Homeowner Association Transition Services

 
 











Developer to Homeowner Transition Attorneys

HOA Transition Consultants

HomeownerAssociationTransitionServices.com



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 substantial disadvantage.

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 consultation fee.

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

 

 

(a)
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 subdivision:

 

    1. The recorded subdivision map or maps for the project.


    2. The recorded condominium plan, if any, and all amendments thereto.


    3. The deeds and easements executed by the subdivider conveying the common area or other interest to the Association, to the extent applicable.


    4. The recorded covenants, conditions and restrictions for the subdivision, including all amendments and annexations thereto.


    5. The Association's filed articles of incorporation, if any, and all amendments thereto.


    6. The Association's bylaws and all amendments thereto.


    7. 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.


    8. 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.


    9. All notice of completion certificates issued for common area improvements (other than residential structures).


    10. Any bond or other security device in which the Association is the beneficiary.


    11. Any written warranty being transferred to the Association for common area equipment, fixtures or improvements.


    12. Any insurance policy procured for the benefit of the Association, its governing board or the common area.


    13. Any lease or contract to which the Association is a party.


    14. 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.


    15. 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.



(b)

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.



(c)
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.


(d) (1)
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.
     
  (2)
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.
   
(e) The governing body shall establish reasonable rules with respect to:
     
  (1) Notice to be given to the custodian of the records by the member of the Association desiring to make the inspection.
     
  (2) Hours and days of the week when such an inspection may be made.
     
  (3) Payment of the cost of reproducing copies of documents requested by a member of the Association.
     
(f)
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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Ventura County:

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Orange County:

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San Bernardino County:

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Riverside County:

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Santa Barbara County:

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San Diego County:

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San Luis Obispo County:

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Kern County:

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