Q: I live in a condominium complex that contains more than 100 units. The developer has notified all of the owners that he soon will be turning over control of the association to them, and they have scheduled a meeting for this purpose early next month. I have talked with a number of owners, and we really do not understand what this means. Specifically, what should we be doing in anticipation of this meeting?
A: Every condominium is governed by a condominium association, through its board of directors. Although people often do not realize it, when the developer sells the first unit in that condominium complex, the association is already in existence. The developer usually selects the initial board of directors, and that board controls the association until turnover of control is completed. Generally speaking, the laws in the surrounding jurisdictions require that control be turned over to the unit owners within two years of the first sale, or when 75 percent of the units have been sold, whichever comes first.
Unfortunately, many developers do not understand the importance of working with the unit owners in advance of this turnover process, so that they will be prepared to run the condominium themselves. It is not good practice, in my opinion, for a developer merely to announce one day that a meeting will be held at which time he will get off the board.
I suggest that those of you who are interested in taking an active role in the association begin to meet with the developer now to prepare for the transition. Many developers will be cooperative, many will not.
The meeting that is scheduled probably will be for electing a new board. I find it interesting that unit owners vote for members of a board that will control their own destiny, without having any preliminary information on who these prospective members are, or what they stand for. If possible, a notice should be circulated to all of the owners informing them that there will be a meeting before the election, at which time people can campaign for seats on the board. In my opinion, a condominium association is a minidemocracy, and just as we have political campaigns for governmental officials, we also should have campaigns for directors of the condominium.
Additionally, the new board should carefully analyze the situation that existed while the condominium was under the control of the developer.
Four important steps must be taken:
* The new board must decide whether to retain the existing management company -- which had been selected by the developer -- or to select a totally independent management company. The association may decide to act as the management, but clearly an association containing more than 100 units needs some formal management procedures.
* 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 that the developer -- while controlling the association -- properly paid all of its obligations to the association. Developers handle the question of payment of condominium fees in different ways, but under any circumstances, the developer must be held accountable for all its legitimate obligations. Additionally, in many instances the developer -- while serving as a board member -- may have allowed many unit owners to become seriously delinquent in the payment of their condominium fees. The new board must establish a careful and comprehensive collection policy, which will be adopted uniformly throughout the complex.
* The association should retain a lawyer to guide it in its activities. The lawyer will have to deal not only with developer problems, such as warranty issues, but also will have to assist the association in its day-to-day activities. It should be pointed out that a condominium association is not only a minidemocracy, it is also a business -- and must operate and function in that capacity, as well.
* 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, which should be called to the attention of the developer.
Turnover of developer control is probably one of the most important functions to assure the future success of a condominium. It is not often understood by developers, and, in fact, some developers do not want to encourage active participation of the new board, for fear that they will be too conscientious in reviewing the activities of the developer.
However, good dialogue among the unit owner, the board and the developer goes a long way toward creating a successful condominium.