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7
Posted by
🏘 HOA Board Member
2 months ago

Small, new community association, moving from builder to homeowner control - questions and advice.

Apologies from the start if this post goes beyond one point. For background: New development, last home sold sixty days ago, Declarant's management company involved.

I am one of three people who volunteered to be on the HOA board. I have made myself very familiar with the articles of incorporation and the bylaws in preparation for this appointment. I previously served in all board of directors positions in the former HOA I lived in, over the eighteen years we lived there. That previous HOA was self-managed and it was an established neighborhood, not a buildout.

I have done a lot of research about the transition, and how it's theoretically supposed to happen, by state law.......but I would like to hear from BOD members who have experienced it. What should I be on the lookout for during the transition?

My instinct is to ask for every document and then spend the time necessary to know everything that went on during the buildout before doing anything. My fear is that the declarant and management company will try and handle/manage us into moving as quickly as possible, and something will be missed that we will not be able to act on later.

29 comments
100% Upvoted
level 1
· 2 mo. ago
🏘 HOA Board Member

So form the experince form our transition that our old board did not handle well:

Get a reserve study done and get an professional (engineer) to walk the grounds and make a list of all the things that are not ok.

The reserve study should be the foundation for how much you need to save in reserve funds to pay future repairs. Just one example: It will tell your community fence will need replacement in 20-25 years and it will cost X, the pavement at the mailboxes will need resurfacing in 8 years, cost Y. With that, you have a base for your HOA dues that are purely needed savings for future repairs. The HOA shouldn't touch these funds for projects. They are earmarked for these future needed repairs. On top of that you have your operating expense for everything that needs to be done every year - from lawn mowing to smaller reserves for ad-hoc repairs.

But back to the walk through the community: Make sure a professional looks at everything, make a punch list lie you did for your home and let the builder fix everything that is out of specs.

Also get the detailed set of maps for your community. They are so helpful. Knowing where easements are, if and what type of buffers you have and what you are allowed to do in them to the exact item list of plants in our retention ponds - all was found in the maps.
Just to give you one example: We had a sinkhole in one of our neighbors yards and it ended with a lot of finger-pointing and the neighbor and builder teaming up against the HOA to cover the cost. One look in the plans form my end discovered that the drainage wasn't where it should be and the sinkhole was caused because the builder had covered the storm drain inlet that was under 3ft of earth and grass. Builder fixed it in the end.

6
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Thank you for your advice.... we are on the same page, so to speak. I am going to ask for every document that is available and just devour everything with the thought of you can't know where you're going if you don't know where you've been.

I have real concerns about the reserve fund because I know that the streets are part of the HOA property, private streets, not taken care of by the city or the county - at least that's the story I'm currently getting ...but that's a whole other can of worms.

Suffice to say, I have a lot of work ahead of me. Thanks for your help.

1
level 1

We did this 6 years ago. I can tell you what we did as well as what I wish we would have done different.

One of the first things I would suggest is make sure you have a reserve study done. This will tell you everything you are responsible for common area wise as well as how your funding is. Builders notoriously under fund reserves to keep assessments low. It will also provide a road map for you.

Next I would review budgets and make sure you are where you're supposed to be financially. Check all the vendors' contracts. We had situations where the vendor was a friend of either the builder or management company so pricing was what I would consider "not optimal".

I would also do a quick check on other management companies in your area (if you have one). We did this, found better service for a lot less money.

Setup your committees next (ACC, facilities, etc). Make sure you have your ACC guidelines set up and the process ready to go. This took us about 3 months to complete. It was a huge time saver and headache saver once completed. We just went out and grabbed several examples of other communities and tweaked them to fit our community.

Next,start writing up policies and procedures for the board as well as charters for your committees. It's a boring and time consuming effort BUT pays off big time down the road. We didn't do this in the beginning and it hurt us in some ways.

Lastly, I would definitely get control of your social media or at least set the tone early on how social media can be used. We didn't do this and the number of problems it causes us on a daily basis I cannot even begin to describe. The amount of misinformation put out on our social media is staggering.

Best of luck in your transition. It will be hard work in the beginning but will pay off in the long run.

3
level 2
· 2 mo. ago
💼 CAM

I have to disagree with get control of social media. Lawyers advise against this. Instead, make sure they claim its community pge not an official page and then just stay the hell off of itm

5
level 2

Excellent advice. Some of our homeowners set up a FB group which sounds like a good idea, but hell no... some people just love to complain and will start shit with the board.

3
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Thank you for your insight. Your experiences mirror some of my many concerns.

The one piece of your advice that I don't already think about all the time is the social media piece. What constitutes social media and are you saying that the bylaws need to be amended to specifically control what can specifically be said without fear of running afoul of the CC&Rs?

I understand social media to mean Twitter, tick-tock, Instagram, etc.... and I was not aware that we needed a presence. We are under 75 units in total.

