The transition from developer control to a co‑owner–run board is one of the most important moments in a condominium’s life cycle. It marks independence for the community, but it also brings real risk if the process is rushed or treated merely as a formality. Associations that do not prepare often find themselves stuck with unfavorable contracts, thin reserves, missing records, unresolved construction issues, or problems that can take years to unwind.
Handled correctly, however, the transition gives the new board a clean starting point and the ability to set expectations for governance, finances, and long‑term maintenance. What follows are practical considerations drawn from common problem areas that emerge during developer turnover.
Start Early, Especially with Contracts
One of the first realities new boards face is that most service contracts were negotiated by the developer, likely with short-term rather than long‑term interests of the association in mind. Management agreements, landscaping contracts, maintenance agreements, and similar service arrangements frequently contain automatic renewals, long notice periods, or termination provisions that make early exit costly.
The most effective boards begin reviewing these agreements immediately at turnover. Each contract should be examined to identify who the parties are, how long the agreement runs, how it renews, what it costs, and how it can be terminated. Developers are usually focused on getting projects built and sold, not on whether an association will be locked into a three‑year service contract after transition.
If the volume of contracts feels overwhelming, spread the work out. Assign individual contracts to board members or trusted volunteers and ask for short, plain‑language summaries. Early review creates leverage: it allows the board to renegotiate unfavorable terms or give timely notice before automatic renewals take effect.
Under the Michigan Condominium Act, once transitional control occurs, the non-developer board has statutory authority to terminate certain contracts that were entered into while the association was under developer control, subject to specific limitations in the Act.
Confirm Insurance Coverage After Turnover
Insurance is another area where associations inherit gaps without realizing it. After transition, the association should independently confirm that its insurance portfolio reflects its actual responsibilities. This typically includes directors and officers coverage to protect board members, appropriate casualty and general liability coverage consistent with the governing documents, employee dishonesty coverage, and workers’ compensation where applicable. Insurers should be updated with current board contact information, and deductible amounts should be reviewed for affordability.
Certificates alone are not enough. The board should review full policy declarations and exclusions, gather a history of prior claims if available, and consider re‑quoting coverage through a broker who regularly works with community associations.
Take Control of the Finances Immediately
Financial control should not lag behind governance control. As soon as turnover occurs, the new board should verify where association funds are held, ensure all bank accounts are properly titled, and update signature authority. Reserve funding should be reviewed for compliance with Michigan’s statutory minimums, and an independent CPA audit should be commissioned if required or advisable.
Michigan Condominium Administrative Rule 511 requires a condominium association to maintain a reserve fund for major repairs and replacement of common elements that is at least ten percent of the association’s current annual budget and restricts use of those funds solely to those purposes. The required reserve amount must be fully funded by the transitional control date, with the developer responsible for any shortfall, and the bylaws must expressly warn that the minimum reserve requirement may be inadequate and should be evaluated based on the needs of the particular project.
An early audit often reveals issues that are far easier to address sooner rather than later. Issues like underfunded reserves, unpaid vendor invoices, or developer‑incurred obligations that were never disclosed are best addressed near transition. Completing this review promptly also protects the new board from future accusations that problems were ignored once control shifted.
Developer‑created budgets deserve special scrutiny. They are frequently designed to keep assessments low during sales, not to accurately reflect long‑term operating costs. A careful review of actual expenses, delinquencies, outstanding liabilities, and missing budget categories helps the board make informed decisions about assessment levels before financial pressure builds.
Get the Records in Order
Good governance depends on good records. After transition, boards should confirm that ownership information is complete and accurate, that lease documentation is on file where required, and that voting eligibility for units, especially developer‑owned or unsold units, is clear.
The association should also obtain full unit files, including violation histories, work orders, and correspondence. Missing or incomplete records make enforcement inconsistent and expose the association to unnecessary disputes. Once collected, records should be reviewed for gaps, organized, and digitized to ensure continuity as board members change over time.
Understand What Came Before
New boards benefit from understanding how the developer‑controlled board operated. Collect meeting minutes, review recurring issues, and identify projects that were deferred or left unresolved. Summarizing prior decisions and open items provides context and helps avoid repeating past mistakes.
This review is not about assigning blame. It is about giving the new board a clearer picture of where the association stands and what issues may still be lingering under the surface.
Verify Construction and Infrastructure
Promised infrastructure should be verified against the approved site plans. Roads, utilities, drainage systems, sidewalks, and common structures should be physically inspected. Municipal approvals are helpful, but they are not substitutes for on‑site verification.
Any deficiencies should be documented promptly. Some issues may be addressed cooperatively with the developer, while others may require legal guidance. The key is to identify problems well before the limitations period expires.
Michigan’s Condominium Act establishes a special statute of limitations for claims against a developer that runs from the transitional control date and is significantly shorter than general limitation periods. Claims accruing on or before transitional control must be brought no later than three years after that date or two years after accrual, whichever is later, while claims accruing after transitional control must be filed within two years of accrual.
Walk the Property with Fresh Eyes
Board walkthroughs provide insights that reports alone cannot. Touring the property, taking photographs, and reviewing past work orders often reveal patterns such as recurring repairs, drainage concerns, or maintenance shortcuts that need early attention. Involving the property manager during walkthroughs adds practical perspective and helps set maintenance priorities. These observations also provide valuable input for reserve planning and budgeting decisions that will follow transition.
Listen to the Residents
Co‑owners and residents are often the first to notice problems that are not visible during inspections, such as interior leaks, sound transmission issues, or pest activity. Surveys and informal feedback can uncover issues that would otherwise go unreported.
Following up on resident concerns builds trust and signals that the new board takes its role seriously from day one.
Plan with Qualified Professionals
A licensed engineer’s inspection and a comprehensive reserve study are essential tools for long‑term planning. They help boards understand what assets exist, their remaining useful life, and the cost of future repairs and replacements. Michigan’s minimum reserve requirements are rarely sufficient on their own; informed planning relies on professional analysis, not statutory bare minimums.
Reserve studies should be updated periodically and after major capital projects to keep projections realistic and usable.
Capture Warranty Rights Before They Expire
Construction and system warranties are among the most overlooked transition assets. Boards should insist on receiving all warranty documentation before the developer disengages and track expiration dates and claim procedures carefully. Even minor warranty claims can translate into significant savings.
Designating someone to oversee warranty tracking helps ensure these rights are preserved rather than lost through inattention.
Final Thoughts
Transition is not just a handoff of control; it is a reset opportunity. Boards that approach it deliberately, with attention to legal, financial, and operational details, position their communities for stability and credibility. By taking the time to review what they inherit and planning thoughtfully for what comes next, co‑owner boards can move forward with confidence and avoid problems that might otherwise linger for years.
You may also wish to review our prior article regarding developer turnover.
