Academy/Developer / Declarant Transition
Bank-account turnover
The developer hands you the checkbook. Here is what to check before you accept it.
Bank-account turnover is the developer transferring the association's operating and reserve accounts, along with full financial records, to the owner-elected board. Signatory authority moves from developer appointees to elected directors. Many states require an independent CPA audit of the entire pre-turnover period first, so the board can confirm the balances it receives actually match what was collected and spent.
What actually changes hands
At transition, the declarant is expected to turn over the association's operating account, reserve account, and the underlying financial records, not just a final balance printed on a statement. That includes closing out the developer's signatory authority on those accounts and adding the newly elected directors in its place.
Exactly what must be delivered, and on what timeline, is set by your state's turnover statute and by your declaration. Florida's homeowner association statute, for example, lists "association funds" alongside financial records, contracts, and insurance policies as items the developer must hand over at turnover. Confirm your own state's list before assuming Florida's applies.
Why an audit comes before the handshake
A bank balance alone does not tell the new board whether the developer managed the association's money correctly during its control period. That is what an independent audit is for, and some states make it a required step of turnover rather than an optional best practice.
"Financial records... shall be audited by an independent certified public accountant for the period from the incorporation of the association."
Source: Florida Statutes, section 720.307, The Florida Senate
Not every state requires an audit as a condition of turnover. Where your state does not, a board can still choose to commission one before signing off on the accounts, at the developer's expense if the declaration or statute allows it.
Money the developer may still owe
Turnover does not automatically zero out what the developer owes the association. Some states require the declarant to cover common expenses attributable to units or lots it still owns and has not yet sold, since those units are not generating assessments of their own.
"The declarant of a planned community shall pay all common expenses of the planned community until the individual lots subject to assessment are assessed for common expenses."
Source: Oregon Revised Statutes, section 94.704, Oregon State Legislature
Separately, a developer that transfers its remaining rights to a successor is not automatically released from obligations that arose before the transfer. A new name on the accounts does not erase a debt the original developer owed the association.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Turnover just happened, but the developer's project manager is still listed as a signer on the association's bank accounts. What should the new board do?
The board reviews the transition paperwork and finds no independent audit of the pre-turnover financial records, in a state that requires one before turnover funds are accepted. What is the real risk here?
Twenty units in the community remain unsold and unoccupied under developer ownership. Who is responsible for covering the common expenses tied to those units before turnover?
Sources
- Florida Statutes, section 718.301, The Florida Senate
- Florida Statutes, section 720.307, The Florida Senate
- Nevada Revised Statutes Chapter 116, Nevada Legislature
- Oregon Revised Statutes, section 94.704, Oregon State Legislature
Developer / Declarant Transition
Next, see how a transition audit actually works before your board signs off on the accounts.
Whether an independent audit is required before turnover, and whether the developer must subsidize expenses on unsold units, are both set by state statute and vary widely.