Developer / Declarant Transition

Four layers decide what happens to your association

Four layers of authority interact during a transition, and they do not always point the same direction. Your state's condominium or common interest community statute sets the legal floor: when control must pass, what the developer must deliver, and what an association can do about a bad developer-era contract. Most states base their acts on a version of a uniform model law, but each state amends, renumbers, and departs from it, so the specific triggers and deadlines are never universal. Check your own state's statute before relying on a number, including any number on this page.

Your declaration (CC&Rs), articles, bylaws, and the original disclosure document the developer filed before selling can grant the developer more rights than the statute requires, or commit the developer to more than the statute requires. Common law duties, such as a board's fiduciary duty to the association, and in some states an implied warranty covering the common elements, operate independently of what the documents say. A private overlay, such as Fannie Mae's project standards, can also be stricter than your state law about what counts as turned over for financing purposes, without being a legal requirement on the association itself.

What most boards get wrong before they even get there

Three beliefs cause the most trouble, because each is wrong in a way that costs an association money or a claim.

The first: that turnover happens automatically at one fixed percentage nationwide. It does not. Even within a single state, condominiums and homeowner associations can use different formulas, and both typically use several alternate triggers: elapsed time, percentage of units sold, developer bankruptcy, abandonment, whichever occurs first. Find your own state's statute and your declaration's turnover section; see Turnover triggers.

The second: that once the developer hands over control, its exposure ends. It does not. A declarant that transfers its remaining rights to a successor is not automatically released from obligations or warranties that arose before the transfer, and losing control involuntarily, through foreclosure or bankruptcy, does not erase what already happened. Construction defect claims can also remain live for years after turnover, subject to whichever filing deadline applies. See Transition litigation and Statutes of limitation and repose.

The third: that directors the developer appointed only answer to the developer. They do not.

"developer-appointed board members have independent statutory and common law fiduciary duties to the association"

Source: Understanding Breach of Fiduciary Duty by Developer-Appointed Directors in Condominium Associations, Hirzel Law, PLC

A board dominated by developer appointees can breach that duty by declining to pursue a legitimate claim against the developer, or by underfunding reserves in the developer's favor. See Declarant-appointed boards.

The shape of a transition, start to finish

Every transition follows roughly the same shape, even though the specific rules differ by state.

First, a control period, during which the developer (or its appointees) runs the board, ends at whichever statutory or documentary trigger arrives first. See Turnover triggers.

Then, turnover itself: the developer delivers governing documents, financial records, contracts, plans, warranties, and permits, and in some states the association also receives an independent audit of the pre-turnover finances and a condition study of the common elements. Exactly what must be delivered, and whether an audit or engineering study is legally required, differs by state; some states require far more than others. See Records turnover and Transition audits.

After turnover, the association is often still chasing something: a warranty claim, a construction defect, an unfinished amenity, or a developer-era contract that was not fair to the association. These claims run against filing deadlines that start on different events in different states, discovery of the defect in some, a fixed date such as substantial completion in others, so missing one can permanently bar a claim. See Construction defects and Statutes of limitation and repose.