2007 Issue 5

Developer Transition
By Bob Burrows, PCAM

With the surge over the last several years of new community associations being constructed, I have had the opportunity to work with many new Boards of Directors as they see their way through the challenging and critical point of a community’s life known as the developer transition.

Unfortunately there seems to be more examples of associations going to battle with the builder, rather than a collegial relationship that is aimed towards the ultimate goal of both parties: to move on.  The association needs to be able to operate on its own, free of unnecessary builder related encumbrances and the builder needs to successfully transition the property and perhaps move on to their next project.

Active board members during this transition time can be an important ingredient to success. In my experience, the system that works the best is that your manager (or another designee on the board if self-managed) handles the day-to-day operations such as owner relations, contractors, contracts, bookkeeping etc. and then have another member or two changed with the transition process. Starting an operational program from scratch is hard enough without complicating it by having to work with the developer transition process too.

The remainder of this article will focus on what these individuals can do to facilitate a better transition.

Job #1 is to take this roll seriously. A failed transition can saddle the community for years with unnecessary costs or a failing infrastructure. There is only one time in the life of the community that you can set it on its right path and that is now!

Job #2  Educate yourself on what legally should be happening with a transition. The Common Interest Ownership Act (CIOA), the collection of CT State Statues that regulate the community association world, is quite clear in the procedures that must occur, such as the transfer of warranties, records, and a transition audit. The requirements set by law are often not understood by those involved so you will be at a distinct advantage, armed with this information.

Job #3  Communicate with the builder that you will be the liaison in this transition. Most builders will appreciate knowing that they can communicate with one person for all things related to the transition. Some important questions to ask of the developer:
Q: Have you been supplementing the association checking account to pay bills and what are your future plans in this regard? (This could indicate an immediate need to raise fees if the builder plans to stop the contributions that they have made to this point to balance the budget.)
Q: Do you intend to try to collect the fees that you have paid in at a later date or were they considered a cost of doing business? (If the builder decides at a later date to bill you for this contribution you will probably not have the necessary funds available to pay it.)
Q: At the point of transition, were all bills paid by the builder, or are there expenses out there that need to be recorded, such as last year’s snow contractor looking for payments? (You need to know the complete financial picture at the point of transition.)
Q: What are your plans to complete the transition audit?

Job #4  Communicate with the owners as to what the association is responsible for vs. what do the owners need to follow up on directly. Sometimes owners assume that once the association becomes involved their punch list items from the original construction will now be handled by the association. Clearly establish the lines of responsibility.

Job #5  Get familiar with the Town office or personnel that are involved with your community. This is usually the Planning and Zoning office and the Building Department. Get copies of as many site maps, utility maps, etc. that you can.  Future boards or managers will thank you when that underground pipe breaks!

Job #6  Review the bond requirements that are in place. A developer will typically need to post a bond with the Town for the completion of certain items. There are usually separate bonds for infrastructure, drainage and landscaping at least. See the bond requirements and obtain a copy of the original plans. Then ask the Town to contact you on behalf of the community prior to the release of any bond money to the developer so that a comparison of the originally approved job can be made with the job actually done. If there are discrepancies such as “building 2 called for a sidewalk and there is none”, advise the Town and they will enforce proper completion. If new issues arise such as drainage issues or erosion problems advise the Town of that as well. They may be able to help you to effect changes.

Job #7  Document everything, dates of meetings, phone calls etc. Hopefully you will never need it but if you do it is almost impossible to recreate.

Job # 8  Seek competent legal counsel. I have always found it advantageous to have legal counsel, someone who has handled transitions before, ready to advise you and ready to step in if needed. Sometimes transitions go horribly wrong and the association has to spend a considerable amount of money on engineers or accountants to get things back on track. An attorney’s guidance can be just what you need in these difficult situations.

This transition business can be hard work, on the bright side there is an ending point, and if done right you can set the Association heading in the right direction. A job well done can reap rewards for the community for years to come.

Bob Burrows, PCAM is the principal of the ABC Group.  Bob has served as a CAI-CT volunteer on the Golf Committee and Publications Committee.