From Property Developer to HOA Leadership: The Importance of a Great Transition Team
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A good HOA transition team will be concerned with more than a seamless handover of control. Rather, it’s about setting up the new homeowners association for success in the long term – after all, how well or how poorly the HOA transition from developer stage is handled can affect the community for many years to come.
So keeping that in mind, we’ve compiled a list of guidelines to help position your homeowners association for success as it transitions from property developer to HOA control.
1. Team with the right people.Your transition team should be comprised of individuals who are both qualified and invested in a successful outcome. As a good rule of thumb, your team should include at least one member of the homeowners association Board, interested community members and, ideally, at least one industry professional with experience in associations and development. Still unsure, or want to confirm your choices? A quality property management company with HOA transition experience can provide you with insights and guidance.
2. Know the team’s purpose.Make sure all transition team members understand their duties and goals. They will be involved in reviewing management and onsite staff (if applicable), developing a “punch list” for completion of common areas, compiling all necessary association documents, reviewing the association’s financials and prior audits, community guidelines, and both architectural guidelines and approvals, meeting with the developer’s representatives and more.
3. Conduct a reserve study to help budget effectively.Fiscal responsibility is the foundation of a healthy community, and a good budget is critical to your association’s financial stability, now and in the future. Property Developers are usually experienced in creating budgets, that’s not always true for homeowners who volunteer to serve on their associations’ Boards. But hiring a professional to conduct a reserve study can help. A reserve study is a long-term capital budget planning tool to help Board members anticipate capital repairs, replacements and other long-term projects. It pinpoints the amount of money needed to fund the association’s reserve fund, useful life of each item and defines how these funds should be allocated to cover future expenses.
4. Training.Sometimes, newly formed associations can be comprised of HOA Board members with more commitment and enthusiasm than actual association experience. That’s okay – and it’s also why the transition stage is a great time for new Board members to undergo training on key association matters, i.e. what makes an effective association, strategies for effective leadership, compliance, including relevant statutes and laws, and more. A quick web search will turn up Board training programs available locally or online, and an experienced property management company can point you in the right direction – and may even offer the training directly.
5. Compile the proper paperwork.The complete transfer of all documents from property developer to HOA board is essential. Typically, these documents include the articles of incorporation, declaration of covenants, conditions and restrictions, and bylaws.
6. Communication.During the HOA transition phase, the team should arrange web forums, printed communications and meet-and-greets between the developer and homeowners. This is a great way to keep everyone apprised of the ongoing progress and help manage homeowners’ expectations. The transition begins when a specific number of units are sold, according to state statutes and the association documents. When that target is reached, your goal should be to communicate to all of these owners in a way that is transparent and effective. At its core, this means educating homeowners on what an association is – and just as importantly, what it is not.
7. Seek advice from professionals.A homeowners association must meet the needs of many stakeholders – while adhering to strict state statutes and laws. To ensure effectiveness and compliance, the team can consult or contract with experienced professionals, such as insurance providers, engineering firms, attorneys and/or property management companies for guidance.
8. Ensure ongoing maintenance.The transition team should be clear on exactly when the owner-controlled Board will assume responsibility for maintenance of equipment, systems, amenities and common areas. There should be no ambiguity on this point – otherwise, these areas may fall into disrepair.
9. Transfer all financial records.It’s a good idea to put an owner-treasurer in charge of the books as early as possible during the transition stage. Books and financial records should be complete, including annual audits and clearly differentiated categories for association funds and developer funds.
10. Conduct an engineering inspection.The transition team should tour the development with a qualified engineer and request a summary report that includes a description of the property, recommended maintenance schedule, and a comparison of what’s been built with what’s outlined in the plans.
11. Purchase insurance.Though the developer will have insured the property during construction, once control is transferred to the owner-controlled association, the proper insurance coverage must be reviewed by an agent and there may be a need for additional purchased coverages to ensure effective gap coverage.
A good team is the first step towards a smooth HOA transition process – and when everyone knows their essential functions, you’re well on the way towards positioning your community for success. For more information, visit FirstService Residential.