until the association makes its first common expense assessment (C.R.S. 38-33.3-315(1)), a rule repeated in the states that adopted the uniform act. After that, common expenses are assessed against all units under the allocation written into the declaration (C.R.S. 38-33.3-315(2)). What changes the default is not the developer's status but a specific clause in the recorded documents, which is why the answer is almost never found in state law alone and why two subdivisions a mile apart can handle it in opposite ways. Find the assessment article and the declarant-rights article of your own declaration before you argue about it with anyone.
Deficit funding: the trade most of these clauses actually make
The common arrangement is not that the developer pays nothing. It is that the developer covers the shortfall instead of the per-lot bill. Florida states it plainly: while the developer controls the association it may be excused from paying its share of operating expenses on its parcels for any period in which it has obligated itself, in the declaration, to pay operating expenses that exceed the assessments receivable from other members and other income of the association (Fla. Stat. 720.308(1)(b)). Read that twice. The developer is not escaping the budget, it is guaranteeing the budget. In a community that sells out fast that is a bargain for the builder; in one that stalls at fifteen occupied homes with a clubhouse to run, deficit funding can cost far more than assessments on unsold lots ever would have. It also means the association should be receiving a computed deficit payment each period rather than an assessment, and a treasurer who does not know which arrangement applies cannot tell whether the association is being shorted.
Guarantees cap dues at a stated number and carry conditions
A second structure caps what residents pay. The developer guarantees that assessments will not exceed a stated dollar amount for a stated period and agrees to pay anything above it. Florida's homeowners' association statute sets out the mechanics: the guaranteed amount must be an exact dollar figure for each parcel identified in the declaration, the beginning and ending dates or events must be the same for every member, and during the guarantee the guarantor has to advance funds whenever assessments and other revenue fall short of the association's obligations, including full reserve funding unless reserves were properly waived (Fla. Stat. 720.308(2) through (4)). Creating a guarantee outside the original documents takes the approval of a majority of members other than the developer. Condominiums run on a near-identical rule, under which a developer offering units for sale may be excused from assessments on unsold units for a stated period if it pays the excess common expenses, or for as long as a guarantee it gave to purchasers runs (Fla. Stat. 718.116(9)(a)).
Reduced dues on unsold lots are not automatically improper
Plenty of declarations assess a builder's vacant lots at a fraction of the full rate, a quarter or a half, on the theory that an empty lot does not use the pool, generate trash pickup, or wear the private streets. Florida permits proportions to differ where the governing documents say so and the difference rests on something real, such as the stage of development or the level of services received (Fla. Stat. 720.308(1)(a)). So the question is not whether a split rate is allowed in the abstract. It is whether the split is written into your recorded documents and whether the gap it leaves is covered by a deficit-funding or guarantee obligation. If the discount exists and nothing stands behind it, the shortfall lands on the residents who did buy. Our guide on whether an HOA can charge different dues to different owners works through when an unequal rate holds up and when it collapses.
Watch the reserves, because that is where the bill comes due
Deficit funding usually covers operating expenses. Reserves are a separate line, and a developer-controlled board has an obvious incentive to keep assessments low by underfunding them, because low dues help sell houses. Florida's guarantee provisions require the guarantor to fund reserves in full during the guarantee period unless reserve funding was properly waived, which tells you how often that waiver gets used. The consequence surfaces years later as a roof, a pool resurfacing, or a street overlay with no money behind it, and a special assessment that lands on the residents who inherited the association. Before turnover, ask for the reserve study, the current reserve balance, and a schedule of what was contributed each year against what the study called for. Our guide on HOA special assessments covers what a board can levy once that gap is found, and it is a far better conversation to have while the developer is still at the table.
What to do about it, on either side of turnover
If you are an owner, start with documents rather than argument: the declaration's assessment and declarant articles, the adopted budget, and the ledger showing what the developer actually paid and when. If a deficit or guarantee arrangement applies, you are owed a computation, not a verbal assurance that everything is covered. If you are on a board that has just taken over, put a turnover review in front of an accountant who has done them before, with a written instruction to compute the declarant's final obligation on an accrual basis and compare it with what was paid; Florida spells out that accrual calculation for guarantees at Fla. Stat. 720.308(5). Note any deadline that could close on a claim and get advice early rather than after it has passed. Our guide on developer control and turnover covers the rest of the handoff, including the records and bank access that tend to go missing along the way.
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These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.