There is a moment where the real estate developer transitions control of the homeowners association from themselves, to the home owners. The timing of the developer transition is controlled by legislation. It is imperative to bear in mind that the developer’s motivation is fundamentally different from the homeowners motivation for controlling the HOA. This transition is sometimes smooth and sometimes developer transitions are terribly complicated. Often times, developer transitions find their way into litigation.
ANGIUS & TERRY LLP can guide your Association through the challenging transition from the developer to homeowner control. It is our goal to assist with the timely election of the homeowner controlled board, and we strive to ensure the Association receives everything it should from the developer.
- LOW FLAT FEE*
- NO WRITTEN CONTRACT AND NO PAYMENT REQUIRED UNTIL AFTER HOMEOWNER BOARD ELECTED
Let us put our developer transition experience to work for your Association.
The Attorneys at Angius & Terry LLP are committed to representing the homeowners to smooth their way through the maze that is Developer Transitions. Our focus is on the Homeowner, and their motivation for a well orchestrated, and economically rational transition.
* ANGIUS & TERRY LLP can also provide these services on an hourly fee basis for Associations who prefer to pay hourly.
Developer Transitions for Homeowners Associations
Homeowners Association transition is solely governed by FS 720.307. Unlike Condominium Associations, there are no Florida Administrative Code provisions that help govern procedure or interpret statute.
Questions – IS IT TIME TO TRANSITION?
Members other than the developer are entitled to elect at least a majority of the members of the Board of Directors of the homeowners association when the earlier of the following events occurs:
- Three months after 90 percent of the parcels in all phases of the community have been conveyed to members
- Such other percentage of the parcels has been conveyed to members or such other date or event has occurred as set forth in the governing documents in order to comply with the requirements of any governmentally chartered entity with regard to the mortgage financing of parcels
- Upon the developer abandoning or deserting its responsibility to maintain and complete the amenities or infrastructure as disclosed in the governing documents
- Upon the developer filing chapter 7 Bankruptcy
- Upon the developer losing title to the property through a foreclosure action or deed in lieu of foreclosure, unless the successor owner has accepted an assignment of developer rights
- Upon a receiver for the developer being appointed by a circuit court and not being discharged within 30 days after such appointment. The term “members other than the developer” does not include builders, contractors or others who purchased a parcel for the purpose of constructing improvement thereon for sale.
- Members other than the developer are entitled to elect at least one member of the Board of Directors of the homeowners association if 50 percent of the parcels in all phases of the community have been conveyed to members.
As noted previously, “members other than the developer” excludes subsequent developers, contractors, builders, etc.
What does this mean? The members vote in the new board upon the “trigger event” but only the unit owners who are “members other than the developer” get to participate in the vote at the transition meeting.
There is no specific election process outlined in FS 720.307; elections should be conducted as described in your association’s governing documents.
DEVELOPER TRANSITION COMMITTEES:
There is no specific administrative code or statutory provision that discusses transition committees for homeowners associations
What does that mean? Because there is nothing at all governing their creation, there is also nothing prohibiting them. Look to governing documents to see if there is a mention of a Transition Committee.
HOA RELINQUISHING CONTROL
TRANSFER OF ASSOCIATION PROPERTY:
At the time the members are entitled to elect at least a majority of the Board of Directors of the homeowners association, the developer shall, at the developer’s expense, within no more than 90 days, deliver the association documents to the Board.
At the time the members are entitled to elect at least a majority of the board of directors of the homeowners’ association, the developer shall, at the developer’s expense, within no more than 90 days deliver the following documents to the board:
- All deeds to common property owned by the association.
- The original of the association’s declarations of covenants and restrictions.
- A certified copy of the articles of incorporation of the association
- A copy of the bylaws.
- The minute books, including all minutes.
- All books and records of the association.
- Policies, rules, and regulations, if any, which have been adopted.
- Resignations of developer directors.
- The financial records of the association from the date of incorporation through the date of turnover.
- All association funds and control thereof.
- All tangible property of the association.
- A copy of all contracts in force with the association as one of the parties.
- A list of the names and addresses and telephone numbers of all contractors, subcontractors, or others in the current employ of the association.
- Any and all insurance policies in effect.
- Any permits issued to the association by governmental entities.
- Any and all warranties in effect.
- A roster of current homeowners and their addresses and telephone numbers and section and lot numbers.
- Employment and service contracts in effect.
- The financial records, including financial statements of the association, and source documents from the incorporation of the association through the date of turnover
- Audited financial statement paid for by the developer.
There is no specific statutory language that allows the members to compel transition.
In order to compel, the HOA can file an injunctive suit compelling specific performance (forcing the developer to transition according to statute).
DEVELOPER’S RIGHTS IN TRANSITION:
The developer is entitled to elect at least one member of the Board of Directors of the homeowners association as long as the developer holds for sale at least 5% of the parcels in all phases of the community.
After the developer relinquishes control, the developer may vote any developer-owned voting interests in the same manner as any other member (except for purposes of reacquiring control of the HOA or selecting the majority of the Board).
FILING CONSTRUCTION DEFECT CLAIMS:
After control of the association is obtained by members other than the developer, the association may institute … actions … in its name on behalf of all members concerning matters of common interest to the members, including, but not limited to, the common areas; roof or structural components of a building or other improvements for which the association is responsible; mechanical, electrical or plumbing elements serving an improvement or building for which the association is responsible; representations of the developer pertaining to any existing or proposed commonly used facility …
Before commencing litigation against any party in the name of the association involving amounts in controversy in excess of $100,000, the association must obtain the affirmative approval of a majority of the voting interests at a meeting of the membership at which a quorum has been attained.
There are no statutory warranties; however, there are common law warranties of good construction. Negligence by the developer and subcontractors also applies.
The statute of limitations for patent (present and obvious) defects is 4 years. When defect is latent (present but not visible/apparent), statute begins to run when the defect is discovered or should have been discovered with exercise of due diligence.
The statute of repose (the very latest time within which a lawsuit can be filed) is 10 years, irrespective of whether a defect is latent or patent.
PRACTICAL ISSUES TO WATCH FOR DURING TRANSITION:
Immediately upon transition, the Board should elect officers to run the association.
Consider creating helpful committees including: Fining and Suspension of Rights Committee, Neighborhood Watch Committee, Architectural Review Committee, Corporate Issues Committee, Documentation Committee, Ownership and Maintenance Committee, Governmental Agencies Committee, Contract Review Committee and more.
Corporate Issues Committee to ensure compliance with:
- Secretary of State (ensure association is in good standing, ensure accurate corporate address, ensure correct Registered Agent)
- Post Office (ensure correct address for association)
- Bank (ensure proper authorization for officers to access funds)
Hire professionals such as CPA, attorneys, banks and more. Presumably, the association already has a management company.
Establish a Document Review Committee to ensure compliance with statutory requirements of transition. Also ensure that all governing documents applicable to the community are delivered to the Board.
Ownership and Maintenance Committee to obtain copies of recorded plats and tax maps which make up the entire project. Inventory all areas owned by the community and all areas owned by governmental agencies and all easements. Review each plat for additional obligations or restrictions.
Create a Governmental Agencies Committee to communicate with governmental agencies in order to obtain documents/permits relevant to community (CDD, Water Management Districts, etc.
Establish a Contract Review Committee to gather and review existing contract and review the right to cancel, evaluate contract necessity and note expiration dates.
Hire a CPA to audit the financial records of the association to determine whether association was properly funded by the developer at transition (deficits/reserves) and whether association was operate effectively and properly while under developer control.