Transition from Developer Control
As you probably have noticed, nearly all of the communities developed in the Georgia in recent years are created with mandatory or permanent membership homeowners or condominium associations, often called community associations. These associations are responsible for maintaining amenities and other common areas in the community, and for enforcing protective covenants designed to prevent nuisances and maintain property values in the community.
Community associations typically are organized as non-profit corporations, and are operated by a board of directors. In nearly every community, the developer of the community retains in the governing covenants the power to appoint and remove the board of directors throughout some or all of the development of the community. For condominiums, the Georgia Condominium Act establishes the dates when the developer must relinquish this power to the homeowners in the community, but for subdivisions, these dates are established by the recorded covenants for the community.
The process of shifting control of the board of directors and responsibility for operating the community from the developer to the homeowners is often called transition. Many developers make transition a process, allowing homeowner participation in the board and in the operation of the community long before the developer fully relinquishes control of the board. Ultimately, when the developer's power to appoint directors expires or is surrendered, then the homeowners assume the responsibility and power to elect their own directors to operate the community.
While the transition process is different for every community, there are some common issues which should be considered or addressed in the process. The following list, although not exhaustive, outlines many of the issues the owners should address in the transition process.
• Identify Your Transition Leaders. If your developer already has provided for homeowner members on the board of directors, these homeowners often act as the community representatives in the transition process. Some developers have found it helpful to appoint or conduct an election to elect a transition committee of homeowners, while other developers begin the transition process with the homeowner election of the board. With any of these transition methods, the election of directors by the homeowners plays a significant role in the transition.
• Elect the New Board of Directors. When the developer's right to appoint directors has expired or been surrendered, a special meeting typically is held for the homeowners to elect the new board of directors. The bylaws or declaration for your community normally will identify the meeting and notice procedures, but notice of the special meeting should be sent to all owners explaining the an election is being held as part of the transition process. Owners should be encouraged to attend and volunteer as candidates for election, if interested, but proxies should be included for owners unable to attend the meeting. The special meeting and election then should be conducted according to the provisions of the bylaws and declaration.
• Take Stock of Where the Association Stands. In many cases, particularly with larger communities, the association already has been operating for several years. The newly elected board should begin by gathering and reviewing all documents and records of the Association. It is important to obtain all of the community's records from the developer immediately prior to or upon turnover. Once the documents and records have been obtained, directors should begin their review by focusing on three areas:
1. Operations Review. The board should evaluate the operations of the association and revise its procedures as necessary to reflect the needs of the association. For specific aspects of the operations review, link to Operations Review.
2. Financial Review. The board's financial review should include several items related to the financial condition and stability of the association. For specific aspects of the financial review, link to Financial Review.
3. Construction Review. The board's review should also include a determination as to the condition of property owned or maintained by the association. The board should walk the property, looking for any possible problems or hire a professional engineer to perform an inspection. The board also may want to ask the members if they are aware of any construction problems with the association maintained property. If problems are found, the association should evaluate what responsibility the developer has to correct the problems.
The board of directors of an association has a duty to act in the best interests of its members. In the perfect world, the board would consist of an engineer, an accountant, an attorney and an entrepreneur. Most boards, however, consist of volunteers often with little experience in running a corporation. Do not be afraid to ask for help. It is better to have consulted a professional before a problem arises than to contact a professional once a crisis has occurred.
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