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Pre-planning for Change of Mgt. Agent

Started by DavidW5 • 7 replies • 1277 views

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DavidW5 (North Carolina)
Posts: 565
Posted:
We are an 800 home HOA that has been under developer control for over 5 years. Transition to homeowner control will take place after the last house is settled. That looks like it will be in 6 to 8 months. The current management company, selected by the developer, and also used at other HOA's of the developer has performed (in the opinion of many homeowners)) very poorly. Examples of poor performance: inaccurate monthly financial reports requiring rampant accounting reclassifications, incorrect and missing accruals, poorly developed budgets that ignore known requirements, failure to notify homeowners of assessment account balances (both positive and negative), shifting burden of work from the MA to volunteer committees, and a whole list of other problems.

What steps should we be taking now so that the first elected homeowner board will be in a position to consider awarding the management contract to another company? Can anyone provide an example of an RFP and contract provisions that are being successfully used? How long of an overlap period, between the old and new MA should we plan for?

Some of the problems we see result from the main office of the management company being located 25 miles away. They do all of the accounting there and we have trouble getting to the right person to answer questions. This also makes it difficult to examine HOA records. We are also paying for a full-time, on site employee of the MA who doesn't seem to provide much added valus. Is it reasonable to require bidders to propose an "on or near site" office location?

Any other advice greatly appreciated.
RogerB (Colorado)
Posts: 5,067
Posted:
Attached is some info concerning your transition from developer control to homeowner control of the Board and changing management companies.
📎 Attachments (2):
📝1830283431571.doc(27 KB)
📝1830283447254.doc(29 KB)
RobertR1 (South Carolina)
Posts: 5,164
Posted:
DavidW5,
I am sure Roger has referenced some worthy material that should provide a great help to you.
Just let me say, I think I detect a note of disappointment with your current management Co. If I am right, it might help to go back and study the relationship between developer and Management. The developer is the current managements boss, which means the Co has to manage as directed by developer, if he holds majority power on the boeard and I bet he does. 5 years is much too long to stay under development control. I am of a mind that once the owners have and can carry 51 % of total owners, there should take over management. Just a general rule and IMHO.

But the owners transition team is probably worn out by now from five years of waiting. It seems it is going to be hard after five years to generate that new owner enthusiasm that comes when you purchase a new home.

My advice. Be absolutely ready to take over the job. I would try and force an Audit before turn over, and I would want an audit of the management books before I would even think of keeping them. Personally, they have made you all wait way too long, they forced a management team on you, so step up and do only what you want to do. DO NOT follow in someone else's footsteps. It it your Ball Game, from that time, you should be primed and loaded and ready to fire.
DavidW5 (North Carolina)
Posts: 565
Posted:
Quote:
Posted By RobertR1 on 08/30/2008 12:26 PM
DavidW5,
I am sure Roger has referenced some worthy material that should provide a great help to you.
Just let me say, I think I detect a note of disappointment with your current management Co. If I am right, it might help to go back and study the relationship between developer and Management. The developer is the current managements boss, which means the Co has to manage as directed by developer, if he holds majority power on the boeard and I bet he does. 5 years is much too long to stay under development control. I am of a mind that once the owners have and can carry 51 % of total owners, there should take over management. Just a general rule and IMHO.

But the owners transition team is probably worn out by now from five years of waiting. It seems it is going to be hard after five years to generate that new owner enthusiasm that comes when you purchase a new home.

My advice. Be absolutely ready to take over the job. I would try and force an Audit before turn over, and I would want an audit of the management books before I would even think of keeping them. Personally, they have made you all wait way too long, they forced a management team on you, so step up and do only what you want to do. DO NOT follow in someone else's footsteps. It it your Ball Game, from that time, you should be primed and loaded and ready to fire.

