The first 90 days after turnover

A new board's job after transition isn't fixing buildings. It's deciding who works for them. Because right now, Everybody used the association was hired by the developer via the manager. And the board just became the decision maker. The day you take a board position, your fiduciary duty is to the community and its owners. Not the developer, not the builder, not the manager, who's been there since day one. And most new boards don't feel that.

Most I've worked with hope and wish that they inherited a smooth operating company and they shouldn't rock the boat. That's exactly backwards. And board members who'd seen the bowed garage wall and kept it to themselves. I get how that happens. You don't want to be the bearer of bad news. You don't want to say the sky is falling at the first meeting, but owners are going to find out. And if you don't talk about it, it's going to be talked about and brought to your attention.

What they remember is they remember the crack in the wall and the board knew and didn't say anything. You can recover from a construction defect problem. Recovering from lack of trust with your neighbors is a lot harder. They're not going anywhere. You're not going anywhere. You have to see them and they want clarity, honesty, openness and transparency. So the first things in the first 90 days, this is what you do. You read the management contract and find out when it ends.

If the company is tied to the developer, the likelihood is that you're going to want to replace them. Two, get the files, drawings, permits, warranties with dates on them, the contractor list, every adopted budget, and the reserve study. Management companies should have a turnover list from the developer, from control from the developer to the owner control. Get a copy of that and start checking off the things you have and start looking for the things you don't have.

General representation lawyers also have this list because they're involved in turnover all the time. Most boards are also told to get a new reserve study completed when the owners control the board. And in some situations, there was never a reserve study to start with, but in most states, The developer has an obligation to fund reserves to an adequate level, but if you don't know that level, then you need to get a reserve study that you asked for and compare it to what the developer gave you.

Because... The new reserve study may say what an adequate amount is that the developer should leave you with that is different than what the reserve study said that the developer created. And all of your assets are completed so you have really hard numbers based on what someone can see versus what somebody is looking at papers or drawings to come up with those reserve contribution numbers. Hire your own people to look at the building and the books.

Your own engineer. your own counsel. Not the developers. Not the developer’s engineer. Because they're going to tell you that the building's fine, right? That's who's paying them. An independent look at the common elements and the reserves is a few thousand dollars against a community that cost millions to build. I've seen boards find the developer left the reserves short. By a lot of money and get it more without a lawsuit. You have a higher chance of doing that if you're involved in that discussion within the first year of turnover.

Skip it and the first time a buyer cancels escrow because of a crack that nobody documented and you have way too little money in reserves. That's when the board finds out what it was worth. Bottom line. Managers and management companies are kept if they've represented the owners properly with the developer. Repairs are made in a timely manner by the developer. Documents were turned over and adequate money was left to fund the reserve account.