and HOA communities continue to get built all over the state.
The developer gets to control the community while the place is
being built and sold, but perhaps the most critical time period
in the entire existence of either a condominium or homeowner's
association is when that control of the association eventually
passes from the developer to the unit owners. This is commonly
referred to as “turnover.” The turnover statute governing
condominiums is 718.301 and for homeowner associations, 720.307.
When are the
owners entitled to a seat on the Board?
In a condominium,
if unit owners other than the developer own 15 percent or more
of the units, the unit owners other than the developer are
entitled to elect at least one-third of the members of the board
of administration of the association.
In an HOA, members
other than the developer are entitled to elect at least one
member of the board of directors of the homeowners’ association
if 50 percent of the parcels in all phases of the community
which will ultimately be operated by the association have been
conveyed to members.
turnover of control triggered?
speaking, in both HOAs and condominium associations, the
developer is required to turn majority control of the Board of
Directors of the association over to the unit owners within
three months after 90% of the units have been sold. Turnover is
also triggered when a developer files a petition for
bankruptcy. There are other trigger points, but these two are
by far the most common. Most importantly, in a condominium, no
matter how many units the developer sells, the developer must
turn over control seven years after the declaration is
recorded. There is no automatic deadline for HOAs.
turnover - The Developer is Not Completely out of the Picture
In an HOA the
developer is still entitled to elect one member of the Board of
Directors as long as it holds for sale in the ordinary course of
business at least five percent of the parcels in all phases of
the community. In a condominium, the developer is still
entitled to elect a member of the Board if it holds for sale in
the ordinary course of business at least five percent of all
units in condominiums with fewer than five hundred units, or at
least two percent of all units in condominiums with over five
owners refuse to accept turnover?
times, this firm is told by unit owners that they don't want
turnover to occur because of the numerous problems facing the
community. It would be incorrect to think that those problems
are likely to be solved if the association remains in the hands
of the developer who is creating the mess in the first place and
who remains in control of the association's funds. Moreover,
turnover can’t be refused. It’s mandatory. The important thing
to do however is to have a plan in place to make the transfer of
power less difficult. The plan must start with the hiring of an
attorney, a CPA and an engineering firm. The attorney can ensure
that the developer turns over all documents required to be
turned over by statute, resigns from the Board, and that the
registered agent of the association is changed with the
Secretary of State. The CPA can determine if the developer is
financially indebted to the association and the engineer can
advise the association as to construction defects. Based upon
the conclusions reached by the CPA and engineer, the attorney
may then be forced to pursue the association's claims against
the developer in a court of law, and as for construction
defects, after compliance with the pre-suit requirements of
Florida Statute 558. Remember, the statute of limitations for
asserting claims against the developer begins to run from the
date of turnover. Construction issues governing the common
areas generally have a three year statute of limitations in
condominiums that are new construction and only one year in
conversion condominiums. Therefore, especially in conversion
situations, the Board is almost immediately under the gun to
learn what claims the association may have against the
developer, if any. In a condominium, any claim against a
developer by an association alleging a defect in design,
structural elements, construction, or any mechanical,
electrical, fire protection, plumbing, or other element that
requires a licensed professional for design or installation must
be examined and certified by an appropriately licensed Florida
engineer, design professional, contractor, or otherwise licensed
Florida individual or entity.
Next week we will discuss what
the developer is required to give the new board upon turnover.