Developer to Homeowner Transition Attorneys
HOA Transition Consultants
• Davis-Stirling Act
• HOA-CID Glossary
• HOA Questions and Answers
Every new community association will transition from developer (subdivider) control to homeowner control. Sometimes the
transition is smooth. Sometime it is not.
Professional developers will usually hire an HOA Transition Consultant such as
Michael T. Chulak & Associates, A Law Corporation, to assist in the turnover of
responsibility to the homeowners. Other developers do not hire a transition consultant leaving the homeowners at a
The HOA transition services offered by Michael T. Chulak & Associates include the following:
- An accounting of all documents that the developer is required by law to turn over to the new board of directors;
- An accounting of all homeowner association assessments from the date the first escrow closed to the date
of the first election of directors;
- Explaining the required legal process for electing a board of directors and assisting with the election;
- Reviewing the CC&Rs and Bylaws with the first elected board of directors and answering any legal
questions concerning the governing documents;
- Explaining the correct legal process for holding board meetings, providing required legal notices,
holding executive sessions, establishing operating rules, and the Open Meeting Act;
- Reviewing insurance coverages with the new board of directors;
- Explaining the budget process, the legal requirement for maintaining reserves, the rights and
obligations of board members, the rights and obligations of members of the association; and
- A question and answer session to answer any questions not otherwise addressed.
Transition Consultants should always represent the association, and not the developer, regardless of which entity pays the
Section 2792.23 of the Regulations of the Real Estate Commissioner of California sets forth the documents developers
(subdividers) are required to turn over to homeowner associations that they form.
Regulation 2792.23 of the Real Estate Commissioner of California
2792.23. Reasonable Arrangements - Inspection of Association's Books of Records
Commencing not later than 90 days after the close of escrow of the first interest in the subdivision, copies of the
documents listed below, as soon as readily obtainable, shall be delivered by the subdivider to the governing body of the
Association at the office of the Association, or at such other place as the governing body of the Association shall prescribe.
The obligation to deliver the documents listed below shall apply to any documents obtained by the subdivider no matter when
obtained, provided, however, such obligation shall terminate upon the earlier of (1) the conveyance of the last subdivision
interest covered by a subdivision public report or (2) three years after the expiration of the most recent public report, on
The recorded subdivision map or maps for the project.
The recorded condominium plan, if any, and all amendments thereto.
The deeds and easements executed by the subdivider conveying the common
area or other interest to the Association, to the extent applicable.
The recorded covenants, conditions and restrictions for the subdivision,
including all amendments and annexations thereto.
The Association's filed articles of incorporation, if any, and all
The Association's bylaws and all amendments thereto.
All architectural guidelines and all other rules regulating the use of
an owner's interest in the subdivision or use of the common area which
have been promulgated by the Association.
The plans approved by the local agency or county where the subdivision
is located for the construction or improvement of facilities that the
Association is obligated to maintain or repair; provided, however, that
the plans need not be as-built plans and that the plans may bear
appropriate restrictions on their commercial exploitation or use and may
contain appropriate disclaimers regarding their accuracy.
All notice of completion certificates issued for common area
improvements (other than residential structures).
Any bond or other security device in which the Association is the
Any written warranty being transferred to the Association for common
area equipment, fixtures or improvements.
Any insurance policy procured for the benefit of the Association, its
governing board or the common area.
Any lease or contract to which the Association is a party.
The membership register, including mailing addresses and telephone
numbers, books of account and minutes of meetings of the members, of the
governing body and of committees of the governing body of the
Any instrument referred to in Section 11018.6(d) but not described above
which establishes or defines the common, mutual or reciprocal rights or
responsibilities of members of the Association.
Commencing not later than 90 days after the annexation of additional phases to the subdivision, copies of those documents
listed under subdivision (a) which are applicable to that phase, shall, as soon as readily obtainable, be delivered by the
subdivider to the governing body of the Association at the office of the Association, or at such other place as the governing
body of the Association shall prescribe. The obligation to deliver the documents listed in subsection (a) shall apply to any
documents obtained by the subdivider no matter when obtained, provided, however, such obligation shall terminate upon the
earlier of (1) the conveyance of the last subdivision interest covered by a subdivision public report or (2) three years after
the expiration of the most recent public report, on the subdivision.
The membership register, including mailing addresses and telephone numbers, books of account and minutes of meetings of
the members, of the governing body and of committees of the governing body of the Association shall be made available for
inspection and copying by any member of the Association – or by his duly-appointed representative – at any reasonable time and
for a purpose reasonably related to his interest as a member, at the office of the Association or at such other place within
the subdivision as the governing body shall prescribe.
In the case of the minutes, minutes proposed for adoption that are marked to indicate
draft status, or a summary of the minutes, of any meeting of the governing body, other than an executive session, shall be
available to members within 30 days of the meeting and shall be distributed to only members upon request and payment of the
fee prescribed in (e)(3) below.
At the time the pro forma operating budget is distributed or at the time of any general
mailing, members of the Association shall be notified in writing of their right to have copies of the minutes of meetings of
the governing body and as to how and where those minutes may be obtained and the cost of obtaining such copies.
||The governing body shall establish reasonable rules with respect to:
||Notice to be given to the custodian of the records by the member of the Association desiring to make the
||Hours and days of the week when such an inspection may be made.
||Payment of the cost of reproducing copies of documents requested by a member of the Association.
Every member of the governing body shall have the absolute right at any reasonable time to inspect all books, records and
documents of the Association and the physical properties owned or controlled by the Association. The right of inspection by a
member of the governing body includes the right to make extracts and copies of documents.
Why Management Companies Should Not
Solicit or Accept HOA Management Accounts
from Home Builders - Developers
We believe that accepting homeowner association property management accounts from home builders creates a conflict of interest for the management company that cannot be reconciled.
When a developer hires a management company to manage an association, the management company becomes the agent of the association the minute the first escrow is closed because the association is created at that time. This means the management company owes its duty of loyalty to the association when the first unit is sold, notwithstanding the fact that it was selected and hired by the developer. While the management company should know that its duty of loyalty runs in favor of the association, it also knows that it will not receive additional accounts from the developer if it takes sides against it, or points out any failures on the part of the developer.
Management companies are well aware of the fact that developer controlled boards are likely to terminate their services and cease future referrals if the management company takes the side of the association against the developer. Management companies that seek management accounts from developers learn quickly that they are in a difficult position.
While not all management companies that accept developer referred management accounts breach their duty to the association, homeowners must be alert to the possibility.
Some of the abuses that we have observed over the last twenty five years includes the following:
- Management company covering up construction defects so that the statue of limitations eliminates the right of the association to make a legal claim against the developer for the cost of repairing construction defects.
- Management company conveniently ignoring the fact that the developer has not paid its HOA assessments on unsold units.
- Failing to charge the developer late fees and interest on delinquent assessments.
- Ignoring the fact that the developer controlled board of directors is using HOA funds to pay for repairs that should have been paid by the developer.
- Advising the buyers that the developer is responsible for making repairs for only one year when the developer's legal obligation can run from one to as many as ten years after completion depending on the facts.
Not every developer is liable for construction defects and breaches its duty to the association, and not every management company hired by a home builder breaches its duty to the association and its members. However, as a board member, you should be aware of the risks and understand the dangers.
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