What is a successor developer

Reviewed: June 12, 2024

Visitor Question: What exactly is a successor developer? We heard that the developer of our subdivision is looking for one. Our subdivision layout already was approved by the city, so we don't understand what a successor developer would do. Maybe the term isn't just what it sounds like, so that is why I am asking the question. Please explain.

Editors Reply: For the most part, a successor developer is just what is sounds like. It's someone who takes over as the developer after the original developer is out of the picture. The original developer might be just bored with the project and looking for a graceful exit or some capital for the next project. Alternatively the developer may have gone into bankruptcy and been ordered by a court to divest this particular asset. It might mean the developer has died, or in the case of a company, gone out of business.

Almost always developers only worry about selecting a successor developer if there is a legal reason to do so. Possibly there is a municipal regulation requiring this step, but it is much more likely that the need for a successor developer arises from some type of responsibility set out in the master deed or covenants.

Older subdivisions in the U.S. don't have, need, or want a successor developer.

Examples of responsibilities for successor developers include permanent representation on the HOA board, ability to appoint or serve on a committee to select persons who approve room additions or significant architectural modifications, and additions to or maintenance of infrastructure, including streets and certain utilities.

So yes, the design of your subdivision and the layout of lots, streets, and easements may be already approved according to your city's subdivision regulation, but in master planned communities, there can still be a lot of things to do.

Incidentally, we are fans of the idea of getting the developer--and any successor developer--out of the picture as soon as possible. That person or company already has the opportunity to impose countless deed restrictions to carry out their own vision of the appearance and functioning of the community, so why not trust the future residents to implement the details?

The questions and comments in this section of this website indicate how and why HOAs sometimes cannot be trusted and often do not even meet or function. However, this also is true of developers who become "absent" either because of death, going out of business, or disinterest. After all, developers act in that role because they are intrigued with the exciting phase of creating something new, and not because they like the details of maintenance and gradual renovation and modification.

So I cannot answer why your developer is looking for a successor developer, but I am thinking that if you read your master deed, deed restrictions, or covenants closely, you will find an ongoing role for the developer, and therefore a successor developer if the original developer cannot or will not serve in that role.

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