BUILDING COMMUNITY
Arabella Country Estate
BEST PRACTICE TRANSITION
A development is not a residential estate – it ’ s a place with houses in a greater or lesser stage of completion . But there comes a time when the developer steps out , and the homeowners association steps in – and from that moment , the estate becomes a community – a place where people live .
What is transition ?
Transition is a term that has evolved in recent years to describe the general process by which the control and responsibilities of the governing board of a community association are transferred from the developer to the persons who bought homes in the community association . Although it includes the assumption of the obligation to maintain the physical assets for which the association is responsible and is often viewed only in that narrow context , the transition process is much broader in scope . It includes the transfer of governance , the acceptance of the common property , and the accounting for funds . Transition is not a single event , such as the election of an owner-controlled governing board or the execution of a settlement agreement regarding construction defects in the common property . It is a multistage process of many events taking place over a period of time .
Governance
A primary component of the transition process is the assumption of responsibility for the governance of the association through control of the board , which is responsible for the operation and administration of the community association and the maintenance of the common property . Preferably , this should be a gradual process that allows the owner board members the opportunity to receive proper training and to gain experience . Also , a progressive transfer of control helps protect the developer from unfriendly and financially harmful actions by the owner members of the board while the developer still retains a substantial economic interest in the project . In some estates , legislative or regulatory mandates require that turnover of control of the governing board from the developer to the owners should occur over the course of development . Commonly , the statutory guidelines require the election of a minimum number of owner board members at various stages of sales based on the number of projected closings that have actually occurred , beginning at 25 % and continuing to 75 %. At this point , the owners usually elect the entire board with the exception of one developer representative who can remain until the completion of sales for the project .
Thoughtful document drafting will create a governance structure within which transition is viewed as successful by all stakeholders – if all those stakeholders take responsibility for their roles in the process . Though there are differences from community to community and estate to estate , transition is most successful in associations where the following practices occur :
• Educate owners as to what a community association is and isn ’ t .
• Educate board members .
• Recognise the duties owed to the association and owners , and establish policies that enable the board to carry out these duties .
• All board members must act in a fiscally responsible manner .
• Engage professional management .
• Hire independent legal counsel to represent the association .
• Support the homeowner board through the completion of the community .
• Maintain a relationship among the association , the developer , and the owners after turnover .
Preparation of the documents
Documentation includes the articles of association , conditions , restrictions and bylaws , and an initial community association budget . Throughout the construction and conveyance process , the developer typically controls the decisions of the association . It is critical that the developer manage the expectations of the home owners through this process . By creating an acceptance procedure and maintenance manual for home owners , addressing potential issues , soliciting home-owner involvement , and turning over the amenities and open space areas to the association , developers can create community and avoid confrontation . Here are some guidelines :
• Draft governing documents that focus on the developer ’ s right and ability to control the development of the project and sale of the units rather than its right and ability to control the board .
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