Transition Process

Transition is a term that describes the process by which the developer of a common interest development passes ownership, governance, and responsibility to the members of the homeowner association. The transition process is not a single event, such as the election of members from the association to control the board of directors.  Rather, it is a multi-stage series of events taking place over months or, sometimes, years. It includes the transfer of governance, the acceptance of common property, and the accounting for funds.

Carl M. Freeman Companies is committed to negotiating a timely, orderly, cooperative, and effective transition that strengthens the long-term viability of our community. We fully intend to turn over control of the Board when we have reached the legal threshold for doing so. That legal threshold is the one contained in the Bayside Community Charter, being 90% or December 31, 2024.

 

If an acceptable transition agreement can be reached with the Transition Committee prior to the legal threshold for turnover, the Charter permits an early voluntary turnover of the Board as part of that agreement.

Certain aspects of the transition are directed by laws in the State of Delaware, which stipulate when control should pass to homeowners, as well as the governance documents for Bayside. In addition, we are guided by the best practices recommended in a research report from the Community Associations Institute (CAI) that is designed to make transitions easier and less confrontational.

Unfortunately, some transitions of board control in common interest developments can be fraught and sometimes contentious. The CAI commissioned a report to address such problems in the best interests of all involved. The report offers helpful guidance on each stage of the transition process from the initial inception of the project through turnover to the owners.

The Delaware Uniform Common Interest Ownership Act ("DUCIOA"), 25 Del. C. § 81-101, et seq., became effective July 1, 2009, was amended September 30, 2009 and again August 11, 2010.  DUCIOA imposes obligations on certain communities and their developers, not previously required in Delaware, and applies only to events and circumstances occurring after the effective date. It does not invalidate existing governing documents, such as the Bayside Charter. Only certain provisions of DUCIOA apply to pre-existing common interest communities, such as Bayside, which were created prior to the statute.

Bayside falls under the Master Planned Community exception to the 75% turnover provision that applies to smaller communities.  The Master Planned Community exception provisions of DUCIOA (and the model act upon which it is based, UCIOA) were written to account for the substantial investment in larger communities and authorized the continued involvement of the developer of such communities by allowing a longer Developer control period in large communities where their completion extends over many years, many units and many acres. Bayside meets these criteria and therefore the developer control period remains as it was defined in the community Charter, which pre-dates DUCIOA.  The applicability of this exception is being defended by Bayside against recent lawsuits trying to force the smaller community 75% turnover rule on Bayside.  

Under applicable Delaware laws, it is both.

 

First, it is a pre-existing Master Planned Community (MPC) as defined in § 81-223 of the Delaware Uniform Common Interest Act (DUCIOA). It states that an MPC is a community where the developer “reserved the development right to create at least 400 units that may be used for residential purposes, and at the time of the reservation that declarant owns or controls more than 400 acres on which the units may be built.” Our development meets this threshold as established in the Bayside Community Charter at Chapter 3, Section 3.1, which defines Bayside as a “Master Plan.” The preamble to the same document also refers to Bayside as a “mixed-use, master planned community.”

 

Second, Bayside is also a Residential Planned Community (RPC), which is an overlay zoning designation approved by Sussex County as provided in the Sussex County zoning code (Section 115 Article XVI). The Code states that “in order to encourage large-scale developments as a means of creating a superior living environment through unified developments, and to provide for the application of design ingenuity while protecting existing and future developments and achieving the goals of the Comprehensive Plan, the RPC District is hereby established.” The Code further states that “to enable the district to operate in harmony with the plan for land use and population density embodied in these regulations, the RPC District is created as a special district to be superimposed on other districts contained in these regulations and is to be so designated by a special symbol for its boundaries on the Zoning District Map.”

Delaware corporate law prohibits the Board from doing so. This principle has been tested and upheld in the courts.  The Bayside HOA is a Delaware Corporation and is subject to Title 8 of the Delaware Code, which allows the Bayside HOA Board of Directors to designate a special committee of Owners to serve beyond an advisory role and administer certain decision-making authority relating to transition of the Association from Founder control to Owner control.

 

“The board of directors may designate 1 or more committees, each committee to consist of 1 or more of the directors of the corporation.”

 

“Any such committee, to the extent provided in the resolution of the board of directors, or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation….”

 

This means the Board is unable to delegate its power relating to transition to anyone other than Mark Littleton and Gordon Green, who are the duly elected homeowner members of the Board.

Good faith is a sincere intention by both parties to be fair, open, and honest, regardless of the outcome of the negotiations. While it is certain that there will be disagreements over various matters, a mutually agreeable compromise can be reached when each party acts in good faith. Threats, personal attacks, accusations of bad faith and unfounded conspiracy theories have no place in this process and are often counterproductive and unnecessarily acrimonious.

