An article authored by the firm’s Lindsey Thurswell Lehr and Berenice Mottin-Berger appeared today as the featured expert commentary column in the online edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper, and will soon be appearing in the “Board of Contributors” page of the print edition. The article, which is titled “Buyers at New S. Fla. Communities Must Diligently Protect Interests During, Post-Turnover,” begins by acknowledging that the South Florida housing market is now booming, thanks in large part to an influx of professionals relocating here and increased work-from-home opportunities under the new post-pandemic normal. The attorneys note that many of the region’s new residential developments now rushing to completion will soon undergo the turnover process by which control of their operation and management is transferred from developers to property owners. They write that this is a crucial stage with significant consequences for the long-term financial and administrative well-being of communities, making it essential for property owners to closely monitor the turnover process to protect their rights and investments. Lindsey and Berenice’s article reads:
. . . Generally speaking, the turnover process presents the initial opportunity for new owners and owner-controlled boards of directors to hire independent legal counsel, financial professionals, and engineers to conduct meticulous inspections of a community’s property as well as its rules and business records. Communities at this stage will need to diligently interview and investigate prospective service providers to ensure only independent and highly qualified professionals are retained to represent the interests of all owners and hold developers to their warranty obligations.
As owner-controlled communities have different goals and needs than those still operating under the regime of their developer, the drafting of new rules regulating community affairs, collections policies and construction matters should be considered.
Florida law permits association boards to settle claims with developers over matters of common interest to the property owners, including claims alleging construction defects and financial irregularities. As part of these settlements, associations often execute general releases from any future claims, making the negotiation process vitally important for a community’s long-term financial footing and the preservation of its property values.
Given the potential impact, it is crucial for independent attorneys and engineers specialized in these areas to guide new communities through this process and help them avoid settling claims for fractions of their real worth or accepting cosmetic repairs that do not fully address underlying defects.
While it should go without saying that boards of directors ought not to retain the services of attorneys and other professionals who were selected, hired or paid by the developer-controlled board prior to the owners assuming control, some communities choose to ignore the obvious conflicts of interest and continue to work with the legal counsel and other professionals who served the developer. Such decisions to maintain the status quo often prove to be detrimental, and they may cause associations to miss out on claims that become time-barred or are released under poorly negotiated settlements.
To safeguard any potential claims that may arise, owners must get involved and thoroughly interview those seeking election to the board to ensure that only truly independent candidates without any ties to the developer or contractor are elected. They should also remain involved to confirm that the newly minted association directors select and retain highly qualified attorneys and engineers who are entirely independent from the developer or contractor behind the community.
The boards and their attorneys should also be prepared to immediately address any construction or financial issues with the developer during the turnover process rather than afterwards. The longer an association holds off on addressing construction issues, the easier it becomes for the developer to attempt to shield itself from liability by shifting blame and raising defenses such as lack of proper maintenance and other intervening causes.
In addition to thoroughly interviewing the attorneys and engineers being considered to represent the association, the new directors must also carefully investigate the prospective property management and administrative staff for any involvement or affiliation with the developer or contractor. They should also review and assess the vendor contracts that the developer has executed for landscaping, valet parking, security and other services. A thorough vetting and interviewing process should be developed and implemented with the help of qualified and experienced professionals. . .
Lindsey and Berenice conclude by underscoring that the initial owners at the myriad new South Florida communities should understand the significance of everything that is at stake during the turnover process and its immediate aftermath. They note that decisions made at this juncture often have long-lasting and important consequences for communities, so it is imperative for these owners to perform their due diligence and become involved in the management of their community during this stage to protect their investments and help ensure all developer/contractor obligations are upheld.
Our firm salutes Lindsey and Berenice for sharing their insights into the perils of conflicts of interest during and after the turnover process with the readers of the Daily Business Review. Click here to read the complete article in the newspaper’s website (registration required).