What is the Declarant Contribution and why is it shown as an Income line item?
It is typical of community associations that, until the community is built out, the income from owner assessments is not sufficient to cover association expenses. Thus, typically the developer of the community subsidizes the association until the community approaches build-out.
The third paragraph of Section 8.1 of the CC&Rs provides that the “Declarant may, but shall not be obligated to, reduce the Base Assessment for any fiscal year by payment of a subsidy …, which may be either a contribution, an advance against future assessments due from Declarant, or a loan, in Declarant’s discretion. Any such subsidy shall be disclosed as a line item in the income portion of the budget. The payment of such subsidy in any year shall not obligate Declarant to continue payment of such subsidy in future years, unless otherwise provided in a written agreement between the Association and Declarant.” The definition of “Declarant” in Article II of the CC&Rs includes “Fred Smith Company acting in its capacity as the managing member of Riverwood on the Neuse, LLC.”
The amount shown as the Declarant Contribution reflects the budgeted amount of the subsidy to the Association by the Declarant and/ or by Fred Smith Company for 2016.