made at any meeting of the board properly
closed or held in executive session.
19.Transitioning of control
from the developer to
homeowners
The background
RCC recognises that successful transition
of community or association management
from the development phase to the home
owner managed phase is the responsibility
of both the developer and the home owners.
This is best achieved through adequate
training and education programmes for home
owner’s participants, and through homeowner
involvement in association governance as
soon as possible.
In the life of every community association,
there is a time at which the control of the
association is transferred by the developer to
the owners who are represented by a board
of directors comprising volunteer owners from
the community. At the outset, the developer
ideally establishes the association entity and
initiates association operations, including the
preparation of an accurate operating budget
and the provision of an adequate reserve
funding scheme, inclusive of accurate
future projections, together with a full and
comprehensive report of all community
assets requiring maintenance, upgrading
and eventual replacing.
This is often not done properly, leaving
the owners to establish the association, its
operations and its funding sources through
raising adequate levies, or to knock a
poorly established, poorly managed, and
underfunded entity into shape, often with
inadequate or non-existent records on
estate infrastructure and common assets.
The developer also ideally provides interim
governance to the community until the
stipulated or voluntary trigger condition is
met for the developer to hand over full control
to the association members. Eventually,
the association will be fully transferred to
the owners who will thereafter control the
association and take full responsibility
for continued governance, administration
and maintenance of common elements.
A successful and productive transition is
one in which the collective interests of the
developer and the owners are served to ensure
completion of the development and sales
process by the developer, while ensuring that
the association functions effectively.
The policy
RCC supports developers who take a
responsible attitude to, and make proper
provision for, a properly established and
appropriately structured and registered
community association, with a complete set
of records detailing the extent and nature
of all community assets, each with a base
establishment cost and correctly estimated
maintenance, projected upgrade and
replacement costs according to a properly
established schedule.
RCC supports developers who properly
establish association operations and
management systems to ensure that the
association takes care of all core functions
through a properly staffed, housed and
funded administration team.
RCC supports developers and communities
which cooperate to establish a properly
constituted board of directors giving
property owners an increasing role in
community management as the handover
of control from the developer to the home
owners approaches. RCC opposes any
unqualified veto rights given to a developer,
either during the period of cooperative
management leading up to the transition,
or after the transition until the point that
the developer has sold all properties in the
development and is no longer a member of
the community.
RCC recognises that a successful transition
is the responsibility of both the developer
and the owner-controlled Board, which itself
is charged in terms of the Companies Act
with the fiduciary duty to investigate and
assess both the finances and the physical
development of the property, after the
developer has transferred title to the real
property as well as association control.
A successful transition can be accomplished
through:
1.Providing professional and recognised
educational programmes for homeowners.
2.Utilising the right professionals for
conducting reserve studies, transition audits
and analysis of the Public Offering Statement
and governing documents during the
transition process.
3.Managing with transparency and consistent
communication with owners.
4.Maintaining the association as a legal
entity with its own separate records, funds
and operations. RCC supports developers
who use the services of an independent
professional to prepare the budget or, at a
minimum, review and offer recommendations
for changes to the budget to help ensure
accuracy, affordability and sufficiency. The
independent professional should have no
financial involvement with the developer and
should have prior community association
budgeting experience.
Additionally, the
professional should rely upon his or her
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