Sorry Robert, but here in Virginia the law gives the developer the right to determine when control transitions to homeowners. In the case or our HOA the developer has written the governing documents so that he retains control until the last home is settled or 10 years, whichever is sooner. We will have 90 days notice, then an election will be held for a board of directors made up of homeowners. We want to be as ready as possible at that point, hence my questions.
RobertR1 (South Carolina)
Posts: 5,164
Posted:
David,
Is this a common practice for developers to write documents like this in Virginia? To me this makes no legal sense. The developer can sell all but one unit and maintain control for ten years. Don't you have any Homeowners on the Board now? I am sure you have looked at this with a lawyer, but honestly, the only reason a developer would write something like this is to generate some money for ten years. As you well know, to run an association is not cheap. Maybe your fees are so small it doesn't matter much, and with the places being new, it will be several years before some things need to be attended to. Have your fees gone up over the years? Is there a relationship between the developer and management co.? You mentioned the homeowners are started to get upset. Well they should and it could be if you have enough residents that your pockets might be deeper than his pockets, at least put some pressure on him with numbers. Call a town hall meeting. Start a Newsletter and follow the developers efforts, and try and get some finances printed out.
Quick and easy.......develop a bare bone web site and set up a Glog on it for comments and generate some interest.
Good luck.
DavidW5 (North Carolina)
Posts: 565
Posted:
Quote:
Posted By RobertR1 on 09/01/2008 6:23 AM
David,
Is this a common practice for developers to write documents like this in Virginia? To me this makes no legal sense. The developer can sell all but one unit and maintain control for ten years. Don't you have any Homeowners on the Board now? I am sure you have looked at this with a lawyer, but honestly, the only reason a developer would write something like this is to generate some money for ten years. As you well know, to run an association is not cheap. Maybe your fees are so small it doesn't matter much, and with the places being new, it will be several years before some things need to be attended to. Have your fees gone up over the years? Is there a relationship between the developer and management co.? You mentioned the homeowners are started to get upset. Well they should and it could be if you have enough residents that your pockets might be deeper than his pockets, at least put some pressure on him with numbers. Call a town hall meeting. Start a Newsletter and follow the developers efforts, and try and get some finances printed out.
Quick and easy.......develop a bare bone web site and set up a Glog on it for comments and generate some interest.
Good luck.

Robert,

The Virginia Property Owners Act (55-510) gives the developer the right to decide when transition will occur. The only homeowners on the board are appointed by, and serve at the pleasure of, the developer. Those appointed, so far, have been "rubber stamps" for the developer. It doesn't really matter since the other board members are employees of the developer and the governing documents give the developer veto power over any board action. Yes, the fees have gone up modestly over the years. The Virgina statute allows the developer to choose to either pay the assessment on the unsold lots OR cover any operating deficit. The board has raised the fees, even though the budget process indicated they did not need to go up, to insure there would be no deficit. There was a deficit in 2006. It took 18 months for the association to collect from the developer. The MA is a company that manages many communities that the developer builds. The developer controlled board has tolerated the poor performance of this company and has extended their contract for three years (we checked and there is a termination clause in the contract). The developer has removed homeowners that it appointed to the Finance and Transition committees when they continued to raise questions.

We have done many of the things you suggested. We have circulated a number of "Dear Neighbor" emails to everyone in the community that highlight issues and deficiencies. We have an independent web site with a homeowner's discussion forum. That web site is kept much more up to date than the "official" community web site and contains a document archive of all official association documents we have been able to obtain. The developer seems immune to any public pressure from the community. The developer's attitude is "we're in charge and we will do as we damn
please".

Obviously, the laws in Virginia are heavily biased in favor of developers, who are big contributors to the campaigns of the politicians. Big surprise! We have involved our local county supervisor and our state delegate in several issues with only modest success.

For these reasons, we want to be as prepared as possible to replace the management company.
GeorgerwilliamsW (Indiana)
Posts: 975
Posted:
Quote:
Posted By RobertR1 on 09/01/2008 6:23 AM
David,
Is this a common practice for developers to write documents like this in Virginia? To me this makes no legal sense.
You observation is on target. Nonsense rules the day sometimes. The covenant declarations I have researched in Hoosierland are sometimes incredibly contradictory, obtuse, and nonsensical. As I have posted elsewhere, they are among the very worst work of the legal profession I have ever seen.

Most of the ones I have read are cut and paste jobs.
The only interest the developer has as the declarant is to protect his interests while there is even one unsold lot.
RobertR1 (South Carolina)
Posts: 5,164
Posted:
David and George,
It appears to me that we all are of the same mind.
David is obviously on top of things and is no newcomer to the game and does his homework. Goerge is a fountain of information so our conclusions from the facts seen daunting. But, it only take a rock to start a landslide and I'm wondering if this particular developer has a weakness. I would also suggest if he shruggs off people pressure, maybe he hasn't had enough and needs some stronger pressure. What do you know about this developer, lots of stuff available on internet and county and state site. Just suggestion that most of the time information is power, and everyone has a limit.
In amy event David, I would not let up for a minute on your efforts to watchdog and report back information to the homeowners. I suppose you have put a little personal pressure opn the "Rubber stamps". And certainly you would expect the folks that he "fired" to have an acute interest. I doubt anyone can give you forward advice about your turnover until this "dictator" presents you all with some papers. It goes without saying to be careful and don't put yourself in financial danger. As a long shot, it may be when turnover comes the homeowners can make this guy regret some of his actions. A good smart aggresive lawyer will be a must, but I am sure you know that.
Keep up the political contacts and don't discount ten people walking into a Congressman's office, the more the better, just numbers can have a decided effect, but you all represent a good sized voting block, use it if you can.

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