Sunday, October 28, 2012

Do developers give thought to long-term governance in the communities they build?

It is no secret that developers build communities with one main goal in mind: selling out their inventory.

While development in Florida and many other parts of the country has dwindled considerably over the last few years, now is the time for reputable developers to give some thought to new ways to ensure success for the product they are peddling.

Most purchasers look at all the obvious things: size and location of the community pool, reliability of the security measures being offered and model types for their desired unit or lot. A potential purchaser might not give much thought prior to the closing about how easy it will be to elect a board, whether the assessments are artificially low, the transparency (or lack thereof) of community operations and whether or not the association's governing documents are properly maintained and easily accessible.

Developers who really want their customers to be talking about how wonderful they are years after transition would be well advised to do the following:

-Create a streamlined governing body. Creating communities with 22 sub-associations and a master association might be easier for the developer to manage fiscally but it is a nightmare of duplication and confusion down the road which is almost impossible to untangle as people identify far too greatly with their "building" as opposed to the community overall.

-Create governing documents with practical realities in mind. Don't make it difficult and/or impossible to amend the governing documents by requiring lenders' consent. Why would you ever subordinate the association's lien rights to lenders? Many developers can secure construction financing without doing so and so can you.

-Be a pioneer and understand that technology is here to stay and often cuts down on expense and time for communities who utilize it thoughtfully. Create an association website and upload the governing documents for inspection convenience. Create reasonable rules and regulations that allow the use of smartphones, scanners and tablets so owners can make their own copies of documents of interest without expending funds and without having the association undertake any labor in that regard.

-Do not create a budget with artificially low amounts to entice purchasers. Your customers certainly want to make an informed purchase decision and you deny them this right when they are unaware of the costs it takes to really provide the common area services you deliver while you are still building homes.

-Take out your calculator when creating your documents to ensure that the percentages of ownership actually add up to 100%. One of the most egregious cases of developer error I've seen was in a large condominium where the percentages of ownership did not add up to 100% and were inconsistent with the surveys attached to the declaration.
-Create a real sense of community from the beginning. Rather than just highlighting your sales office, set up a Welcome Committee that is run by the residents and has nothing to do with your remaining sales. Hold regular meetings and set the tone for inclusion and transparency.

The economic woes over the last few years have given developers ample free time to consider new ways of creating planned communities that will support long-term enjoyment by the residents. It all starts with a plan that makes sense for those who live in the community and not just those who buy.

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