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Subject: Suggestions on developer homeowner transition
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Author Messages
YoramK
(Georgia)

Posts:1


09/13/2021 7:24 AM  
We are just about to take over the HOA from the developer/builder. Any tips on how to go about it, what to look out for? any suggestions and ideas are welcome.
AugustinD


Posts:1585


09/13/2021 7:44 AM  
To get the ball rolling:

Either (1) ask the Declarant to have a licensed reserve study company do a study; or (2) the very first year, have the new, owner-controlled board arrange for a reserve study. Plan to do a full-blown reserve study every five years. Once a year, update the existing reserve study with regard to useful lives remaining and estimated cost to replace.

The new board needs to know whether what the HOA is assessing the owners is appropriate.
TimB4
(Virginia)

Posts:17710


09/13/2021 8:04 AM  
Here is some information on transitions:

Transition from the Community for Association Research

Developertransition.com This website is intended to specifically address the issues facing townhome, condominium, and homeowner associations in North Carolina. [still has good general information as well]

Checklist For Transition To Homeowner Control from CO attorney




Subject: HOA transition from developer control to homeowner control thread on this forum that discusses having a Transition Study done by an engineering firm.



Hope this helps,

Tim
MarkM19
(Texas)

Posts:841


09/13/2021 8:04 AM  
Yoram,
I agree with Augustin regarding the Reserve Study. I would also add that in nearly all cases your old Property Management Company is not your friend. Their loyalties are with the Developer and they normally do not like to work with the Owners boards. They are used to running the Show and when the owners take control giving up that power is not easy. In my many years of experience on HOA boards an exit strategy should be put in place to look at other PMCs.

I am sure you will get other tips here. I would advise learning as much as you can and take positive steps forward. Good things don't happen overnight. They happen over time.
DouglasK1
(Florida)

Posts:1670


09/13/2021 8:19 AM  
It is not unusual for developers to keep assessments lower than they probably should be so they can attract more buyers. One way they do that is by not funding saving to reserves. If you have expected expensive maintenance items (road resurfacing, retention pond maint, etc.), a reserve study will identify expected lifespans and costs and give you an idea how much you should be putting into reserves. Depending whether you have many of these items, an assessment increase to fund these could be needed. This can make the initial homeowner board's job a contentious and difficult one. Elect directors who are up to the task or you could end up like this years down the road:

https://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/311010/view/topic/Default.aspx

Escaped former treasurer and director of a self managed association.
LisaB21
(Texas)

Posts:8


09/13/2021 8:32 AM  
great advice to get the Reserve Study done ASAP. You have no other way to know if our assessments are set at a rate to maintain a healthy operation budget AND to fund your reserves for the coming years. It is not uncommon for the Developer to keep assessments low to attract buyers and then at turn over the HOA finds that there is not enough $ coming in to even maintain a healthy operating budget, much less fund a reserve.
In our HOA we found the annual assessments to be too low to cover the reserve funding and prior Boards had waited to the end of each year to see what was left over from the operating budget to make any contribution, if there was a surplus.
We now, and for the past 12 years that I have been on the Board, make monthly budgeted contributions to the reserve funding so that we are sure we have the $'s to do so.(Single family homes/1057 homes fully built out/homes and amenities now approx. 20-25+ years old)
Get copies of the operating budget used for the past two years and then you can make a realistic budget for the coming year. Also find out what the % collected on the assessments is. You can bill assessments all day long but if they are not paid, you will not be able to pay the bills.
SheliaH
(Indiana)

Posts:4175


09/13/2021 8:36 AM  
I've never been through the process - and from what I've read on this wrbsite, that appears to be a good thing! That said, one thing you'll need to do is develop some sort of punch list to ensure everything the developer promised to do is completed before the HOA changes hands. This would concern the common areas such as making sure streets have been put in and are paved.

You might also get an attorney to review the documents to check the areas where the developer references will need to be deleted. I wouldn't worry about changes to the CCRs and Bylaws right away - that will come, but for now making sure the finances and common areas are in good order may take up a lot of time in the beginning.

That's why Augustin's suggestion about reserve studies is so important. Developers usually set assessments very low to get people to buy, but when the homeowners take over, they find assessments must be increased - a lot - to cover routine expenses and reserves properly. The sooner people face reality in that regard, the better.

In addition to the resources Tim mentit, getting some training in for the new board will be critical to start you on a good foot. The CAI website has lots of resources for new board members, including webinars and perhaps live training in your area of you have a chapter.

Joining that chapter would be a good way to meet homeowners and board members from other communities who've been where you're heading. Networking with them could provide more tips on what to do and not do. Good luck!
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