CAI-NJ November 2020

FINANCIAL IMPACTS... from page 14.

times this report will indicate that the association is due additional funds from the developer, and as such, can be a valuable process that is worth looking into. In addition to the finan- cial concerns addressed above, the unit owner board may also consider having a thorough review of the site itself. This process involves having certified engineers and professionals complete invasive testing to deter- mine whether or not any construction defects or deficiencies are present. Similar to the financial transition exam- ination discussed above, these reports can often identify defects which can require significant amounts of money to repair. As such, having these stud- ies performed can definitely be a ben- eficial task for boards to undertake. At first glance, it may seem obvi- ous that it would be wise for any newly appointed unit owner board to undertake the inquiries and exam-

inations discussed above. However, in order to ensure that your site has a successful transition, it is always recommended to utilize your team of professionals including engineers, accountants, lawyers, etc. These pro- fessionals have years of experience in dealing with transition related matters

within their association’s governing documents. After the unit owner board has gained a thorough understanding of the developers funding requirements, they may then begin the process of evaluating whether the site was ade- quately funded during the period of developer control. This process begins with obtaining the audited financial statements and accounting records since the inception of the site. Once this information is obtained, the board may then engage an independent certified accountant to perform a “transition examination”. This exam- ination provides a summarized report, by year, and indicates whether or not the developer had over or under fund- ed the association’s operating and reserve accounts in past years. Often

“If not properly planned for, the

transition process can cause a site to fall into a financial pitfall.”

and can help guide boards through the process. Although these services can greatly benefit the association, it is very important for boards to remem- ber that all of these services come at a cost. If not properly planned for, the transition process can cause a site to fall into a financial pitfall. To help avoid this, there are three keys that a board can use to help them stay ahead of transition expenses: 1) Budgeting: The annual budget is one of the most important tools that a board has at its disposal. Without an accurate budget, the chances of an association having successful financial results are greatly diminished. This could not be more true than when it comes to transition. Throughout my experiences, I have found that it is not uncommon for boards to be operating on their initial budget (i.e. the budget that was included by the developer in their public offering statement) even after ownership of the site has transitioned to the unit own-

Wilkin Management Group , Inc. 30 Years of History

For over 30 years, Wilkin Management Group has held to an unshakeable corporate philosophy of Creating Value for Our Clients. Our People, Process and Performance demonstrates an un-wavering commitment to do so. With locations in Northern and Central NJ Visit us on the web at www.WilkinGrp.com | 201.560.0900

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