Developer Turnover Question Concerning budget

I live in a new neighborhood in Georgia. I serve on the advisory board. We are meeting soon to discuss the 08’ budget, our annual HOA meeting and the developer turnover.

My concern is approving the 08’ budget set by the Developer and the managing company in October when the developer will be turning the neighborhood over to the homeowners in January.

What should I lookout for? What did you experience during your developer turnover? Any help on this would be greatly appreciated.

BruceD1 - Developer budgets are often low-balled, sometimes to tease prospective buyers. Our developer budget was significantly low across the board. Once the owner controlled Board assumes control over the governing of the community, and the developer is entirely off the Board, you will then be able to hire an independent transition engineering firm to perform a capital reserve replacement analysis and deficiency report of the constructed elements. Your budget will most likely increase as a result of those studies. Budgeting for the unknown is difficult, so until your community has something concrete to justify increase transfers to reserves, you may just be safe in a nominal CPI (Consumer Price Index) increase, or something to that effect. As for the actual turnover, there's two. Turnover of the Board, and turnover of the community's elements (transition). As for turnover of the community's elements or transition as it's widely know, sign off on absolutely nothing. Get an attorney hired by the Association on retainer to represent the Association in any negotiations with the Developer for compensation of deficiencies and low-balled budgets based upon the engineer's reports. Get with your Borough to understand how much of the developer's bond money, if any they are holding. Address your concerns with them over the current state of construction. Try to get the Developer to put in writing that it will provide a 4 year maintenance warranty on the roadways that were constructed. Stretch, but we got it from our developer. Form a transition committee reportable to the Board to document any and all concerns and known deficiencies. Been in your shoes during this process in my community. Good luck!!

Bruce:

Good post above, I would like to add to make sure you have a reserve fund to begin covering your amenities.

Like the post states above most Developers have contractors that do volume work therfore their fees are reduced, making the dues attractive to buyers. These line items will more than likely go up a percentage when you begin looking for vendors that are not used by the Developer.

Joe's response is so true. Get the reserve study done asap, before your budget if possible.

Retain a bond from the developer. We are a 12 year old community and the state just said our pond banks are not at the angle they are supposed to be. We called the builder, we still have the bond. He is going to repair each and every pond to conform. He will repair/replace any damage they do during excavation, to common and individual property. The only problem we are having is our roads. We want him to guarantee that our newly (2 months) repaved/blacktoped roads are also in the consideration of repair.

Holding onto bonds from the developer work!! This would have cost the HOA $300,000. if we had to repair the banks.