Assuming we have the same definition of social media, do you believe a small HOA should try to maintain a social media presence, and if so, should it be the secretary's responsibility?

2
level 1

I did several transitions as a manager. For management company, there are three ways the developer picks them: 1) cheapest, 2) biggest in market, 3) Someone they have relationship with.

In any case, it's worth looking.

Some developers keep the dues artificially low to sell homes. This is really bad. It puts you in the position of having to raise, maybe double fees in the first few years. That reserve study will be critical.

I also strongly recommend a real architectural committee. New homes have lots of changes going on.

3
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Yes, thanks for this advice. All three points you make are on the top of my list of things to accomplish as soon as possible.

I have not looked at the vendor agreement between the builder and the management team yet - but that is definitely part of the all documents approach that I want to take.

I have only seen the annual report so far but you are exactly right. Absent a very healthy reserve, which I think is highly unlikely, we already have a deficit on next year's budget due to no more HOA initial fees coming in from new home sales. This means we are already in the difficult position of having to raise monthly fees or find new contracts.

As to the architectural committee - that is one of our biggest areas of concern as it relates to current CC&Rs. I am advocating for a top to bottom bylaws overhaul to make the CC&Rs more rational for homeowners as opposed to the builder. I also am considering doing advocating for some sort of amnesty period now that the new board has taken over...something like for the next six months, if you haven't approved your changes through the architectural committee, please bring your documents so that we can review/approve/suggest changes. After six months, the CC&Rs will begin to be enforced as written.

1
level 1

Make sure that your HOA dues actually cover what you need them to cover.

Builder–managed HOA dues are artificially low to entice buyers. Chances are it’s not even close to enough to cover expenses to savings.

3
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Yeah, I know just from the overview that the Management company handed out to all the homeowners that we do not have enough income to cover expenses next year. One red flag among many.

2
level 1

My thoughts as maintenance tech for association management, get little things like model# for light fixtures, paint codes, siding color or manufacturer. Keep on file later when stuff needs to be fixed someone would not be chasing down materials costing more.

3
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Excellent point. I did keep all of that information about my unit, and I would hope all of that would be part of the package that we get from the developers.

1
level 1
· 2 mo. ago
💼 CAM

If your community is a townhome, condos, or has any large fixtures like clubhouse, pool, etc, look into possible construction defects before the statute of limitations runs out.

2
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Understood. Thank you for the advice.

1
level 1
· 2 mo. ago
💼 CAM

In addition to the below advice, I want you to make the Association's insurance policy a top 3 priority. Find out the agency, call them. Get a copy of the policy. Understand the coverages.

In my personal experience the coverages are NEVER correct and often missing vital components such as D&O. The reason is simply because the declarant officers typically have coverages via other means that cover their activities with the Association. You will not have that.

2
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Directors and Officers, yes, I have asked about that..... I haven't seen the documents yet but I do know the importance and will make sure that we're covered.

1
level 1

The Articles of Incorporation and By-laws are typically boilerplate documents, though the By-laws do control corporate, hence HOA, governance. The most important documents are the CC&Rs and the Rules and Regulations (if any). The CC&Rs will give you the powers and duties of the HOA and the HOA members. Read them carefully. Good luck!

2
level 2
Op · 2 mo. ago
🏘 HOA Board Member

Thanks, I appreciate the advice.

1
level 1

Having owned two condos- both over 20 years old when I bought them- if you can, pay the money for an independent structural inspection ASAP- not the builder.

Both condos within the first 10 years found structural building issues from original build. Both went to court- fine- but the settlements received were no where near what the actual costs to repair were. The HOA then had to foot some of it- and when reserves are “fine” less than 10 years in and you don’t think a $50 or $100k hit will hurt that much- it adds up. At 30/40 years, you’re reserve will hit even lower because it’s lost that earning potential for so many years.

This is going to be a hard sell though- it takes a lot of future view to buy into the cost at first, and many people don’t even plan on owning a condo that long. But it’s a lesson I wished both my HOAs had done much better on.

2
level 2
Op · 2 mo. ago
🏘 HOA Board Member

This is very good, specific advice. I appreciate it. I am not going to disclose, but our particular neighborhood has some unique challenges regarding future planning. I am going to try and do my best to make sure reserves cover what's expected.

2
level 1

We are in the process now, actually have been for the last 3 years.


Check with your County/State Dept. of Land Use and make sure there are no deficiencies in the common areas. Ours has not been able to be fully turned over due to a series of issues and failure to correct by the developer such as broken sidewalks, improperly lined retention pond, drainage, plantings, etc.

2
level 2
Op · 2 mo. ago
🏘 HOA Board Member

3 years? Wow, okay. Good luck to you all! I certainly hope ours doesn't take this long.

1

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