Transition from Developer Questions

MarianneG1 - 90 days ticking??? OMG!! Please explain what you mean?

The Association should sign off on absolutely NOTHING, without first hiring an Association attorney and having a Transition analysis performed. Developer's don't usually provide the cost of an attorney. Transition is basically about the owner controlled Association seeking funds from the Developer to construct the elements it didn't construct properly according to building code, or for financial reimbursement for the Association to do so. Basically, a lawsuit with the Developer to force the Developer to comply. Our Association attorney advised us that you don't want to move too fast, but move quickly when you need to. Which means be prepared. Sounds like you guys are getting there, just that it may be premature, especially if the Developer is still building. It sounds like your part of the community is being forced, or being persuaded to have a formal acceptance of your part of the community from the Developer. Read your governing documents because it's possible the Developer can Transition the community regardless as to whether or not you accept it. Your part of the community is not prevented from seeking reparation from the Developer, unless of course their is an official signed acceptance.

The Developer should absolutely not pay for Transition costs. Though if they do better for you. That is not what Transition is about. The Developer will 9 times out of 10 take the approach that everything was constructed correctly.

An Association may decide to use the amount set aside in Reserves to pay for the study. However I believe that is not appropriate. Reserves are funds set aside to pay for the eventual removal, and replacement of the elements the Association must maintain. If an Association doesn't have the money set aside to cover expenses involved in a Transition study, and Transition process, than the BEST put that money they use back into the Reserve account after the studies are done. Reserves set aside build cumulatively, so if something costs more to replace than originally budgeted the Reserve contribution must be corrected going forward so the deficit doesn't build cumulatively. If you take a large portion out to cover expenses not previously budgeted, that's one heck of a deficit that needs to compensated for.
But again, that's not the Developer's problem. However, if an Association learns that the Developer low-balled the budget that can become part of the amount the Association seeks from the Developer.

I speak to you from experience regarding Transition, Capital Reserve Replacement Analysis (CRRA), and Deficiency Study Analysis (DCA). When necessary I was a member of our Transition committee. As a Board member I helped to contract, and form the scope of work/study for our Transition engineering firm. I highly recommend all BOD members and Association residents read Graham Oliver's Book Reserve Fund Essentials, 3rd printing. Just a friendly plug, it's an invaluable read.

That said, in a nutshell, an Association OWNER controlled Board needs to form a scope of work, compile all the site-plans, hopefully they are "as builts", hire a Transition engineering firm to perform CRRA and DCA studies, and provide the firm the site-plans or "as builts". If the community is not fully constructed then "as builts" should not complete. However, a set of the site-plans should be on file with your municipal borough clerk, or your building code department offices. Those plans usually must be reviewed and certified by an engineer,and conform to all construction code. Those plans are what the municipality uses as a reference, and the municipal engineer can perform site visits to verify construction meets with critical standard. So, perhaps you can get a copy from your municipality.

TracieciatesR - Great advise you've given. However, you wrote, "...the developer will have to comply to the HOAs requests.". That is not entirely true. The Developer must build the community in accordance with a set of pre-approved plans. The Developer typically has the ability to make changes but that involves a procedure with the municipality. The Developer does not have to comply with unreasonable requests from the HOA. The HOA typically cannot make decisions that will adversely affect the Developer while the Developer has control over the community. Usually that means that as long as the last unit in the community is not closed the Developer retains a seat, or seats on the Board and may even have rights of veto.

Like my mamma always told me, "slow and steady wins the race". In this case it's "methodical and steady".

TracieciatesR - Spot on with your reply above. Absolutely correct. My concerns are that MarianneG1 knows enough to "dangerous" so to speak, but not yet enough, and not yet in the position, to look back and see the big picture. MarianneG1 will get there but gosh does she and her community have a lot to go through. What really concerns me is this "90 days is ticking" thing. Either her Association owner Board is really behind the 8 ball, or someone is pressuring them to make decisions prematurely. Sometimes, for nothing else than stonewalling is an attorney necessary.

