HOA transition - did we miss our opportunity?

Six years after taking control it is probably too late for anything except unfulled common area commitments which are in writing and are significant enough to discuss with an HOA attorney.

I am in a similar position as Joseph, so I would like to see where this discussion goes.

As I read the OP, their HOA took control only in 2011. So, it's been an year since the homeowners controlled the board. As I understand, election-of-homeowners is only a step in transition. It is not the end/completion of transition. Many transition activities can only be performed after getting elected to the board. For example:

1. If homeowners want to retain a different attorney to guide them through the transition and review common property documents, they can only hire one after getting elected to the board.
2. If homeowners want to get an engineering audit done, they can hire a firm only after getting on the board.
3. If homeowners want to get a financial audit done, they can demand the developer to provide one. But, their demand would carry more weight if homeowner-elected-board makes it.

Time may have been wasted by Joseph's board, but there may still be opportunity. I would suggest the following:

1. Contact the Engineering department of your township and see if the developer has requested release of bonds. That will tell you how fast he wants to get out. Then, see if the engg. department has conducted an inspection as part of bond-release process. Get a copy of it and review it.
2. Create your own issues list for common elements and decide whether you can afford an engineering audit. (We are finding that engg audit cost ~$10,000 and it is too expensive for us).
3. Decide if you are happy with financial condition of the association. If not, consider a financial audit (we are finding it costs ~$5000).
4. Decide if you are comfortable with legal documents related to the property (like master deed, income tax submissions, etc.)
5. Communicate to the developer with your issues list, you intent for engg/financial audit, status of legal documents and tell him that the transition is not complete. Submit a copy of this letter to your township so that they are in the loop.

Joseph, there's some good advice here & it seems that KaushalV has some nice insights.

In our HOA, the developer sweet-talked previous boards and said, oh sure, we'll take care of this or that suspected construction defect. A group of us finally got a majority on the board and asked in friendly written ways for action. More foot-dragging.

We ultimately had to take legal action as we (rightly) were concerned that the statute of limitations would run (time would run out). Here in CA, by hiring attorneys, who took a certain action, the statue of limitations clock was stopped. We reached a successful settlement two years later.

So, no matter how friendly & helpful the developer seems, your board must take responsibility for making sure the books, structures, etc., are OK.

Thanks to everyone for all the comments so far and I’m already in the process of looking into KaushalV’s suggestions which I think will be helpful.

What bothers me is that most of the discussions about transition on this forum seem to imply that there is a point in the process where the homeowners have a position from which they can negotiate with the developer before “accepting” control of the HOA.

I just don’t see how that happens. The year before I was elected president, the Developer’s Board resigned as per our bylaws, an election was held and the homeowners were elected. (Also, the common areas were not completed at the time).

Should we have refused to hold the election?

Even if it’s too late, I would like to understand where we went wrong.

Joe H

Joe:

I think your situation is far more common than having a developer who works with homeowners to do an orderly transition. There is nothing I am aware of that says the developer must negotiate with the homeowners when he hands control to them.

Until the homeowners had control of the board you had no control over anything that happened. Refusing to hold an election after the developer washed his hands of the association would have left you with a bus without a driver.

I do not understand why you think you went wrong.

Thanks again to all for the comments.

After considering all the comments and doing some research, it seems to me that our current homeowners’ Board is in the following position:

1. We are OK with our financial situation.
2. There are a few documents missing which I am getting from the Declarant.
3. As to the physical condition, our declarant deeded over the land for our common areas back in 2006 when he controlled the Board. At that time the common area facilities (storm water drainage facilities and a few foot paths) had not been built.

Since then, as these facilities were constructed, I assume they were inspected and approved by the Township. Once approved by the Township I guess they automatically become property of the HOA.

Most of these facilities are now buried underground and would be difficult or impossible to inspect if we hire an Engineer. I called the Township and they are checking to see if any report is available.

At some point in the future, if we discover something improper in the construction of these facilities, we can negotiate with (or sue) the declarant to correct any defects, providing there is no statute of limitation on when a defect is discovered.

Joseph, I would like to respond to your comments:

"...Since then, as these facilities were constructed, I assume they were inspected and approved by the Township. Once approved by the Township I guess they automatically become property of the HOA."
--> Don't be so sure about automatic ownership transfer of common elements. There needs to be a final Plat map or a deed filed with the county clerk's office showing ownership to HOA. And the builder needs to do this for you. Our builder forgot to do this and he has now agreed to get it done through his attorney.

Most of these facilities are now buried underground and would be difficult or impossible to inspect if we hire an Engineer. I called the Township and they are checking to see if any report is available.
--> As I understand, even underground pipes can be inspected by camera-on-flexible-tube. It's a matter of your confidence on the builder and affordability. If the Township has done a thorough job, that could be a risk mitigation tool.

At some point in the future, if we discover something improper in the construction of these facilities, we can negotiate with (or sue) the declarant to correct any defects, providing there is no statute of limitation on when a defect is discovered.
Somebody help us out here....isn't there a statute of limitation after which you can sue the builder?

A statute of limitations puts a cap on how long you may have to file a lawsuit against another party. Statutes of limitations varies greatly from state to state, not only in terms of how long but also when the clock starts.

There may be multiple statutes of limitations in a single state. Oral contracts, written contracts, personal injuries, libel, and construction defects may all have their own statutes of limitation.

If a developer installs a defective storm sewer, for example, some states hold that the clock starts when the storm sewer was completed and others may say the clock does not start until you first discover the defect.

From personal experience I have found that statute of limitations is one of the trickiest areas of the law. So tricky, in fact, that if you ask two lawyers, as I once did, you will get two entirely different answers.

If you have concerns that there are construction defects the time to start discussing these with your lawyer is today.