A successful HOA (Homeowners Association) transition team will be concerned with more than a seamless handover of control.  The transition team takes priority of setting up the new homeowners association for long term success.  How well – or how poorly – the transition team handles the HOA transition from the developer stage can affect the community for many years to come.

Here’s a list of guidelines to keep your new homeowners association on track for success as it transitions from the developer to resident control.

1. Work with the right people.
Your transition team should consist of professionals who have qualified experience and are invested in a successful outcome of your association.  We recommend your team includes at least one member of the HOA Board, one interested resident and at least one resident with previous professional experience in associations.

2. Understand the purpose.
All members of the transition team should have a clear understanding of their duties and the overall goals as soon as the transition begins. Not only will the team be focusing on the turnover from developer to the resident Board, but they will also be involved in developing action item lists to ensure completion of commons areas, compiling all necessary association documents, and reviewing of the financials and audits. The team should also review the community Rules and Regulations, reexamine the architectural guidelines and approval process, take the time to meet the developer’s representatives, and more.
3. Board training.
Sometimes, a newly formed Board is made of up individuals with more commitment and enthusiasm than actual association experience. Because this is often true, the transition period is a great time for new Board members to undergo training on key association matters, such as what makes a successful association, strategies for effective leadership, compliance, including relevant statutes and laws, and more.  FirstService Residential has Board Training sessions throughout the year that cover various topics. If you’d like to learn more, sign up to participate in or be informed about our next training session, click here.

4. Gather paperwork.
The complete transfer of all vital documents from property developer to the HOA board is crucial. This includes:
•    Articles of Incorporation
•    Declaration of Covenants
•    Rules and regulations
•    Bylaws
•    Financials
•    All-encompassing Amendments
Be sure to have an open conversation with your developer to ensure all documents and paperwork have been turned over to the new HOA board.

5. Communication is key.
During the transition period between the developer and HOA, the team should arrange web forums, printed communications and social gatherings – try a meet-and-greet – between the developer and homeowners. This is a great way to keep all parties informed of the ongoing progress and help manage homeowners’ expectations.  The transition from the developer to resident control typically begins when either a specific number of units are sold or a certain amount of time has passed since the recording of the documents. This will be spelled out in your association documents and state statute. Your goal as a team should be to communicate to all owners in a way that is transparent and effective and from very early on in the process or even before the process truly begins. Ultimately, homeowner response comes down to how well your team educates homeowners on what an association is – and just as importantly, what it is not.

6. Ask the professionals.
A homeowners association must live up to the expectation of residents while abiding strict state statutes and laws. The transition team should consult and contract experienced professionals like insurance providers, engineering firms, attorneys, and property management companies to ensure that everyone involved, most importantly the homeowners, are pleased with the outcomes.

7. Transfer all financial records.
Consider having a homeowner on the Board as the Treasurer as soon as possible once the transition begins.  The Treasurer should be sure that all of the books and financial records are complete, including annual reviews and clearly separated categories for association funds and developer funds. It is common for associations to hire a third-party accounting firm to perform a full audit prior to the transition.

8. Conduct a reserve study to help budget effectively.
Fiscal responsibility is the core of a flourishing community, and a strong budget is crucial to an association’s financial stability, now and in the future. A reserve study is a long-term capital budget planning tool that Board members can use to anticipate primary repairs, replacements and other projects that may occur in the future.  It can help determine the amount of money that should go into the association’s reserve fund, the useful life of each item and determines how these funds should be allocated to pay for future expenses.
9. Perform an engineering inspection to ensure proper maintenance programs.
During the transition process, the transition team should have a clear explanation on when the Board will assume responsibility for maintenance of equipment, systems, amenities and the association’s common areas. There should be no ambiguity on this point, or these areas may fall into disrepair. The team should also schedule an engineering inspection with a qualified professional, and request a summary report that includes recommended maintenance schedules and a comparison of what’s been built with what’s outlined in the plans.

10. Review and purchase insurance.
After control is given the owner-controlled association, the insurance policy must be reviewed by an agent. Even though the developer will have insured the property during construction, there may be a need for additional purchased coverages to ensure effective gap coverage after the transition is complete.
11. Ensure ongoing maintenance.
During the transition process from the developer to the owner-controlled Board, the transition team should have a clear explanation on when the Board will assume responsibility for maintenance of equipment, systems, amenities and the association’s common areas. There should be no ambiguity on this point, or these areas may fall into disrepair.

A good transition team is the first step towards a smooth Homeowners Association transition process – and when everyone knows their necessary functions, you’re well on the way towards positioning your community for success.
Wednesday March 30, 2016