By Benny L. Kass
Saturday, February 11, 2006; F23

Q: I am on the board of directors of my community association, and this is a critical time for us. We are a new community facing a transition from developer control. What steps -- legal and practical -- should we take to make sure the process will be successful?

A: In the past two years, there has been an explosion of new community associations, especially for condominiums. The associations represent as few as four units, and often more than 200. But the process of transition is important regardless of the size of your association.

Many community association owners are first-time buyers, with no homeownership or business experience. But many associations are big businesses, with budgets in the millions of dollars. Unless owners get involved, learn the process and hire competent professionals, your association may be headed for disaster, financially and emotionally.

Service on a community association board of directors is a thankless job. The hours are long and there is no pay. But if you want to make sure that your investment (your home) will not be wasted, you may want to seriously consider running for a seat on the board.

Although many owners do not understand it, the association already exists when the first home in a complex is sold. The developer usually selects the first board of directors, which controls the association until it is turned over to the new owners.

In general, laws in the Washington area require that control be turned over to the owners within a set number of years after the first sale or when a certain percentage of the homes have been sold, whichever comes first. The turnover requirement should be spelled out in your association's governing documents.

Transition between developer control and owner control is perhaps the most important aspect of any community association. If it's done properly, your association will be off to a good start. If it's done poorly, it may take a long time to get back on track. Unfortunately, some associations never succeed.

Many developers do not understand the importance of working with owners so that they can own property and effectively manage their own associations. Some developers do not encourage active participation by the new board for fear that they will be too conscientious in auditing the developer's activities.

It is not acceptable for a developer merely to announce one day that a meeting will be held, at which time the owners will elect a new board of directors. Owners are new to the complex and do not know one another. They are reluctant to vote someone into office without knowing who that person is or what that person stands for.

You can take the lead and arrange a meeting of the owners. Have it in the social hall, a nearby church or school, or even in someone's home. Once you learn who is interested in taking an active role in the association, contact the developer and ask for a preliminary meeting to ask your questions and raise your concerns.

You and your group should try to pin the developer down on when control will be turned over. You should also discuss the level of cooperation that the developer will give you during transition. Find out whether the developer intends to be helpful, or will just wash his hands and walk away. Some developers will even front some money so the association will be able to hire a lawyer and other professionals as soon as possible.

At some point, the developer will schedule a meeting of owners. The purpose of the meeting will be to elect a new board of directors. Your bylaws most likely require that a formal notice be sent to all owners advising them of the meeting and the pending election. That will give owners the opportunity to campaign for seats on the board.

In my opinion, a community association is a mini-democracy. We have political campaigns for government officials; we should also have campaigns for directors of community associations.

Once the owners are in control, the new board must take four steps:

? Select a management company. The new board must decide whether to retain the existing management company -- which was selected by, and may be loyal to, the developer -- or select a different company. The association may decide against hiring such a company and become "self-managed." I do not recommend that. An association with a large number of homes needs professional management.

? Audit the books. An independent auditor or a certified public accountant must examine the association's books. It is important for members of the new board to satisfy themselves (and the owners they represent) that during the time the developer was in control of the association, all money collected and all expenses paid were properly accounted for. Keep in mind that while the developer controls the association, the developer also has access to the association funds. Often, access is unlimited. You want to make sure that money that should have been paid by the developer was not inadvertently (or deliberately) paid out of association funds.

Developers handle the question of payment of fees for the homes they still own in different ways, but the developer must be held accountable for all its legitimate obligations. In many instances, the developer, while serving as a board member, may have allowed many owners to become seriously delinquent in paying association fees. The new board must establish a comprehensive collection policy that will be applied uniformly. I am a strong believer in a "zero-tolerance" policy when it comes to delinquencies.

? Retain legal counsel. The association should retain a lawyer who knows community association laws. The lawyer will have to handle a wide variety of issues, ranging from developer problems -- such as warranty and other transition issues -- to assisting the association in its day-to-day activities.

? Inspect the property. The board should consider hiring an engineer to inspect the complex as soon as possible. The engineer should determine whether there are any warranty defects or problems that should be called to the attention of the developer.

The engineer can also help the board determine the proper level of reserves needed for future repairs in a "reserve analysis study." The engineer determines the useful life of the major components in the complex (such as the roof, elevator and other common areas), and how much it will cost to replace each at the end of its life. On an annual basis, sufficient money should be placed in reserve so that when a component wears out, there will be enough money to pay for its replacement. Otherwise, each owner may be charged a large special assessment.

Good communication among unit owners, the developer and the board goes a long way toward creating a successful association. It's hard work to be on a board of directors, but your home is yours and you want to protect it as best you can.

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The Washington Metropolitan chapter of the Community Associations Institute will hold its annual Conference and Expo on Feb. 18 at the Washington Convention Center, starting at 8 a.m. The transition from developer to owner is one of the seminar topics. For more information, see http://www.caidc.org/ .

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.