• Create governing documents that enable rather than impede the business and financial management of the association .
• Create a governance structure that encourages involvement by owners and other residents .
• Create a transition team in the governing documents .
• Include alternative dispute resolution in the governing documents .
• Establish reasonable schedules for turnover .
The governing documents should provide for a transition process that establishes :
• when and how elections of owners to the board occur
• who is entitled to vote and whether class voting is allowed
• how developer-appointed board members are removed or resign
• the continued right of the developer to control the development of the community association until completion
• what documents , financial audits or reports must be delivered to the owner-elected board
Communications
Effective communication is probably the most important element in the success of any community association . Especially during the developer control period , a successful communications system can forestall the development of cliques and factions , enable the association to provide services that owners want , and help owners develop a sense of trust in the developer , reducing or eliminating the acrimony that often follows the transition to owner control . An effective communications programme is composed of several components , each of which is an essential part of the programme . These are the home owners , the on-site sales force and / or estate agents , managers , the developers and the developers ’ attorneys . Ideally the developer should strive to create a community of residents who are proud of their homes and who view the developer as part of the team committed to the success of their association .
Litigation
Developers can be exposed to liability ranging from breach of contract to fraud , or for violating government statutes . Homeowners associations can also be exposed to litigation for breach of fiduciary duty , discrimination or a failure to keep common areas in a state of repair and maintenance . And lenders who loan money to developers can , in some instances , be liable for construction defects or misrepresentations pertaining to the development .
Preventing litigation
In order to minimise the risk of litigation , hire independent specialists who help owner boards navigate the transition from developer to owner control . These include the engagement of independent counsel and accountants for the association at an early stage of transition , usually no sooner than the first transition election when 25 % of the units have been sold .
Emerging strategies to discourage litigation include a comprehensive risk-management programme that would take place at the completion of the architectural and engineering drawings , and continue until the completion of construction , when the owners take control of the association . It would include reviews of the budget , building compliance , coordination between architectural and engineering designs , and a punch list with input from the home owners .
Checks and audits
And , before final handover , the board should do a physical and common elements audit and an organisational audit , and commission an engineering inspection of the property .
The engineering inspection will include checking the condition of the physical property , a capital reserve study , a recommended maintenance schedule , and a comparison of the actual construction with the approved plans and applicable codes .
When doing the physical and common elements audit the association should :
• determine the condition of the common elements and other physical portions of the community through appropriate engineering or contractor inspections
• confirm with legal counsel that the association owns all the common elements
• review the existing reserve study
• take a hard look at assessments and budgets .
The organisational audit consists of :
• corporate audit for the association
• governing document review
• covenant enforcement audit for issues of breach of covenants , design review , consistency in enforcement , status of claims , possible waiver issues .
Insurance
Insurance provides protection for losses , so it is essential to ensure there is no gap in cover during the transition process .