Review This Checklist to Protect Your Atlanta Condo or HOA.
In this economy, many developers with inadequate budgets and resources are looking for a quick exit out of half built and unfinished neighborhoods. Make sure you protect your Atlanta condominium or homeowners association by reviewing this checklist before you agree to take over from the developer.
1. Obtain Copies of all Governing Documents. Get copies of the Articles of Incorporation, Covenants, Bylaws and Amendments to the Covenants and Bylaws and make sure they were properly signed, notarized and filed of record in the appropriate County. Review the governing documents before the transition date to make sure the developer has fully complied with all of the legal responsibilities for the developer as set forth in the legal documents.
2. Obtain Copies of All Current Contracts and Leases Entered Into by The Developer. Read all the contracts the developer has entered into on behalf of your Atlanta condo or HOA association to determine whether they’re necessary and reasonable. Some contracts may be voidable within a certain number of days of months after the transition. Determine whether the contracts entered into by the developer were “arms length” contracts or sweetheart deals the developer entered into with affiliated entities. In other words, make sure the contracts are not one sided or unreasonable. If they are, find out what is required to terminate the contracts and prepare to do so as soon as the transition takes place.
3. Audit the Books. Make sure you carefully review the developer’s financial records. If necessary, have an accountant or CPA perform a cursory review of the financial records, and look at the income statements to make sure the projected revenue will cover all the expenses and that they also provide an adequate reserve. Identify what owners have paid their assessments and what owners are past due. Make sure the developer has paid all assessments on unpaid units before the developer disappears.
4. Confirm that All Taxes have Been Paid. Make sure the developer has paid all property and income taxes and filed an annual tax return. If annual tax returns haven’t been filed while the developer was in control of the association, the developer needs to indemnify the association for any future tax liabilities imposed as a result of the failure to file returns. Check the County records to make sure property taxes have been paid and are up to date.
5. Obtain Copies of All Plats, Building Diagrams and Fire, Electrical and Utility Systems. The worst thing that can happen is for the developer to leave before providing the owners with all information they need about the building, construction, diagrams, plats and fire, electrical and utility systems. These documents are critical in both emergency and non-emergency situations and the cost to recreate them can be exorbitant.
7. Obtain Copies of all Construction, Termite and Other Warranties. The question of warranties arises over and over as soon as the developer leaves an association. Make sure you know exactly what warranties are in place, when they expire and how claims are made. Confirm with the warranty company that the warranty has been transferred to the association and that the association can make future claims in its own name.
8. Sit Down with the Developer to Create an Annual Maintenance Schedule. No one knows the maintenance history of your Atlanta condo or HOA association better than the developer. The developer can tell how often the infrastructure has been inspected and what maintenance is done year round and seasonally so you don’t fall behind on any necessary maintenance.
9. Hire a Lawyer to Prepare a Transition Agreement. A transition agreement should require the developer to make full disclosure of all assets and liabilities of the association and should require the developer to indemnify the association if anything is not fully disclosed or there are any future liabilities as a result of the developer’s acts or omissions.
10. Appoint a Transition Committee and Create a Transition Calendar. Do the groundwork before the transition. Appoint a developer’s liaison committee so that when it comes time for the transition, you’ll have four or five owners who already understand how the association operates. Make sure they are ready to take control of the association before the transition takes place. Be prepared to appoint a new registered agent with the secretary of state so that if your association gets sued, you’ll get notice right away. Create a transition calendar so none of these loose ends gets overlooked.
If your Atlanta condo or HOA is preparing to transition from the developer, make sure you take the time to do it right so you start off on a solid foundation.