Developer Control and Turnover in Community Associations

When a new condominium, homeowner (HOA), or townhome community association is created, owners the developer often maintains control until enough homes are sold and the association can be transitioned to owner leadership.

Understanding how developer control works and what happens during the turnover process, is essential for new board members, property managers, and homeowners.

How Developer Control Works

A community association is officially established when a declaration is recorded and/or the not-for-profit corporation is registered with the Secretary of State. However, even though the association legally exists, it does not operate like a traditional owner-run community until a board is formally elected.

The developer remains responsible for the association until a specific milestone is reached or a percentage of the units or lots are sold. Once this threshold is met, control shifts from the developer to the owners.

During turnover, the incoming board assumes responsibility for budgets, financial accounts, vendor contracts, association maintenance, and day-to-day operations.

The First Year: A Critical Phase

The first year of owner-elected leadership typically sets the tone for the association’s long-term success. Newly elected boards should consider taking the following steps:

• Elect Officers: After turnover, the board convenes to elect its officers (ex. president, treasurer, secretary), establishing leadership roles for the year ahead.
• Identify or Confirm the Management Company: If a management company is in place, the new board should review the contract and ensure they understand the manager’s role and responsibilities. If the association is self-managed, qualified professional guidance may still be necessary to ensure essential tasks (ex. collecting assessments, paying vendors) are handled correctly.
• Select Legal Counsel: A knowledgeable community association attorney is essential during transition. Legal counsel helps interpret governing documents, review contracts, and guide the association through potential risks.
• Collect and Organize Governing Documents: New boards should gather all governing documents including the association’s declaration, bylaws, rules, amendments, plats to ensure they understand the association’s authority, obligations, and operational structure.
• Review the Association’s Finances: Boards should familiarize themselves with the current budget, assessment obligations, collection policy, reserve balances, and outstanding financial commitments. This helps ensure accurate planning and responsible financial oversight during the first year.
• Establish Rules and Regulations: Boards have a dual responsibility of running a corporation while both administering and enforcing policies on behalf of the community. These may include rules addressing parking, short term rentals, pets, signage, and holiday decorations.
• Establish Committees: If allowed by the governing documents, committees make association operations more manageable. Common committees include finance, social activities, and architectural standards review. Committees also serve as excellent training opportunities for future board members.

Additional Tasks for New Boards

To ensure a smooth and legally compliant transition and to minimize risks by establishing a strong operational foundation, the new board should:

• Inspect the property and document defects or uncompleted items
• Review working drawings, punch lists, and warranty claims
• Work with the association’s attorney to review contracts to confirm they are current and properly performed
• Engage an architectural or engineering firm to help prepare a reserve study
• Evaluate insurance coverage with the association’s insurance representative
• Establish meeting guidelines and enforcement procedures
• Confirm that the developer has paid assessments on developer-owned units

Legal Resource

Transitioning from developer control to an owner-run board is one of the most important milestones in a community association’s lifecycle. With proper planning, professional guidance, and clear communication, newly elected boards can confidently take the reins and position the association for long-term stability.

Do not hesitate to contact our law firm if your community association has questions about developer turnover, construction defects, developer warranties, board member responsibilities, governing documents, or other legal concerns.

Please call 855-537-0500 or visit www.ksnlaw.com.

Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.

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