Developer turnover of Association

Started by BruceneS • 15 replies • 2866 views

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BruceneS (Tennessee)
Posts: 9

Posted:

We are a small association of about 43 homes plus 7 lot owners and the Developer still owns the balance of 10 lots/homes for a total of 60 homes/lots. The Developer sent in writing a notice that by the Covenant he is allowed to transfer the Association over to the Homeowners and has scheduled a meeting for Jan 16th. We currently have no Directors or Officers and have been pretty much kept in the dark as to the running of the Association. I have gone to the county and received copies of 1A & 1B of the Covenant(2 sections of the development)and one Addendum and have received upon request a copy of the By-Laws from the Developer. The Developer has also provided us with a Transferal Document. Since we have no officers I have scheduled a meeting 1 week prior to the meeting with the Developer to discuss with the Homeowners what we are going to do, and I guess that is my question What are we going to do? I know we need to see an Attorney that specializes in Real Estate and HOA's and have found one but the cost is $275 per hr to review the docs and we have no money but I am pretty sure we can get most to chip in. The Developer is turning over the Community Building, Pool and Tennis Court and indicated in the document "AS IS" so I believe we should have it inspected and a title search done but again no money. We have still not received a financial statement from the Developer with the exception of one last year but all items were in even dollars so we know that is probably inaccurate. I also need help as to where I can get a copy of the Charter in Tennessee. I really need any and all help and suggestion you can give me.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Bruce,

The normal procedure is for the developer to schedule a meeting at which time a board of directors would be elected. I'm surprised he did not ask for volunteers to run for the board positions in the letter he sent. A slate of candidates should be included with the notice of the meeting so elections can take place at the meeting. The meeting may have to be set for a later date to allow some time to gather volunteers to run for office. Your bylaws should state when the notice of the annual meeting must be sents. Usually it's at least 10 days but not more than 50 days before the meeting (or something to that effect). Holding elections at the annual meeting is the best way to go since the HOA will be turned over to the members at that time. Without a board in place it would necessitate another meeting to hold elections and also result in the HOA not having a BOD until that meeting can be scheduled. I would suggest having a talk with the developer to ask if he plans on doing it this way.

IMO, there is no need to meet with an attorney before the meeting. The developer may have documents he wants the board to sign to accept the community bldg, etc, however, IMO, they shouldn't have to be signed at this time -- in fact I would would strongly advise you NOT to sign any documents until you've spoken to an attorney. The BOD can meet with an attorney after the elections and the cost will be paid by the HOA. Just because the developer has turned over control of the HOA to the members doesn't necessarily mean his obligations are over. If there are repairs to be made to any of the amenities he may be legally resp. for taking care of it. The attorney you contact should be well versed with HOA law in order to best serve your needs.

GlenL (Ohio)
Posts: 5,491

Posted:

Brucene go to Community Associations Network (link on the left) and under Development there is a whole section on transition including a To Do checklist.

Studies show that 5 out of 4 people have problems with fractions

RogerB (Colorado)
Posts: 5,067

Posted:

Brucene, the transition is critical! I would not signoff at this time to accept "as is". Read the attachment for some help on what is needed prior to final transition.

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📝114593024771.doc(23 KB)

MaryA1 (Arizona)
Posts: 7,043

Posted:

Roger,

It is acceptable to have the turnover take place at the annual meeting at which time the member-BOD is elected? Then the new BOD can take the appropriate actions as outlined in your transition document.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Brucene,

A copy of your Charter and all documents that are filed under the HOA's name is in your County Register of Deeds office. If not there, Nashville office of

SECRETARY OF STATE
CORPORATIONS SECTION
312 ROSA PARKS AVE. (8th Ave)
WILLIAM R. SNODGRASS TOWER, 6th Floor
NASHVILLE, TN 37243

As for the "AS IS" from the Developer?? We say "When hell feezes over" Roger posted his list and I think that you would be wise to follow the items on his list. My Tn. association is getting prepared for our turnover and we are thankful that we have this really organized document to use.

BruceneS (Tennessee)
Posts: 9

Posted:

I want to thank you all for the information which will be quite useful.
The Developer did schedule a meeting for January 16th and provide 3 names that we can vote on for 3 Directors with the option of a write in. The only problem I see is that everyone in the Association was not given a chance to say if they wanted to run for Director only three were asked and those 3 are listed on the Ballot. My biggest problem is that none of these people are working on anything associated with the takeover, I have been the only one running down the information on the documents and in the course of doing so found that the Taxes on the land were still due for 2009. Our Developer still owns 9 lots and one house and base on the Covenant he is entiled to 3 votes for every lot until he turns over the Association (40 will be 2/3 of the votes) Is it feasible to request at his meeting on the 16th that we have a new vote? we have asked people not to sign the ballot which is required to be handed in by Jan 13th. I have scheduled a meeting with the Homeowners 1 week prior to the Developer meeting to discuss the election, turnover documents, Covenant, By Laws, problems and question to see where we all stand on the issues.
Do the Directors when elected select Officers for the Association or do the Directors also become the Officers?

