Condo Transitions

Transitioning here refers to the process of the Declarant (Condo World language for “Developer”) transferring control to the Owners. This can be a bit daunting both because most Owners are not developers and know little to nothing about whether the construction is adequate, and because most owners have never operated an Association before, and they are volunteers who can spend a limited amount of time sitting on a Board. What follows may help:

Start a Transition Committee. Like many things in life, the more preparation before the task, the easier the task will be. Start by forming a transition committee. (It can't be official as the Declarant will still control the Association, but ask the Declarant to establish a committee and be a part of it. The first sign that something may be amiss is if the Declarant either refuses to create one or refuses to participate in it.) In New Hampshire, as general rule (it's a little tricky) a Declarant controls an association until either 3/4ths of the interests in the Association are sold or two years after the first sale, whichever occurs first. As such, the committee should have plenty of time to meet.

Begin Interviewing Management Companies. The easiest way is to operate your association properly is to hire a management company. They have been doing for years what you are trying to learn in a very short period of time. See if they will agree to charge more the first year or two setting up the budget, tracking expenses, working with the developer on a punch list and then, perhaps, lower the fee in future years.

Create a Budget. The Declarant frequently doesn't. But the Declarant will know what s/he has paid for snow removal, lawn mowing, insurance, i.e. all of the costs the Association will have to assume. Most projects take more than a year.

Hire an Engineer to Perform a Transition Study Before the Declarant Leaves. Once the Declarant leaves, there is less chance the Declarant will be willing to address what owners have found. Also, construction defect cases have a limited time period. Better to work with the Declarant. And if that fails, approach the municipality. Every municipality requires the Declarant to post a bond to ensure the (proper) completion of the project. Working with the Town after the failure of the Declarant to address your needs can provide the right amount of leverage not to hurt the Declarant, but to ensure the Declarant does what what s/he promised the municipality would be done.

Get an Accountant. Have an accountant review and verify that the Declarant has collected all the revenue owed the Association. (Nothing worse than starting out by chasing an owner who hasn't paid fees for a year.) Also, make sure the Declarant has paid his/her share of the common expenses on units owned before they were sold. Check with contractors and utility companies to make sure all of the bills have been paid. Establish a reserve account. The Declarant wants to keep fees low to sell; the Association wants proper fees to take care of finances now and capital repairs down the road.

Get a Condominium Lawyer. Have the lawyer review the Declaration, Bylaws, Site Plan(s) and Floor Plan(s). In my experience, most Declarants spend the least amount of money and the least amount of time creating the documents. Sadly, I spend a fair portion of my practice fixing problems with very new sets of the Declaration and Bylaws. Have someone review them and ask the Declarant to have them updated to reflect not the wishes of the Declarant, but the wishes of the Owners. Also, speak to all Owners. It has not been uncommon for a Declarant to deed someone something that the condominium documents prohibit, such as “deeding” someone an extra parking space while the Site Plan limits spaces to one per Unit. Anything for a sale at times.

All of this may not sound like fun, and the duty to do so was surely not brought up by your Relator, but the potential consequences of having no idea what you are walking into when the Declarant leaves should far outweigh any hesitancy. Or you can just do nothing until the Declarant leaves and hope/assume everything will be all right. Sort of like saving for retirement.