HOA Transition Checklist

This is arguably the most well-known and critically important HOA process – the transition of management from a developer-controlled association to a resident-controlled HOA.

The transition process will almost certainly require external assistance from a CPA, lawyer, and others. It is highly recommended to bring in a neutral third party to review the books, validate your community’s financial health, train the new treasurer, and even help resolve potential conflicts during the turnover.

The transition process also requires close collaboration between the developer and the HOA members, which is accounted for in the checklist with approval tasks that require review and approval from both parties before moving on to the next stage of the transition.

In brief, here are the six key things you should do as part of the transition process.

1. Inspect all financial documentation (budget, bank statements, tax returns, vendor contracts, etc.)
2. Conduct a financial audit (highly recommended to hire an experienced CPA)
3. Conduct a reserve study to evaluate the health of the reserve fund
4. Ensure compliance with state laws and CCRs
5. Determine the HOA board of directors (election) and conduct training with the developer
6. Hire an engineer to inspect the properties

This HOA Transition Checklist will take you through each of the above tasks while maintaining communication with other stakeholders such as the developer and external professionals assisting you with the transition.

Bear in mind that the best time to start your transition is about 4-6 months before the official developer turnover. If you wait until during (or after) the turnover process, you may find it more difficult to get access to important records from the developer.

A little info about Process Street

Process Street is superpowered checklists. By using our software to document your processes, you are instantly creating an actionable workflow in which tasks can be assigned to team members, automated, and monitored in real-time to ensure they are being executed as intended, each and every time.

The point is to minimize human error, increase accountability, and provide employees with all of the tools and information necessary to complete their tasks as effectively as possible.

First, enter some basic details regarding the HOA, the property developer who is transitioning out of managing the property, and the date of the first transition meeting.

To get the transition ball rolling, the property manager needs to hand over all essential documentation for the HOA to take over management. 

These should include:

If there are any important notes that you would like the HOA to be aware of when receiving the documents, state them below. 

Also, if all or a portion of the documents are stored online in a cloud folder (e.g. Google Drive), you can link to the folder below for easy access. 

Gather all relevant financial documents for careful inspection.

Complete the sub-checklist below to make sure no statement has been overlooked.

You can attach/link to relevant documentation below for record-keeping purposes and for easy reference. 

You should confirm that capital contributions (also called initiation fees) are being deposited, contracts match contractor fees, and all budget variances are explained.

Hire a CPA to conduct a full audit of the property's finances. 

Process Street has developed a separate HOA Audit Checklist to serve this purpose.

We recommend completing that checklist and then entering the link below so it can be easily referred to at any point during the transition.

If you would rather conduct the audit without using our template, feel free to attach and/or link to the audit report.  

The reserve fund is your long-term savings account for major repairs and replacements. 

By conducting a reserve study, you determine how much money is required to pay for those repairs and replacements.

In other words, a reserve study will help the association determine the useful life and cost of replacement of major capital items such as roofs, furnaces, and driveways.  The replacement cost of each item is divided by its useful life to determine how much money should be allocated to the reserve fund annually.

The most important thing to verify now is that the developer has created a reserve account, and is funding it with capital contributions.

The association should hire professionals to perform the reserve study. The board should resist the desire to perform these studies themselves to save money, as most boards are not qualified to perform this type of work. Most importantly, hiring a professional reserve study company ultimately protects the board from liability.

Review the insurance coverage set up by the property developer. 

It’s best to have an insurance expert review your policies, so you can have the right coverage in place by the time the new board takes over.

For the legal portion of the transition, it's important that you seek professional legal counsel to ensure the newly-created HOA is compliant with state laws and any other relevant rules & regulations. 

Enter the contact details of your HOA attorney in the form fields below. 

With the guidance of your legal counsel, ensure the HOA is in compliance with state laws. 

The Homeowners Protection Bureau (HOPB) website has a search engine for HOA state laws where you can find out which laws apply to your specific state.

Click here to search your state's HOA laws

Covenants, conditions and restrictions, otherwise known as CC&Rs, are part of a suite governance documents the regulates homeowners association-run communities.

Of all the governing documents of an HOA, CC&Rs are the highest level, superseded only by local, state and federal law. Bylaws are the second tier, as they pertain to how the HOA is run and rules and regulations are the lowest priority. All are tied to one another in one way, shape or form; and changes to each should be a collaboration between the board, legal and community residents. - COMSOURCE

With the guidance of your legal counsel, carefully read through the CC&Rs to ensure they are appropriate and being enforced. 

Sometimes CC&Rs become outdated and need to be modified. For example, perhaps your CC&Rs were created 10 years ago and certain sections are no longer relevant. Or your community demographic has changed. 

Whatever the case may be, make sure that the CC&Rs are up to date and being adhered to. 

 "Read your CC&Rs," advises Justin D. Park, an attorney at Romero Park & Wiggins P.S. in Bellevue, Wash. "They specify the transition powers of your developer, and there's usually a specific date in them for the developer to step back and for the board to step forward." 

Now that the financial and legal stuff are out of the way, its time to focus on setting up the association. 

The first step is to hold an election for the board of directors. 

Enter the results of the election in the form fields below by entering the names of the individuals assigned to various positions. There is also a form field for you to outline other HOA board member responsibilities

In general, a homeowners’ association will typically enact a set of bylaws that govern how the original Board of Directors will be elected and how subsequent elections will take place and at what intervals of time. Most bylaws provide that the original directors be nominated by the members of the homeowners’ association.

Next, establish board committees.

Note that in order to create committees, HOA board members must first create an annual budget. When creating the annual association budget, board members can budget a certain amount for each committee, which is then used to carry out the committee’s day to day operations.

It is important for board members to clearly define the committee's roles.

There are numerous types of committees, each of which fulfills a different purpose. 

These are a few of the most common types of committees you can create:

• Communication committee 
• Safety committee 
• Financial committee
• Architectural control committee
• Landscape and maintenance committee

Note down your HOA board committees in the form field below. If you would like to attach/link to a document that contains more relevant information, feel free to do so. 

Hire an engineer to inspect the community's properties to make sure they are in good condition.

Its important that the HOA board is in agreement with the developer regarding the condition of properties and subsequent repair/maintenance needs.

Record the contact details of the engineer in the form fields below. 

Have the engineer conduct the inspection for all properties. 

We recommend using our HOA Property Maintenance Checklist to perform the inspection. 

Or, as an alternative, you can use our Home Inspection Checklist. 

Using either one will make your life and the engineer's life easier as well as create a trackable process which you can monitor in real-time and store safely for future reference.

Record any details of the inspection that you feel are important moving forward. 

For example, are there any significant concerns that you have that need to be discussed with the developer?

Hopefully, the inspection went smoothly and you can simply write "All properties looking good".

If there are any inspection reports that you would like to attach and/or link to, you can do so below. 

Make sure that you have received all relevant documentation from the developer.

The list below was completed in task 4 of the checklist, but here it is again just to make sure nothing has been missed. 

Finally, confirm a date for a follow-up turnover meeting between the developer and the HOA board of directors. 

This is important to ensure the transition is going smoothly and to address and concerns either side may have. 

• Jonathan Doro - HOA Transition Toolkit
• BJM&Co. - An HOA Checklist for Effective Developer Turnover
• Nacok - Developer Turnover Checklist
• Scott A. Burdman - Checklist for Transition from Developer Control
• Kaman & Cusimano - Six Simple Steps For Successfully Transitioning The Association From Developer Control to Owner Control
• Condo-Smart - HOA Developer Transition Checklist
• Spectrum Association Management - A Guide About Setting Up, Running, and Managing HOA Committees

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