BEST PRACTICE :
TRANSITIONING TO HOA
A development is not a residential estate – it’s a place with houses in a greater or
lesser stage of completion. But there comes a time when the developer steps out, and
the homeowners association steps in – and from that moment, the estate becomes a
community – a place where people live.
Also, a progressive transfer of control helps protect the
developer from unfriendly and financially harmful actions
by the owner members of the board while the developer still
retains a substantial economic interest in the project.
In some estates, legislative or regulatory mandates require
that turnover of control of the governing board from the
developer to the owners occur over the course of development.
Commonly, the statutory guidelines require the election of a
minimum number of owner board members at various stages
of sales based on the number of projected closings that have
actually occurred, beginning at 25% and continuing to 75%. At
this point, the owners usually elect the entire board with the
exception of one developer representative who can remain
until the completion of sales for the project.
What is transition?
Thoughtful document drafting will create a governance
structure within which transition is viewed as successful by all
stakeholders – if all those stakeholders take responsibility for
Transition is a term that has evolved in recent years to describe their roles in the process. Though there are differences from
the general process by which the control and responsibilities community to community and estate to estate, transition is
of the governing board of a community association are most successful in associations where the following practices
transferred from the developer to the persons who bought occur:
homes in the community association. Although it includes the
assumption of the obligation to maintain the physical assets for
which the association is responsible and is often viewed only in
• • Educate owners as to what a community association is and
isn’t.
that narrow context, the transition process is much broader in • • Educate board members.
scope. It includes the transfer of governance, the acceptance of • • Recognise the duties owed to the association and owners,
the common property, and the accounting for funds. Transition and establish policies that enable the board to carry out
is not a single event, such as the election of an owner-controlled
these duties.
governing board or the execution of a settlement agreement • • All board members act in a fiscally responsible manner.
regarding construction defects in the common property. It is a • • Engage professional management.
multistage process of many events taking place over a period • • Hire independent legal counsel to represent the association.
of time. • • Support the homeowner board through the completion of
Governance • • Maintain a good relationship among the association, the
the community.
developer, and the owners until the development period
ends.
A primary component of the transition process is the assumption
of responsibility for the governance of the association through
control of the board, which is responsible for the operation
Preparation of the documents
and administration of the community association and the
maintenance of the common property. Preferably, this should Documentation includes the articles of association, conditions,
be a gradual process that allows the owner board members the restrictions and bylaws, and an initial community association
opportunity to receive proper training and to gain experience. budget. Throughout the construction and conveyance process,
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