Albert Moore, Attorney at Law

What Does An Owner Need To Know About Turnover Of A Property By The Developer?


First of all, turnover basically means that it’s going from developer control to member control. So the board of directors is most likely going to change drastically. Now it’s going to be elected members by the membership as opposed to being appointed by the developer. So you are going to have a board that is made up of association members that are looking out for your best interests, hopefully, for the association as a whole as opposed to just looking out for the developer. So that’s the first thing that people need to understand about turnover. The second thing is that there are some requirements from the developer depending on if it’s a condominium or an HOA but they have to meet once turnover takes place to membership control.

In a condominium, you have to have an engineer’s report so that if you have a clubhouse or if you have common areas, the engineer can go through them and say okay these are what the issues are that the members are now going to have to face. The second part, aside from the engineering report is that there has to be a financial audit to make sure that the financial records have been kept appropriately and if not, the reason for that and what the developer plans on doing to correct that. If they are not correct, they may be perfectly fine and on a lot of cases, they are. In an HOA, what’s required is just the financial audit. You don’t have an engineer report on that. So those are the big things.

There are statutes that allow for the membership under certain circumstances to back out of both contracts that the developer may assign. So if you have a bookable contract for instance and the members are not happy with it but the developer assigned it, even if the term has not ended with the provider, the membership does have a right to terminate that contract once they take over control of the association.

Our Developer Is Not Addressing Legitimate Repair Issues In The Units And Common Elements. How Long Do We Have To Pursue The Developer?

The unit owners are bound like any other litigant would be by the statute of limitations. Because of the fact that the declaration that’s in place is part real estate related and also part contractually related. The statute of limitations typically for a written contract would be 5 years. Now, the issue is when does the defect become known to the unit owner? So if it’s under developer control and you find out that there is a problem and it should be maintained either under the declaration or under the statutes by the developer and the developer refuses to do anything about it, you have 5 years from the time that you are aware of it or you reasonably should have been aware of it because somebody can always come in and go I wasn’t aware of it. The court can say, a reasonable person would have been aware of it. So that’s when the statute of limitations are going to start running.

Now we talked about the turnover of developer control to membership control and with a condominium you have to have engineers report. So a lot of times, that is kind of the starting point for the statute of limitations because you have a list of things that have gone wrong and typically associations at that point will look at the engineering list and then go back to the developer and say these are things that are on and this is the money that it is going to cost to fix. If that doesn’t get done then there is a lawsuit. Sometimes those are based on construction defects. In fact most of the time, those are based on construction defects but at other times, it may be from lack of maintenance or some other issue but typically 5 years is the statute of limitations cutoff but the question is when does that begin and so sometimes that becomes grey.

But it’s really what a reasonable person would know and if you have an engineering report in front of you then definitely you are on notice that this is what the issues are in complaint 7 years later. We didn’t know about these issues. You didn’t know about them whether they are in the engineering report or not and you had 5 years from that date but you waited 7 years. The statute of limitations has run. So that’s kind of how that part works when it comes to having some type of cause of action against a developer for failure to maintain some kind of construction defect from the original construction.

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