MarianneG1 - Given what you've posted, I will say in short that you all need to relax, but be cautious and sign off on NOTHING. What the developer is communicating pertains to a transition of control over the Board from the developer to the owners. Control over the Board just means that the Developer seats will be open for an election by the owners for the owners. Your procedure for following elections must be quickly reviewed, the developer seats that will be open for election, the number of seats must be ascertained and a date must be set for that election to occur. You all should become familiar with South Carolina state law regarding elections if there is something that you need to follow outside of the guidelines in your governing documents. Since you all as a committee are becoming familiar with the Transition Capital Reserve Replacement Analysis, and Transition Deficiency Study, it seems to me you really have a leg up on the process. That's good news. Yes the clock is ticking on the election of owners so hurry up with firming the procedures. But don't rush and sign off on something that the elements were constructed to the satisfaction of the Association. Don't, don't do that without getting an attorney and a study to show you what the Developer actually did. You guys are volunteers and you need experts to guide you. In that process you will all become experts in the end!!

: )

GeraldT4

Same here, no HOA laws with TX, only Condo.

Interesting thing was when our townhomes were marketed to us, we were told that they were "hybrid" condo/townhomes. Practically have to beg for a copy of CCRs for review ahead of committing to signing the dotted line. The CCRs quoted the Uniform Condominium Act throughout. Only much later did we wise up to understanding were were just townhomes...but not sure how that stacks up. I personally feel any changes the developer makes is usually not in favor of the homeowner!

MarianneG1, I wish you luck on your transition, and get an attorney's guidance if you can. I pray others don't find themselves in a predicament like mine:

I don't consider our neighborhood "transitioned" yet from the last built in 2006 and we have never signed anything; however, homeowners were elected to the board, then resignation letters from the developer presence followed in the mail. (??) This was a few months after one of the buildings (built 2004 with 5 units within) split in half with a foundation crack. I don't think anyone else in our neighborhood knew anything happened until we saw the equipment come in to install the concrete pilings. We ended up contracting an engineer for about $10K and tried to use that to negotiate many many repairs and coding violations with the developer. They got an engineer to write a rebuttal! We have went back and forth several times and have dragged this out for almost a year, and I have little volunteer support from the residentsand little left personal vacation time from work...with little to show!! Any "repair" work is done so terribly. We are a new association with hardly a dollar to spare, and no attorney would take us on a retainer. How could we risk paying a good, experienced lawyer $300/hour for something that could get dragged out for a top-5 homebuilder? Throw the burst housing bubble on top of that with a foreclosed home or two, and a huge side of renters, and you have moi! Phew!

I wish you the best!

KM1

MarianneG1

1. If I were the Developer I'd deny your request for a fee to inspect the construction condition of the community. If the Developer approved $15,000 for a building inspector, take it in cash and apply the money towards conducting the studies I recommended or at the very least a building inspector.

2. If I were the Developer I'd deny your request for a fee to employ an owner controlled association. Why pay twice to have the association sue me.

3. If your governing documents or state law require a CPA to conduct an audit of the books, and one wasn't budgeted for or done by the Developer I'd get bids and insist the Developer pay for an audit during all the years the Developer had control. If the time period an audit will capture falls during a time of an owner controlled Association, that portion should be budgeted and funded by the owner controlled Association.

Since you've already submitted the bids you received to the Developer wait and see what the response is. Maybe you'll get lucky.

You stated, " Oh brother... no wonder you can never get anyone to volunteer for anything!!". You're assuming that owners know all the things you now do. Some probably do, but most don't and will never know. Most owners are apathetic and would rather let someone else handle the headaches.

Charles,

Until the developer transitions (turns over control of the HOA) to the members, he is in charge. Any questions should be directed to him or to the prop. mgr if he is employing a prop. mgmt. co. Maintaining a friendly relationship with the developer is beneficial in working with him whether it be assn business or any problems encountered with the building of your home. When I was elected to the first HOA board after declarant control I was the only board member who was able to get results from the builder. He always returned my phone calls immediately and was very receptive to anything I asked of him. Sugar works a lot better than vinegar!