Transition from Developer/Builder to Homeowners

Just went through the same process.

You should hire an association management company to help.
You'll need an audit and on-going accounting support.
All service contracts need to be reviewed.
A transition study should be conducted as well as a reserve study for future costs to be incurred.
Someone needs to get in touch with your township and/or county and coordinate various issues like roads and sewers.
The builder needs to post a bond for repairs.

This is just a partial list, there's lots of work to do!

Don't rely too heavily on the management company, which was probably hired by the developer. Many times, this is a conflict of interest, especially if there are problems. Your state's law probably spells out exactly what is supposed to happen and when. Read the law carefully, and remember, it is the fiduciary responsibility of the BOARD to make sure the law is followed. Many times, an attorney is needed, and bad developers need to brought into court. Hopefully, this is not the case for you, but BE PREPARED. Also, an INDEPENDENT AUDIT should be conducted. By independent, I mean by a CPA who was not hired by or who has not worked for, the developer. It is sometimes very difficult, but it is up to the board to see that these things are done. And, if the developer does not choose to follow the governing documents, remind him that he was one who had them drafted. Also, remind him that he was fully aware of your state's laws prior to incorporating.

Good start EGoldman. And once you read your Bylaws and Declaration of CC&Rs you can determine if you have the votes to take over or to elect a owner majority to the Board of Directors. If you do, then try for a friendly takeover by talking to the Developer. Otherwise you would have to remove the Developer's Board members and replace them with owners. I have discussed that process in another post.

During the transition I would have an experienced attorney or manager involved and would request an audit (not just a financial review, a comparison of source documents to financial reports, which many HOAs consider to be an audit).

Roger

TerryL, here is an example Bylaw for removing a Board member.

Replacement of a Board Member.

The Unit Owners, by a two-thirds (2/3) vote of all Members present in person or by proxy and entitled to vote at a duly called meeting of the Unit Owners at which a quorum is present, may remove any member of the Board with or without cause. In the event of death, resignation or removal of a director, his or her successor may be elected by receiving a majority vote by the members present who shall vote by secret ballot. The Board member elected shall serve for the unexpired term of the director being replaced.

duly called means that the notice of the meeting advises that there will be consideration to remove a director.

Roger

I have tried emailing you for a copy of your checklist, but your email address doesn't seem to be a good one??? If you don't mind sharing the list, my email is [email protected]

Carol:
Please mail me a copy of your checklist.
Thanks,
Patty Martin
EMAIL: [email protected]

Carol, Please also email me a copy of the checklist to [email protected] Thanks, AndreaW.

CarolB: My HOA will flip to owners this fall, perhaps next spring. I would really appreciate a copy of your check list. Will you please email me? Thanks so much.

With all these requests, has anyone actually received the checklist from Carol?

I'm in a community that is working towards transition, slowly if it'sup to the developer, and would appreciate any information on transition I can find.

Bruce Parker
Dumfries, VA

I have not received the requested list from Carol. However, I did "search" and found a great list previously posted.

Thanks RogerB!

Misti

The most critical time in the life of many HOAs will be the transition from Developer control to Homeowners control. Numerous questions and posts have been made about this transition. I have discussed a transition audit which includes a financial audit and a physical audit.

First, I would recommend contracting for an experienced Managing Agent several months prior to the transition. An Agent who can employ a good a HOA attorney as needed. A good CPA is definitely needed to do a thorough financial audit and a good Engineer is needed to do a phyical audit which includes drainage and contruction of homes, roads, pool, club house, fences, irrigation, monuments/signage, etc.

The Agent needs to be competent in co-ordinating and monitoring all of these professional's activities as well as co-ordinating with the Developer. The Agent needs to be able to work with and get the Developer to correct all problems uncovered - there usually are several. The Agent should get and review items listed on the transition check list previously provided.

The Agent should also review the Developer's commitments which were approved by a Planning Commission Agency to assure every commitment has been completed. If not, the Agent should get the Developer to complete these or else agree to do so in writing and post a bond which would assure completion.

I WOULD NOT TRANSITION WITHOUT PROFESSIONAL HELP. To those who say "We can not afford professional help" I say, "You can not afford not to". And yes, I realize what some of you are thinking - it can be a 'catch 22'.