The Point of Transition: Developers and SFR

The Point of Transition: Developers and SFR

A homeowner association doesn’t spring into existence the day the first property sells in the subdivision. The creation of the homeowner association begins before the developer pours the first foundation. Because it is not the city, the state or the even the property owners that determine if a planned community will be a homeowner’s association. It is the developer.

The developer considers and answers all community questions, such as:

  • Are the streets, sidewalks and streetlights the responsibility of the community.
    • Will these elements be maintained by the municipality or homeowners?
  • Is there an entry monument?
    • What is the lifecycle of the material used for the monument?
    • Will it be lit?
      • Will it use electrical and who would pay for the power?
        • Will it be solar and who will maintain the batteries?
      • Will there be common elements?
        • A clubhouse, a pool, tennis courts or a park?
      • Should the perimeter wall be considered a common element?
        • If so, what is the HOA’s responsibility for upkeep
        • If it is considered a limited use common element will the homeowner
          • maintain the party walls between the yards and a portion of the exterior wall with the HOA maintaining the remainder or
          • take full responsibility for the walls as it pertains to their property?
        • Will there be curbside and median landscaping?
          • Who will maintain it, pay for water and insure the area for liability?

 

During the build out of each subdivision, the developer holds all positions on the association board.  But they must manage the association no differently than if the board had all owner elected participants. They prepare a budget, maintain financials, issue compliance notices and hold meetings. The developer will also be fully funding the assessment needs of the community and the association will continue to function this way until a specific percentage of properties have been sold.

Many states regulate the point at which the association board begins to transition from developer control to homeowner control. If not, the timeline will be laid out in the original declarations for the community.

In general, as a specific percentage of properties are sold, the developer will relinquish one board position to the owners. Assessment payments, contract decisions and routine maintenance will gradually become the responsibility of the owners, one board seat at a time, until the point that the association is 100% under owner control.

Buying in a developer owned community means you’re on the ground floor of a new association and can influence decision on the everything from CC&R’s to vendors. Simply stated, your participation will define the future of the community.

This transition may take years to complete and requires detailed documentation. It is in the best interest of both the developer and the owners to work with a community management company that specializes in the transition from the developer to the owners.

It is imperative that the transition committee, made up of  community members and developer representatives, be properly guided through the process. Beyond obtaining plat maps and parking rules, the transition committee will verify that all common area parcels have been properly deed to the association.

The Transition Committee: Developers and SFR