When it's Time to Cut the Strings
Associations must make sure the proper steps and procedures are followed through turnover. A common mistake occurs when the developer continues to exercise control of an association after transition has already occurred. For any association in which the owners aren’t electing 100% of the directors, it’s important to know when transition is to occur because once the requirements for transition are met, the transition happens by operation of law whether or not the owners, developer and/or association manager realize it.
Calculating the date of turnover is an important step in the process. The general rules for transition in Oregon and Washington associations are:
WA Condominiums: Transition starts when 25% of the units are sold, and once 75% are sold, all board members must be owner elected. RCW 64.34.308.
WA Homeowners Act: There is no provision in RCW 64.38, so the association’s governing documents control.
OR Condominium Act: Declarants may elect to control an association for a certain period of time. For single phase condos, declarant control must terminate either at the time of conveyance of 75% of the units or three years from conveyance of the first unit, whichever occurs earlier. If the condominium is a staged or flexible condominium, declarant control must terminate either at the time of sale of 75% of the units which may be created or seven years from conveyance of the first unit, whichever occurs earlier. ORS 100.200.
OR HOA Act: Declarants may elect to control an association for a certain period of time. Transition may occur upon a stated event or timetable in the declaration. Transition may never occur if the development is less than 20 lots and declarant elects in the original governing documents to retain control in perpetuity. See ORS 94.600.
It’s important to distinguish between special declarant rights and declarant control. Unlike the latter, special declarant rights do not necessarily expire at the time of transition. Some rights – for example, the right to control easements or add development phases – may extend for many years (the termination date for special declarant rights are ordinarily contained within the section of a declaration that describes and preserves the specific rights).
Associations should review their governing documents and perform a complete analysis to determine if the period of control has expired and if the declarant has maintained special declarant rights that continue past transition. The process does not have to be adversarial. Once the issues are explained, responsible developers generally cooperate in that analysis given the liability they could incur for failure to transition to the owners.
If you are an owner, board member or manager of a developer controlled association, we would welcome the opportunity to review your association’s status for transition.