What Is A DEVELOPER?
You may have heard the term “Developer” thrown around occasionally, especially if you live in a newer association which may not be entirely finished being constructed. The Developer is the founder of the community. This is the company or individual that acquired the land and initialized the construction of homes, drafted the governing documents for the Association, and formed the basis of what became your community.
Generally, the Developer maintains controlling interest over the Board, placing their own representatives on the Board of Directors to keep things running until the homes and units have been completed and the Association is thoroughly populated. They also may have more weight with their vote on matters within the Association. Most of the time, there is a certain percentage of the homes that must be occupied before Homeowners assume their positions on the Board of Directors and the transition of power begins, passed from the Developer to the Homeowners.
Community TURNOVER
When preparing to transfer authority from the developer to the Homeowners, there are certain measures to be taken.
1. Organize
To ensure a smooth transition, the Homeowners should form their team, known as a transition committee, to oversee the process. This is also good preparation, in that the association will need a new Board of Directors once the Developer and its representatives are no longer the acting BOD, although the members of this committee may not necessarily be grandfathered in. A formal election to decide the new Board should be required.
2. Financials
Performing an audit and study of the Association’s reserve funds is also good practice, to ensure there the Association’s funds are in order and there is nothing missing or unaccounted for.
For this, it is best to hire a professional CPA. This might be costly and tedious, making for a lengthier process, but you will be glad you did it. If not only for peace of mind, but in the case that funds were mismanaged, it will be much easier to sort out the matter while still in close contact with the Developer. This is especially the case if the Declarant operates under a Corporation that could be dissolved after the transition takes place. You do not want to be left chasing a ghost.
3. Secure MANAGEMENT
The Developer may or may not have a Management Company in place. Once authority is transferred to the Homeowners, the Board of Directors will be comprised of a set of elected Owners, operating part-time on a volunteer basis. Many Board Members have families and full-time jobs, leaving little time for the numerous tasks necessary to the operation of the Association. A Community Manager handles the needs of the Association, facilitating vendor contracting, providing documents, assisting in the enforcement of the CCRs, and examining budgets to ensure integral expenses have been paid for, at the discretion of the Board. Some smaller Associations are self-managed. However, your Board of Directors should assess the time they have to contribute against the needs of the Association to determine if a Management Company is needed.