What Condominium Owners Should Know About Developer Turnover of the Association: Part II
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During the construction and initial sales of units within a condominium association, the developer will manage the association’s operations and governance. This means the developer controls the association’s board of directors. Once the development is constructed and a certain percentage of units are sold, then turnover of control of the association to the unit owners must occur. What follows is Part II of what every condominium owner should know about developer turnover of the association.
Florida law regulates the turnover process and provides express procedures that a developer must follow during the process for turning over certain association documents and financial disclosures to the unit owners and the member-run board of directors. To illustrate, once the unit owners are entitled to elect a majority of the board of directors, the developer is required to turn over the following documents to the member-run association at the turnover meeting: (This is not a complete list of required turnover documents. For a complete list please reference Fla. Stat. § 718.301(4)):
- The recorded declaration, articles of incorporation, bylaws and all amendments thereto;
- The minutes of all developer-run board meetings;
- The association’s financial records, including financial statements from the incorporation of the association through the date of turnover;
- All association funds;
- A copy of the plans and specifications utilized in the construction of the condominium;
- A list of names and addresses of all contractors and suppliers for the construction of the condominium;
- Association insurance policies;
- A roster of unit owners;
- All contracts to which the association is a party, including employment and service contracts. Fla Stat. § 718.301(4).
The developer shall pay all costs associated with the preparation or duplication of these turnover documents. 61B-23.003(4), F.A.C. The developer is also required to provide a turnover audit. 61B-22.0062, F.A.C. This turnover audit must cover the period beginning with the date of the association’s incorporation and ending with the date of the turnover. Id. The financial statements within the turnover audit shall present the revenues and expenses separately for each fiscal year included. Id. There must also be a statement of total cash payments made by the developer to the association. Id.
Every contract entered into by the developer on behalf of the association prior to turnover must be fair and reasonable. Fla. Stat. § 718.302(4). Any contract made prior to turnover that provides for the operation, maintenance or management of the association may be cancelled by the unit owners. Fla. Stat. § 718.302(1). The cancellation must be made by an approving vote of at least 75 percent of the non-developer voting interests. Id. Any contract made by the developer prior to turnover that requires the association to purchase or lease condominium property shall be deemed ratified unless rejected by a majority of the non-developer voting interests within eighteen months after turnover. Fla. Stat. § 718.302(2).
Turnover of control of a condominium association from the developer to the unit owners is a complicated process. Most owners are not aware of their rights, the developer’s obligations and the time constraints within which certain actions by either party must be taken. If your association is nearing turnover, or went through the turnover process within the past several years, you should ensure your member-run board of directors is represented by competent counsel and is aware of the turnover requirements under Florida law.