Tips for a Successful Turnover
A Smooth Transition – Tips for a Successful Turnover
By: Miye Johnson Yi
Turnover, sometimes called transition, is the formal transfer of control of a community association from the developer to the owners.For many associations, turnover is a highly anticipated event because the owners finally have control of and responsibility for the day to day operations of the community.To ensure a smooth transition, there are some common issues that should be addressed.
The first step is to elect the board of directors. When the developer’s right to appoint directors has expired or been surrendered, a special meeting is typically held for the owners to elect the new board of directors. Notice of the special meeting should be sent to all owners in accordance with the bylaws explaining that an election is being held as part of the transition process. The special meeting and election should then be conducted in accordance with the association’s bylaws and declaration.
Once the newly elected board of directors is in place, it must get to work! In order to properly manage the association’s affairs, the board must first review and evaluate the operational and financial conditions of the association. Accordingly, the board must obtain all records including legal, financial, and maintenance documents of the association from the developer to perform a proper review. The following outlines the important items that need immediate board attention.
· The board should become very familiar with the association’s governing documents including the associations’ bylaws and declaration. The board should evaluate whether or not the existing governing documents of the association sufficiently meet the needs of the community. Specifically, it is important to review the governing documents regarding association and owner responsibilities, enforcement authority and collection power. The board should work with its association manager and legal representative to ensure that the association’s governing documents provide as much authority as necessary to adequately meet the needs of the community.
Tg The board should also review all contracts including service and insurance contracts. The purpose of such contract reviews is to determine if (1) the contract is necessary to protect the interests of the association; (2) the services provided are performed properly; (3) the costs for such services are reasonable; and (4) the contract conforms to the requirements of the law and the governing documents of the association.
· The board should assess potential risks to the association in terms of its common areas and amenities. The board should take proactive steps to minimize as much potential liability as possible. The board should consider adopting rules and regulations as necessary to minimize association exposure to risk.
· The board should also have a title examination done to ensure that all units or lots are properly submitted to the declaration and the developer has properly transferred all common areas to the association. Additionally, the board should confirm that previous taxes on all common areas were paid and are assessed at nominal value. Moreover, the board should confirm that all correspondence for the association including property tax bills is sent to the association as opposed to the developer.
· The board should review the association budget to ensure that is it adequate to meet the financial needs of the association. The board should determine if the assessments are adequate to fund the expenses of the association and also to help fund reserves. The board may engage a certified public accountant to perform an audit of the association’s books and also have a reserve study done to adequately prepare for future expenses.
· In reviewing the expenses incurred by the association while under developer control, the association should try its best to verify those expenses and costs. For any items without proper back up, the association should seek additional documentation from the developer to confirm that the expenses were legitimate expenses incurred on behalf of the association.
· The board should also confirm that all areas of the community owned by the association are maintained and in proper condition. The board may engage a professional engineer to inspect the common areas of the association. The board may also work with local county officials to ensure compliance with local rules and regulations regarding traffic signs, fire hydrants, street lights and sewer maintenance, community accessibility by emergency vehicles, and retention ponds and/or dams.
· The following is a quick checklist of items that should be obtained before or immediately after turnover:
1. Copies of all association documents including bylaws, declaration, articles of incorporation, minute books, resolutions, and deeds for association owned properties, and community plats;
2. All association funds and control of association funds;
3. Copies of all tax returns, contracts, warranties, insurance policies and accounting records; and
4. Lists of contractors and service providers, and lists of all owners with names and addresses.
While turnover can be a stressful time for new boards, keeping these items in mind can certainly help make the process easier. With the help of a property manager and attorney, associations can have a smooth transition from developer control and work towards building and maintaining a successful community.