Homeowner Participation

There has been one homeowner member (“Homeowner Board Member”) on the Board of Directors since 2008 and two Homeowner Board Members since 2016.  A finance committee, compromised fully of homeowners, has been in place since 2008 and has reviewed and established budgets for the Association.  A full slate of committees, made up 100 percent of homeowners, exists and includes Website & Communications, Grounds & Operations, Finance, and Covenants.  One Homeowner Board Member serves on each committee as well.  Answering Brief

The Board, regardless of Developer control, has voted unanimously on approximately 95% of all issues brought before it and continues to follow the Budget Impact process where 100% Homeowner led committees make recommendations for Board actions that are confirmed by the Board.  In only a few instances has a committee recommendation not been enacted by the Board and in those cases the decisions were primarily based upon Homeowner Board Member input that was contrary to the committee recommendation or legal advice by Association Counsel.

The Board has and continues to implement the recommendations of the homeowners as recommended from the Homeowner Board Members and Committees.  Each annual budget is recommended by the Finance committee directly and approved by the Board unless changes are requested by a Homeowner Board member.  The Board also follows the recommendations of the committees for daily expenditures through the budget impact statement process.   Each year end financial statements are fully audited by a third-party accounting firm under the direction and with the participation of the Finance Committee. Answering Brief

We have worked in concert with the homeowners in the community that have served on the Board of Directors since 2008 and homeowner populated committees on both the long-term vision of Bayside as well as the day-to-day operations.  The financial decision making of the HOA has been directly guided by the homeowners for many years with the management of community finances handled by both the resident-led Finance Committee and professional HOA management. Answering Brief

Turnover Issues

Bayside Development

The developer has continuously acquired properties particularly over recent years to advance these efforts and has recaptured over 275 units of approved residential density.   Most recently the Developer completed the construction of a $13 million dollar clubhouse facility, a significant long-term investment.  Answering Brief

Performing arts have been a longstanding component of the Bayside community.  The Freeman Arts Pavilion and the area where it will be located is owned by The Joshua M. Freeman Foundation, not yet developed. This area is neither part of the residential HOA nor is it subject to its requirements.  This project has been before Sussex County on numerous occasions and approved with no appeals filed. These actions were of course subject to required public notice.  The Executive Director of The Joshua M. Freeman Foundation has on numerous occasions presented the plans for the expansion of this facility directly to the HOA at regularly noticed meetings of the Association dating back to 2016 and most recently in 2019. Answering Brief

You can find more information in our Reserves Memo.

The Developer works very closely with the HOA on turnover of Community common area and originally implemented an inspection and turn over process with direct HOA Homeowner Board Member involvement.  Suggested revisions to the process by the Grounds and Operation Committee were voted on and approved unanimously by the Board including the Homeowner Board Members.  Most recent common area turnovers were completed and signed off by Homeowner Board Member Gordon Green. Answering Brief

Since there is direct community participation and inspections of common areas prior to turnover, there is no genuine or even potential risk of imminent irreparable harm inherent in such property transfers.  There is no intention of changing this thoughtful and appropriate land turnover process. Answering Brief

Legal Issues

The lawsuit was initially filed on November 16, 2020.  On December 4, 2020 the developer filed its motion to dismiss based upon the pre-existing Master Plan exception in DUCIOA, which is pending before the Court.

COASTAL CROSSING PHASE II FREQUENTLY ASKED QUESTIONS

No. While the completion of Phase II of Coastal Crossing will not physically alter the existing nest it still requires a permit because the construction activities may “disturb” the nest through construction activities in and around it. Given the longstanding occurrence of human activities around the nest we expect no potential adverse impacts.

Construction start is dependent upon final housing type design, market demand, and the gathering of necessary permits and approvals.  Groundbreaking is not expected in 2021.

No. Bald eagles were removed from the federal list of threatened and endangered species in 2007 and are no longer protected under the Endangered Species Act.  However, bald eagles remain protected under the Bald and Golden Eagle Protection Act and the Migratory Bird Treaty Act.

The U.S. Fish and Wildlife Service (“FWS”) in March 2021 reported that since 2009 the bald eagle population in the United States has quadrupled. The FWS reported:

“Bald eagles once teetered on the brink of extinction, reaching an all-time low of 417 known nesting pairs in 1963 in the lower 48 states. However, after decades of protection, the banning of the pesticide DDT, and conservation efforts with numerous partners, the bald eagle population has flourished, growing to more than 71,400 nesting pairs.

 

“According to scientists from the Service’s Migratory Bird Program, the bald eagle population climbed to an estimated 316,700 individual bald eagles in the lower 48 states. This indicates the bald eagle population has continued to increase rapidly since our previous survey.”

Yes. Carl M. Freeman Companies will take appropriate and reasonable measures to ensure any existing nests and eagles remain undisturbed. 

