Condo turnover, sometimes referred to as developer turnover, can refer to both a process and date. The process involves the transfer of control of an association from the developer to the non-developer owners. The date refers to the date the transfer of power occurs.
Florida Statutes 718.301 covers turnover and is titled "Transfer of association control; claims of defect by association."
To better understand turnover, it may be useful to understand:
When a condominium developer builds a condo development, the first day they begin to sell condo units, the developer owns all the units. Therefore, the developer controls the voting rights of all the condo units. The developer also controls the association board of directors. And thereby makes all the decisions.
Upon turnover, the association members will elect unit owners to fill the majority, if not all, the seats on the board. In certain situations the developer can hold one seat on the board per FS 718.301
The article "Developer Is Preparing to Turnover the Association to the Owners. What Now?" presents a list of questions that describe the areas involved in turnover
The article "Turnover From Developer Control" by Florida law firm Arias Bosinger provides additional information about turnover. As noted in the article:
Importantly, turnover is not an event which signals the end of an association's opportunity to hold the developer liable for any failed obligations. Rather, turnover enables the non-developer-controlled board the opportunity to review the history of the operation of the community by the developer, determine whether the developer met its obligations with respect to such items as construction and financial funding, and pursue any claims the association may have against the developer.
The work required to "review the history of the operation of the community by the developer, determine whether the developer met its obligations" is extensive and time consuming. It often requires hiring engineering firms, consultants, and attorneys.
Whether the "review opportunity" is handled in the best interest of the association and unit owners depends on the quality of the review process. The process can take years.
Some Florida condo buyers who purchased before the turnover review process ended wish they had better understood whether or not turnover had already taken place before making an offer to buy.
Some Florida condo buyers who purchased after turnover wish they had better understood how well the association handled the turnover process.
Condo association costs can increase after developer turnover for several reasons.
One reason for increased costs is that the developer may have subsidized certain expenses in order to make the condo units more attractive to buyers. For example, the developer may have covered the cost of landscaping, maintenance, or amenities such as a pool or fitness center. Once the developer turns over control of the association, these costs may become the responsibility of the unit owners, leading to an increase in assessments.
It's possible that some costs are based on a vendors estimate. For example, property insurance may be priced according to an insurance appraisal. Developers might use vendors that have an optimistic view on appraisal values. Likewise, developer purchased reserve studies may use vendors that provide optimistic valuations and component lives, leading to a lower reserve contribution than what may be needed.
Another reason for increased costs is that the association may need to undertake certain repairs or improvements that were deferred by the developer. During the developer-controlled period, it's possible that some repairs or maintenance issues were overlooked or postponed in order to keep costs low. Once the unit owners take over control of the association, they may need to address these deferred maintenance issues, which can be expensive.
When a developer builds a new condo property, they are typically responsible for managing the association until a certain percentage of the units have been sold. Once the turnover occurs, the responsibility for managing the association is transferred to the unit owners themselves, and this can lead to changes in how the association operates and the associated costs.
In addition, the unit owners may have different priorities than the developer when it comes to the management of the association. For example, the unit owners may want to allocate more funds towards landscaping or amenities, or they may want to increase reserves in order to be better prepared for future maintenance expenses. These changes in priorities can lead to an increase in assessments in order to cover these new expenses.
Overall, developer turnover can lead to increased costs for condo associations as unit owners take on more responsibility for the management of the association and address deferred maintenance issues.