 Developer
Transition –
It Takes a Plan
As
your association is approaching the final phase of the
buildout process, the developer and/or builder for the
association is thinking about closing out sales of the
final homes, while the members are looking forward to managing
the association. In some cases, the “turnover” process
can be fraught with animosity and hard feelings between
the developer and homeowners. With planning, however, the
association, builder/developer, and the management company
can work together many months in advance of the turnover
date to assure a smooth transition from developer control
to homeowner control. Here are some helpful tips.
(Requirements may vary from state to state. Check
with a knowledgeable local attorney.)
When
Does Turnover Occur?
Has
your association reviewed the governing documents to determine
when this specific time will occur? Each association
will have different wording and different requirements. In
some cases, turnover occurs at 75% sell out, some at 100%,
while others specify that control can change when the developer
prepares notice to the association that it is willing to
transition – and this may be anytime during the build out
phases. Some Covenants, Conditions, and Restrictions
(CC&R's) establish that the developer is required to
perform certain duties when turnover is eminent. Make
sure you know and document that these occur.
Transition
Committee. . .It works!
Prior
to a turnover, a developer-controlled board of directors
has the same duties and requirements as a homeowner controlled
board. While the developer is still in control, it
is a good idea to establish a transition committee as a “board
in training”. Include as many members as possible,
but limit the number to a reasonable working group. These
members would be entitled to the financial records that
show the association maintenance fees collected, the reserve
plan and funds, and contracted services like landscape
maintenance, pool maintenance, property management, and
insurance. As the developer controlled board is making
decisions, it is advantageous for the transition committee
to be involved in providing input and making recommendations. It
is important for the developer controlled board of directors
to avoid making drastic changes and implementing politically
sensitive policies during its final days in office.
Introduce
Professional Advisors. . .It's a Must.
The
new board of directors is not expected to be knowledgeable
in technical areas like management, accounting, investment,
and law. While some of these functions may be handled
through a professional property management company, it
is very important to identify and introduce these advisors
to the transition committee. These advisors would
include the attorney, CPA, and contract vendors.
Site
Inspection
Why
not meet on-site with the transition committee, developer,
vendor, and management company? This is one of the
least remembered steps. During this meeting, all
the parties can identify a “hit list” of issues ranging
from roads, sidewalks, and landscaping, to facility maintenance. A
direct hands-on approach and agreement to development and
construction issues will make the transition smooth and
assist in completing open items well before the final turnover
date.
Association
Records/Documentation. . . You Need the Books!
While
not all records may be applicable to each association,
it is important to review with the transition committee
what is stored with the management company. Here
is a list of minimum records retention:
 |
Copy
of governing documents, supplements, and amendments
(Articles of Incorporation, Bylaws, CC&R's,
Rules/Regulations, Design Guidelines)
|
|
Minute
books and other meeting documentation of the
association
|
|
Association
Owner records, such as copies of deeds, rosters,
correspondence
|
|
Financial
records for the association
 |
Balance
Sheet
|
|
Income
Statement
|
|
Control
of banking records
|
|
|
All
association property
|
Real
Estate
|
|
Furniture & Equipment
|
|
Supplies
|
|
|
As-built
architectural, structural, engineering, mechanical,
electrical, plumbing plans, plans for underground
site service, site grading, drainage, landscaping,
list of contractors
|
|
Any
other information relating to repair or maintenance
of the property.
|
|
Insurance
policies
|
|
Copies
of any occupancy permits
|
|
Copies
of any leases
|
|
Employment,
service or other contracts to which the association
is a party.
|
Developer
Follow Up
In
order to facilitate an orderly transition, the developer
or an informed representative should attend several meetings
with the board of directors during the months following
the turnover meeting. Open issues can be discussed
during these meetings, rather than leaving the items left
undone well into the future.
In
Closing. . .
Have
a transition plan in place. Be
ready to recruit members to assist in the transition. Communicate
what is happening during the transition to the entire membership. Get
all the parties involved. Don't
leave anything to chance!
Association Times' Staff Writer
|
