What Every Member of a Homeowner or Community Association Should Know about Transition
What is Transition for a Homeowner or Community Association?
Transition is the process of turning over control of a Homeowner or Community Association from Declarant, Developer or Builder control to a Board of Directors made up of elected members of the Homeowner Association.
When does Transition occur?
Transition typically occurs pursuant to the terms outlined in the governing documents of the Community Association at the time when the Declarant, Developer or Builder no longer controls the Board of Directors or in accordance with statutory requirements depending on the type of community.
Is Transition timeframe different for a Condominium than for Single Family Homes in the State of Arizona?
Per Arizona Revised Statutes 33-1243(E) of the Condominium Act transition must occur no later than the earlier of: 90 days after conveyance of 75% of the units, which may be created or sold to Owners other than the Declarant OR four (4) years after all Declarants have ceased to offer units for sale in the ordinary course of business. In a planned community or HOA, the timeframe for transition depends on the specific language in the community’s governing documents as there is not a statutory requirement in single-family home communities in Arizona.
Is there a Statutory Limit in the State of Arizona for Transition to occur for Single Family Home Planned Communities?
No, there are currently no statutory limits; the Governing Documents control the Transition timeframe.
What are the requirements for Transition of Cluster Housing, Patio Homes and Townhomes?
These are all marketing names for some types of residential housing. Any of these names may come under the Arizona Condominium Act or be part of the Arizona Planned Communities Act, dependent upon how the Community was established and platted. Refer to the two previous answers for these types of communities under the two applicable sets of Statutes.
What are the most common types of Transition?
- The Governing Documents require placement of homeowners as Board Members at specified times.
- The Governing Documents require turnover at a specified time, such as at 75%.
- The Documents require turnover at 75%, but allow for the Declarant to retain control of certain items.
- There is a Voluntary resignation of Declarant Control.
What is evident when there is a good and successful Transition?
The common areas are well maintained, the Association has been run like a business and has money to fund its operations, the reserves are well funded and the homeowners are educated. It is also important that the Governing Documents have been enforced and that the Association Corporate Structure is in place via its annual renewal with the Arizona Corporation Commission.
How can a homeowner tell when a Transition has gone poorly?
A few examples are insufficient cash to cover operations, the Reserves have not been adequately funded, the CC&Rs have not been enforced.
Should an Association have an Audit at the time of Transition?
Arizona Revised Statutes §33-1243(J) (Condominium Act) and §33-1810 (Planned Community Statutes) require that an audit, review or compilation of the financial statements be prepared for community associations every fiscal year. If an Association has not had an audit but has only had compilations or reviews since inception of the community, it would be a good idea to have an audit completed for the most recent fiscal year-end in conjunction with the timing of transition from Declarant to homeowner control.