When a new community is built, the developer typically controls the HOA board from day one — setting up the CC&Rs, initial budget, and rules before any homes are even sold. Eventually, control has to transition to the homeowners themselves. This handover period is one of the most important and sometimes contentious phases in a new community's life.
Why the builder controls the board initially
During construction and initial sales, the developer has practical reasons to retain control — coordinating construction logistics, setting initial dues at a level that supports early operations (sometimes artificially low to make homes more attractive to buyers), and making decisions before there are enough homeowners to form a functioning board.
When transition typically happens
Most states set triggers for mandatory transition, commonly based on:
- A percentage of units sold — often somewhere between 75% and 90% of units sold to individual homeowners
- A maximum time period — even if sales are slow, many states cap builder control at a certain number of years regardless of sell-out percentage
- Completion of the project — some transition triggers are tied to construction completion rather than sales
Exact thresholds vary significantly by state, and some states have little to no statutory requirement at all, leaving it to whatever the CC&Rs specify — which the developer wrote. This is worth checking directly if you're buying into a newer, still-selling community.
What to watch for during transition
- Reserve funding — this is the single biggest area of post-transition disputes. Some developers underfund initial reserves to keep dues low during the sales period, leaving the new homeowner-run board with an underfunded reserve and hard choices (special assessments or dues increases) almost immediately after taking over.
- Deferred maintenance — construction defects or maintenance items the developer may not have prioritized before handing off control.
- Transition audit — many states require or strongly recommend a financial and physical property audit at transition, specifically to catch these issues before the developer walks away. If your community is approaching transition, pushing for a professional transition audit is one of the most valuable things a new board can do.
- Turnover documents — the developer is typically required to hand over financial records, contracts, warranties, and association documents at transition; incomplete turnover is a common early friction point.
If you're buying into a community still under builder control
Ask directly: what percentage is sold, when is transition expected, and has a reserve study been done independent of the developer's own numbers? A newer community with builder-set artificially low dues is a common trap — the honeymoon pricing often doesn't survive the first homeowner-run budget cycle.
Related: Reserve funds explained · How HOA board elections work