HOA Developer Transition to Board Owners

Here is a list of things to lookout for when transitioning from developer control to Owners

So you bought a new construction home, you’ve waited around as the community begins to take shape and the neighborhood begins to fill up with excited new homeowners. There will be a time when the builder will transition control of the development to the homeowner through the elected Board members. Each developer contract has a different set of criteria to determine when this turnover will occur. It usually is tied to the percentage of units sold and the total number of units within the community.

As Campbell Property Management, one of our clients points out,  Florida law requires that the developer handover control of the homeowners’ association to the homeowners three months after 90% of the homes have been transferred to their buyers. At this point, homeowners are entitled to elect the majority of the board. “

It is during this crucial time where a simple grouping of homes flourish into a community and develop the neighborhood culture. While there is a ton of opportunity, there is also space for missteps. You should review the following steps to ensure your transition from developer control to owner control is as easy as possible. Check out the graph below as a rough timeline.

 

This timeline provides a guide for HOAs to transition from Developer to Owners

The full timeline and accompanying text can be found on CAI’s Transition report.

 

1.) Form a Residential Transition Committee

This is a group of active owners that can supervise the process of transiting from developer to residents. While it doesn’t have the ability to overrule the developer’s governing board, it can set the course for things to come.

2.) Documentation Audit

While this is not an exhaustive list, it’s a great place to start. A newly elected board need to request the following documentation:

  • All Governing Documents
  • Minutes of all board meetings
  • Copies of all contracts
  • Copies of all warranties
  • Copies of all insurance policies
  • Copies of deed and plats for common areas
  • Copies of all leases
  • Names and contact information for all owners
  • Copies of all ads, brochures, and marketing material used by the developer
  • Financial records including budgets, audits, bank records, balance sheets, accounts receivable, account payable, etc.

3.) Communications

“Effective communications is probably the most important element in the success of any community association.” CAI Transition. While Vintuem software can’t assist with your legal or maintenance issues, we are able to assist with developing an impressive communication plan to ensure all stakeholders are kept up-to-date! Using our HOA and Condo websites, board members can have a website up and running within the day, offering residents valuable information as to how things are progressing. Sign up for a free trial to see if we would be a good fit for your community.

4.) Understand the Funds

It’s best to involve a CPA to conduct a review of the financial records, taking a look at the income statements and ensure projected revenue exceeds the projected expenses. They also need to ensure there are adequate funds in the reserve.

There are times when a newly elected HOA board of directors uncovers a slew of devious behavior conducted by the developer. There are times when an HOA builder will intentionally underestimate, Lowball, or even subsidize expenses our of their own pocket to lower the common area maintenance fee and appeal to buyers. Builders may bury their construction costs within the operating budget, fail to collect maintenance fees from existing owners or fail to budget properly. This step is crucial for a smooth transition from the builder to Homeowners.

5.) Review current contracts

As the community developer enters the construction phase of the development and starts working on common areas, they will likely begin to hire local vendors to maintain specific areas of the community. It is essential that all existing contracts for vendors are properly scrutinized to ensure the terms are agreeable, the prices are competitive, and the length is reasonable.


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