Thanks again we are all clueless here and need all the help we can get.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Brucene,

Without reading your bylaws, you will not know how you are to elect Board members. The Developer says that he has 3 candidates. How many Board members are required per the ByLaws? Definitely request a meeting with him. He seems to be in a rush. He needs to pay the taxes on all common property before you take over from him but this sounds like a good need for an attorney before your members get stuck with some hidden huge cast that he has failed to take care of.

As for Board members, usually once the Board is seated, they elect amoung themselves who is President, V.P. Secretary, etc.But you need to know what officers are required, again , in your bylaws.

BruceneS (Tennessee)
Posts: 9

Posted:

Thanks, the ByLaws indicate a minimum of 3 Directors and a President, Vice President, Secretary & Treasurer but the VP and Treasurer can be the same person.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Brucene,

"MINUMUM of 3??? Is there no maximum? Eee Gads I think you guys are in for quite a ride from this guy.

BruceneS (Tennessee)
Posts: 9

Posted:

Thats what I am afraid of!

DonnaS (Tennessee)
Posts: 5,671

Posted:

As we say here, "Where ya'll at?"

BruceneS (Tennessee)
Posts: 9

Posted:

We are in Monroe County which is part of the Foothills to the Smoky Mts.

FrederickD (Virginia)
Posts: 7

Posted:

Our Association (similar in size to yours) is in Southwest Virginia and we faced the same situation in October 2008. Our developers ran out of money and walked away from the Association in the dark of night. Fortunately there was a Management company involved that scheduled an Annual meeting - the first in years. At the annual meeting we held elections for the property owners Board of Directors (previously the developers were the Board). The Management company pushed for there only being 3 Directors (less for them to have to deal with), but I pushed for five (a wider source of opinions). There were minimal documents passed from the Developers/Management company to the new Board. In spite of what you should or desire to receive for documentation you will get what you get. Our developers were an LLC (limited liability corporation) and they dissolved, plus we, like yourselves, had no money to pursue them legally.

Our new Board worked with the Management company for 10 months until their contract was up and then our Board took over management of the HOA. The management company was basically asleep at the switch and we felt we could do a better job. We plan to continue Board management only for 1-2 years, whereupon we will engage a reputable management company. During the remaining 10 months of the management contract we gleaned as much knowledge about HOA finances and contracts as we could. We continued to push to get more documents, but that was largely unsuccessful. We are into six months of Board of Directors management and so far all is going well. Since taking over the HOA we have published a HOA newsletter, created our own website and conducted "open" monthly Board meetings. Our property owners now know everything that is HOA relevant.

We have executed lawn care, snow removal, garbage pickup, and several maintenance contracts with on-site scrutiny by the Board. We also have addressed two budget periods with setting aside 23-25% of our income towards the HOA Reserve fund. In our first budget we put more money in the Reserve fund than the Developer Board allocated in six years.

We have found that the President and the Treasurer carry a heavy load in administering HOA business. It is important to elect good people to your Board since there will be much work to do.

Be prepared for a steep learning curve as you elect a new Board. If you are fortunate enough to have a decent Management company that will lessen the burden on the Board. My observation is that Management company sometimes forget that they are being employed and tend to try to direct rather than follow the direction of the Board.

Good luck as you go forward

BruceneS (Tennessee)
Posts: 9

Posted:

I am glad to know others have experienced the same problems we are having and that you are willing to share your experiences with us. Unfortunately we do not have a Management Company and never had, the Developer paid the Sales Office Person $6,000.00 a year to take care of business for the Association in addtion to her having a sales office on site but she quit at the end of 2009 and I am not sure if we will be able to get any information out of her but we will try. So far I have a copy of the Covenant and the addendums to the Covenant, and the By Laws. I have not been able to obtain a copy of the Charter yet and I guess I will have to go to the State in hopes that they actually filed one, other than the Accounting Documents what else will we need? Our meeting with the Developer is Jan 16th and we are supposed to turn in our ballets for the Directors by Jan 13 but I have put a stop to as many ballets being turned in until we have our own meeting of the Homeowners this coming Friday. The Developer did not canvas the entire Homeowner base to see who would like to run for Directors, the Sales Office person who has been taking care of the Association picked the three people to put on the ballet and I find that they are completely unaware of what is expected of them and will challange them this coming Friday to make sure they understand the amount of work and responsibilty that will be required. I was also hoping by this meeting of the Homeowners this Friday that we could meet each other and let everyone know who it is that they are voting for, since most have no clue who these people are on the ballot. Good luck with your Association and I hope in 6 months I will have the same success story.

BruceneS (Tennessee)
Posts: 9

Posted:

Thanks for the info. We went to the County office and there is no filing for the Charter there so this information is really great. I had already come to the conclusion the we will not accept the "AS IS" and was hoping to somehow get the Homeowners to chip in for an Inspection of the Club House and Pool to see where we stand, I am currently getting a cost of an inspection to let everyone know what this will cost us.

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