C O M M U N I T Y
L I V I N G
SMOOTH AND
SEAMLESS
TRANSITIONS
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 home owners. 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 occurs 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.
• Ensure all board members 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 between 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