Your masterplan holds a lot of information about how your community should operate. Reading the plan and working through operating decisions with the same thoughtfulness that went into its design helps protect your vision.
Governance documents provide the operating system for generations to come. Done right, they allow the developer of a New Urban community—often known as a Founder—to build out all aspects of the master plan. They then transition smoothly to guiding the permanent operation of the community.
While some New Urban developments have public streets and may even have a municipal government, most New Urban projects rely on a mix of homeowner associations (HOAs), commercial property owners’ associations, deed restrictions, easements and other private operating agreements.
To get it right, Founders and their attorneys need to recognize how New Urban projects differ from conventional development. Here are some ways the master plan influences governance structure decisions.
New Urban communities have a mixture of uses.
New Urban communities differ from conventional subdivisions primarily due to the proximity—and intermingling—of commercial and residential uses.
Even though the uses are physically close together, their governance needs to be separated. Management of the downtown or town center should be completely independent of the homeowners’ associations. Inclusion of any residential parcels in the downtown governance may make it subject to HOA statutory regulation and is to be strictly avoided.
New Urban Communities have quasi-public space.
New Urban open spaces, in the form of plazas or greens, often look like public parks, even though it most likely is owned and maintained by an HOA. For each shared space, documents need to clearly define who owns it, who maintains it (and pays for its support), who programs it and who can use it.
Often, particularly near the center of town, plazas, squares or greens are an extension of the commercial uses. Restaurants may spill out onto sidewalk cafes. In other communities, the plaza may be intended as an open-air marketplace, with farmers’ markets, pushcarts, kiosks or other small, semi-permanent store buildings. Concerts or other special events may be scheduled for these spaces. Such space may be owned and maintained by a commercial property association, a commercial developer or other entities.
Amenities are different.
Certain amenities, such as a pool club, may be reserved exclusively for HOA use. Often, however, New Urban communities don’t have private clubhouses and gyms. A YMCA or commercial gym may take their place.
Town center is the primary amenity.
New Urban plans create mixed-use or commercial districts, often resembling a traditional town’s Main Street. However, even if it looks like Main Street, the operational model may be closer to a lifestyle center—the open-air successor to the shopping mall. It’s crucial to recognize whether it will operate like a lifestyle center or Main Street.
Generally, a lifestyle center has centralized ownership of the shared spaces, by the Founder or other entity, and often centralized ownership of much or all the retail space as well. The Founder or other entity may control merchant mix, store aesthetics and hours of operation.
Main Street types are generally smaller and may consist primarily of live/work units with minimal commercial shared space. Buildings may front a public street. Main Street gives the individual property owners and merchants more freedom and independence but still needs coherence and basic operating rules.
Architectural Control is usually privately enforced.
Buyers and builders participate in carrying out the master plan’s vision through adherence to a design code. A code may have a lot of detail or not, but either way, the right to create and enforce the design regulations should be reserved to the Founder, not the HOA, at least through the entire development stage.
The community may have a very long build-out.
New Urban communities may develop much more slowly than conventional development and may evolve over time. Sometimes the residential portions are developed first, with incubator buildings forming the outline of the commercial district. Rather than sell off land quickly and get out, New Urban developers often plan to keep a long-term stake in the community, particularly its town center.
The Founder’s attorney must make sure the Founder has all the rights needed to protect development and the flexibility to modify the master plan, no matter how long it takes to finish. At the same time, the governance structure must allow the community to operate and evolve for generations after the development stage is (finally) done.
Recorded documents are difficult and sometimes nearly impossible to amend later. In the worst case, bad documents can prevent the Founder from being able to build what was envisioned.
Before the first parcel is sold, governance documents should establish how to maintain the community, to share costs equitably and to make decisions about the community as conditions change over the ensuing decades.
The masterplan is the right place to start.