Transition of Association Control - Part III, Practical Applications
 
TRANSITION OF ASSOCIATION CONTROL
PART III, PRACTICAL CONSIDERATIONS

    This is the third and final part of a three part series concerning the transition of control of community associations to the non-developer owners. In the first part, we addressed the technical requirements for condominium association transitions. In the second part, we addressed the technical requirements for transitions of Homeowners’ Associations (HOAs). In this part we will address many of the practical considerations relating to transitions.

    While it is important to know and understand the technical requirements relating to the transition of community associations, those requirements are only a part of the complete transition process. In this article we have listed many, but not all, of the practical steps which must be taken to protect the community and the association’s members.

I. PRE-TRANSITION REQUIREMENTS:

    From a purely legal standpoint, there is nothing required of the non-developer owners prior to transition. That being said, many times official 'transition committees' are created or interested owners create ad hoc committees to assist in that process. In those instances, some of the matters addressed in Subsection II below will have already been accomplished prior to the actual transition election.

    One major advantage in conducting pre-transition discussions with the developer is the possibility of convincing the developer to exercise whatever unilateral power it retained to amend the Governing Documents. Many times developers will agree to amend the documents to cure or resolve obvious problems, thereby avoiding the need to call an immediate members’ meeting for that purpose after transition occurs.

II. POST TRANSITION REQUIREMENTS:

    Traditionally, the real 'work' begins after the transition is completed. While many tasks will overlap, the following is a list of many, but not all, of the steps which should be taken as soon as possible after the new non-developer controlled board is seated.

    A. ELECT OFFICERS AND APPOINT COMMITTEES:

    The first order of business should be the election of officers. While elections are many times based on popularity, the directors must be willing to put aside their egos and elect those persons who are best suited for each position based on qualifications and available time.

    The next order of business should be the identification of the various required and appropriate committees and the filling of those positions. Examples of such committees are Architectural Review Committees, Nomination Committees, Neighborhood Committees and Fining/Suspension Committees. In our view, it is critical at the time of the appointment or creation of each such committee that the Board prepare a detailed 'scope of duties' which, at a minimum, should require that each committee prepare and submit periodic written reports to the Board.

    B. PRACTICAL AND CORPORATE MATTERS:

    A committee should be created to:

        1. Check with the Secretary of State:

            a. To ensure that the Association is in good standing;

            b. To ensure that the correct corporate address is being used; and,

            c. To ensure that the proper Registered Agent exists for the Association.

        2. Ensure that the post office has the proper address for the Association.

        3. For condominiums, ensure that the annual fees have been paid.

        4. Ensure that the proper forms have been supplied to the bank to allow the new officers to access the Association’s funds.

    C. SELECT AN ATTORNEY, CPA, AND OTHER NECESSARY PROFESSIONALS:

    A committee should be created to begin the process of retaining an attorney, CPA and the other necessary professionals which will be needed for guidance through the post-transition process and beyond.

    D. INVENTORY OF OFFICIAL RECORDS:

    A committee should be created to review and inventory all the records which were delivered to the new Board to ensure that all of the statutory requirements were met.

    E. DOCUMENTS:

    Because it is imperative that the Board have all of the Governing Documents which apply to their community, we suggest that the following actions be taken:

        1. Have a title search performed to ensure that all Governing Documents, and all supplements and amendments to those documents, have been delivered to the Board by the Developer.

        2. Assign a committee or request that your legal counsel review the Documents to determine if they should be amended. One of the most important elements of this preliminary review is the identification of reserved rights of the developer (e.g. Reserved power to control the Architectural Review Committee or to add additional land to the community in the future).

        3. Review all existing Rules and Regulations, including Architectural Guidelines, to determine if they should be supplemented or amended.

    F. PROPERTY OWNERSHIP AND/OR MAINTENANCE OBLIGATIONS:

    In the vast majority of cases, communities are designed to own and/or maintain real property. Therefore, we suggest that the association obtain copies of the tax maps which reflect the totality of the community and also certified copies of all of the recorded plats which make up your community. A committee should then be appointed to perform, at least, the following tasks:

        1. Inventory all areas which are to be owned by the community. After the inventory has been completed, the committee must:

            a. Confirm that title has been transferred to the association;

            b. Confirm that the address for the association on file with the Property Appraiser and the Tax Collector for each such parcel is correct;

            c. Confirm if any limitations on the use of the land are found in the Governing Documents or the plat or by any governmental agency (e.g. Conservation Easement); and,

            d. If governmental agencies have required annual engineering reports, obtain copies of the same (e. g. Private Roads).

        2. Inventory all areas which are to owned by governmental agencies. After the inventory has been completed, the committee must:

            a. Confirm if any limitations exist on the use of the land; and

            b. Determine who is responsible for the maintenance of the land (e.g. County may be responsible for the operation of the pond, but the Association is required to mow the grass around the pond.)

        3. Inventory all easements. After the inventory has been completed, the committee must:

            a. Determine the uses of the easements; and

            b. Determine who is responsible for the maintenance of the easement areas.

        4. Review all 'Notes' which are found on the face of each plat to determine if any additional restrictions or obligations exist.

    G. CONSTRUCTION DEFECTS:

    After the tasks outlined in F above have been completed, a committee should be appointed to search for, and recommend to the Board, a qualified engineer(s) to inspect the property and improvements for which the Association will be responsible.

    To assist the engineer, we recommend that the committee gather data concerning the areas in question and supply that data to the engineer. For instance, a survey could be sent to all owners asking if they are aware of any possible problems.

    Please remember that Florida Law establishes a four (4) year statute of limitations period for the filing of any construction defect cases.

H. GOVERNMENTAL AGENCIES:

    A committee should contact all relevant governmental agencies and obtain copies of all governmental documents and permits which apply to the community. By way of example:

        1. Water Management Districts;

        2. County/City; and,

        3. Community Development Districts (CDD).

I. CONTRACTS AND OTHER SERVICE PROVIDER INFORMATION:

    A committee should be created to review all existing contracts and service provider agreements to determine, at least the following:

        1. Expiration Dates;

        2. Power to Terminate;

        3. Fairness to the Association; and

        4. Necessity/Effectiveness.

    This analysis should include both those companies which traditionally have long term contracts (e.g. managers, landscapers, water treatment companies, etc) and those service providers which can be changed at the will of the Association (e.g. banks, attorneys, CPA’s).

    Please remember that with condominiums, some long term contracts may be terminated by the members notwithstanding the remaining term of the agreement.

    J. FINANCIAL MATTERS:

    The Board should hire a qualified CPA to review all financial records to determine whether the Association has been properly operated and to determine if the Developer has properly funded the Association. (e.g. funding of deficits or reserves)

    As stated above, this is a list of many, but not all, of the steps which should be taken as soon as possible after the new non-developer controlled board is seated. As you might expect, while completing the above listed tasks, it is very likely that many other issues will be discovered.

    Most importantly, time is not the ally of the Association, therefore, the sooner that the process is started, the better.

The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne, Tampa and Palm Coast, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition was prepared by Robert L. Taylor, Esq. of Taylor & Carls, P.A. The information contained in The Association e-Lawyer should not be acted upon without professional legal advice. The opinions expressed herein are as of the date hereof, and this law firm undertakes no obligation to advise the Association of subsequent changes in the law.

©2007 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached Toll Free at 1-800-395-6235 or locally at 407-660-1040.
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