The Bald and Golden Eagle Protection Act is a United States federal statute that protects two species of eagle. It requires a permit issued by the Secretary of the Interior for activities deemed to "take" bald eagles even if the nest is not physically disturbed.

U.S. Fish and Wildlife Service makes these decisions.

Since 2016 over 300 so-called eagle “take” permits have been issued nationally by the U.S. Fish and Wildlife Service. On average over this time span six permits have been issued each year by the Service in the R5 region, which includes all of Delaware. We will begin the process of working with U.S. Fish and Wildlife on permitting for the completion of Coastal Crossing and we will work to minimize the impacts of our construction activities.

According to the FWS, after it issues an eagle incidental take permit for disturbance of breeding bald eagles, the agency typically requires that the applicant monitor the nest while the project is ongoing and sometimes for one year after construction is complete. FWS says the goal of this monitoring is to determine 1) do the eagles use/reuse their nest or do they relocate and build anew, 2) do they show any signs of stress in response to the project, and 3) are they ultimately successful in fledging young.
Carl M. Freeman Companies will, of course, abide by not only the letter but the spirit of the FWS directives.

According to FWS, there are generally a handful of potential outcomes to these permits, including:
• The eagles are unaffected and continue to use their nest site
• The eagles put up with the project for the first season, but then select a new site for subsequent seasons
• The eagles build a new nest in the first season
• The eagles attempt to nest at their original nest site, but cannot tolerate the project activity, are disturbed, and fail in their nesting attempt

Carl M. Freeman Companies are taking proactive steps to help ensure to the best of our ability that the nest will remain undisturbed.

No. According to FWS, nest failure is actually a relatively common and natural occurrence among bald eagles. Estimates are that usually around 20% of nesting attempts fail in normal populations.

No. While the completion of Phase II of Coastal Crossing will not physically alter the existing nest it still requires a permit because the construction activities may “disturb” the nest through construction activities in and around it. Given the longstanding occurrence of human activities around the nest we expect no potential adverse impacts.

Construction start is dependent upon final housing type design, market demand, and the

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gathering of necessary permits and approvals. Groundbreaking is not expected in 2021.

No. Bald eagles were removed from the federal list of threatened and endangered species in

2007 and are no longer protected under the Endangered Species Act. However, bald eagles

remain protected under the Bald and Golden Eagle Protection Act and the Migratory Bird

Treaty Act.

The U.S. Fish and Wildlife Service (“FWS”) in March 2021 reported that since 2009 the bald eagle population in the United States has quadrupled. The FWS reported:

“Bald eagles once teetered on the brink of extinction, reaching an all-time low of 417 known nesting pairs in 1963 in the lower 48 states. However, after decades of protection, the banning of the pesticide DDT, and conservation efforts with numerous partners, the bald eagle population has flourished, growing to more than 71,400 nesting pairs.

“According to scientists from the Service’s Migratory Bird Program, the bald eagle population climbed to an estimated 316,700 individual bald eagles in the lower 48 states. This indicates the bald eagle population has continued to increase rapidly since our previous survey.”

Yes. Carl M. Freeman Companies will take appropriate and reasonable measures to ensure any existing nests and eagles remain undisturbed.

The Bald and Golden Eagle Protection Act is a United States federal statute that protects two

species of eagle. It requires a permit issued by the Secretary of the Interior for activities

deemed to "take" bald eagles even if the nest is not physically disturbed.

U.S. Fish and Wildlife Service makes these decisions.

Since 2016 over 300 so-called eagle “take” permits have been issued nationally by the U.S. Fish and Wildlife Service. On average over this time span six permits have been issued each year by the Service in the R5 region, which includes all of Delaware. We will begin the process of working with U.S. Fish and Wildlife on permitting for the completion of Coastal Crossing and we will work to minimize the impacts of our construction activities.

According to the FWS, after it issues an eagle incidental take permit for disturbance of breeding bald eagles, the agency typically requires that the applicant monitor the nest while the project is ongoing and sometimes for one year after construction is complete. FWS says the goal of this monitoring is to determine 1) do the eagles use/reuse their nest or do they relocate and build anew, 2) do they show any signs of stress in response to the project, and 3) are they ultimately successful in fledging young.

According to FWS, there are generally a handful of potential outcomes to these permits, including:

  • The eagles are unaffected and continue to use their nest site

  • The eagles put up with the project for the first season, but then select a new site for

    subsequent seasons

  • The eagles build a new nest in the first season

  • The eagles attempt to nest at their original nest site, but cannot tolerate the project

    activity, are disturbed, and fail in their nesting attempt

Carl M. Freeman Companies are taking proactive steps to help ensure to the best of our ability that the nest will remain undisturbed.

No. According to FWS, nest failure is actually a relatively common and natural occurrence among bald eagles. Estimates are that usually around 20% of nesting attempts fail in normal populations.