Transition Law &
The Transition Team
The Association’s Auditor is based upon past experience a critical member of the Community’s Transition team. It is imperative that the Auditor has true Community Association Transition experience as the issues which re often presented to a Board in connection with determining the developer’s compliance with its financial obligations while in control of the Community are subtle and complex. The Auditor selected needs not only an understanding of the developer’s financial obligations as set forth in the Governing Documents and related State regulations but needs as importantly to know what documents to ask for in order to perform a comprehensive and substantiated Transition audit.
Experience demonstrates that most issues identified in a Transition audit do not result from the fact that developers are crooks. Rather, these issues result from the developer’s lack of planning, discipline or a true understanding of Association administrative responsibilities. It is the responsibility of the Association’s Transition Auditor to confirm for the membership that the developer has properly collected and posted to the credit of the Association all monies which the developer was to collect while in control of the Board. As importantly, one role of the Auditor is to assure to the membership that monies expensed by the Association, while under developer control, were appropriate.
We have seen developers fail to collect working capital contributions, fail to collect membership fees from certain Unit Owners, fail to fund the Association’s working capital account and expense Association dollars on an unrelated project. We have even seen developers purchase golf carts to ferry around perspective Unit purchasers all at the Community’s expense.
The preparation of a Transition audit report may identify monies which are owing to the Association by the developer. Those claims which are set forth in the report should be shared with the developer along with a demand for payment to the Association. Quite often, those claims are resolved after a series of sit-down negotiations. The Association’s Transition Auditor should be a part of those negotiations.