For every association, there is a point when members should take over leadership and control from the developer. An association’s declaration and bylaws will stipulate when the developer is required to turn control of the association over to the members. (For more on Declarations and Bylaws see my article about common HOA terms defined.) While the state has specific timelines and triggers regarding transition to members of a condominium association through the N.C. Condominium Act, the N.C. Planned Community Act does not offer these. But there are still some things your association should expect.
Transition of the control and management of an association typically starts by allowing the members to select all or the majority of the board of directors. When your association nears the transition from developer control to member control, it is good practice for the developer to appoint an ad hoc steering committee. This committee should work with the developer-appointed board of directors to work on the day-to-day decisions as well as the operations of the board.
It is important to understand that a membership-elected board which takes control of the association’s management and operations is only one step in the transition process.
Other important parts of the transition are: inspections of structures and other common areas to ensure they are compliant and in good working order; engaging professionals in the stormwater permit transfer process; and confirming that any streets or roads which are designated as public have been accepted by the state or municipality.
Your association should obtain the original construction vendor list and warranties, a complete set of any governing documents, recorded plats and condo maps, a complete set of building plans and a copy of the stormwater permit with operation and maintenance requirements. It is smart to have the developer file an “assignment of rights” document with the register of deeds in the county in which the association is located as part of the transfer process.
Copies of all contracts and other obligations of the association should be reviewed in detail. It is also a good idea to create a master document that specifies each contract, its expiration date, termination requirements, service provider insurance information, contact person, and the like. This list should also include all insurance policies held in the name of the association.
The new board or appointed committees should meet with each service provider to review the appropriate contract and set future expectations. It is important to meet with the association’s insurance agent soon after a new board of directors is elected to ensure there is a Directors and Officers Liability Policy in place.
A list of all of the common areas should be kept and the developer should transfer ownership of these to the association, with deeds recorded with the register of deeds. For larger communities, the board may want to consider having the common areas surveyed as many times developers will convey property with a quitclaim deed. This may not identify the legal description of the common areas. Keep in mind that the association may be required to maintain the common areas even if they have not yet been deeded to the association.
While the developer may be subsidizing the budget during the development period, it is strongly recommended that the developer contributions be paid to the association rather than the developer paying invoices in lieu of contributions. We recommend this practice because it records and tracks actual expenses of the association and the contributions made by the developer. It also provides transparency to the membership during the development period.
Any professional association management company, such as my experienced team at CAMS, will guide you through the transition process. We can provide a transition guideline as well as thorough training for the elected board of directors and officers.
The Community Associations Institute (CAI) is an excellent resource for volunteers of condominium and community associations. CAI membership is encouraged for board members and other community volunteers. Most professional association management companies participate and are members of CAI.
Starting your association right, with attention to the details that matter, can set you up for a successful future. We will be happy to help your association manage the important transition of moving from developer control to membership control.
If you have questions about transitioning your association, please reach out to the experts at CAMS for trusted guidance.