Q: The owners in our community are assuming control from the developer at the end of the year. We want to prepare for turnover and the developer is reluctant to let us have any formal structure or authority. What should we be doing to prepare?
A: An excellent and common question. Turnover itself is an election where the owners get to control a majority of the seats on the Board of Directors. Thus, the owners have control over the contracts, budgets, vendors, and day to day administration. Until the turnover election, there is not much you can do as a homeowner and, more specifically, there is nothing that the developer-appointed Board must do in order to help you prepare for turnover.
We have checklists and forms that clients use after turnover and a lot of those documents could likewise be used leading up to turnover. You may request official records such as insurance policies, vendor contracts, delinquency reports, reserve studies, and rules. You can review these documents so that the post-turnover Board already has some working knowledge of the contracts and policies which create the infrastructure of the community operations. For example, if there is a multi-year contract that expires immediately after turnover with an automatic renewal provision, the Board needs to know immediately whether it needs to take action to stop that autorenewal from occurring. If the Board waits weeks following turnover to look at these contracts and policies, it may be locked into a long-term arrangement that is not desired.
We also have a number of clients that form pre-turnover committees for the purpose of vetting and interviewing potential vendors. These committees make recommendations to the Board after turnover for potential partners, professionals and vendors. This can be difficult because it is entirely possible that all or none of the committee members will actually be elected to the Board and thus the level of pre-turnover activity varies from community to community.
At the end of the day, the Board has the authority to resolve claims with and against the developer, so many communities simply wait until turnover to know who will be on the Board and then proceed with the above activities. I do believe pre-turnover preparation is helpful and productive, but there is no roadmap that fits every community.
John C. Goede Esq. is co-founder and shareholder of the Law firm Goede, DeBoest & Cross, PLLC. T o ask questions about your issues for future columns, send your inquiry to: email@example.com. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross, PLLC or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.