An HOA transition from developer to homeowner control in Texas is a staged handover governed by the Texas Property Code. Once 75 percent of the lots in a subdivision have been sold to end buyers, the developer has 120 days to let homeowners elect at least one-third of the board. Full homeowner control comes later, on the schedule set by the community’s declaration. The incoming board inherits records, contracts, bank accounts, and a set of legal deadlines that are already running, so what happens in the first few months matters more than almost anything the board will do afterward.
When Homeowners Get Board Seats
Two statutory triggers force the developer to share control, and the declaration cannot waive either one.
The main trigger is sales volume. Once 75 percent of the lots that can be created under the declaration have been conveyed to buyers other than the developer, homeowners gain the right to elect at least one-third of the board, and the election must be held no later than 120 days after that threshold is reached. Lots sold to builders who bought from the developer in order to construct and resell homes do not count toward the 75 percent; only lots conveyed to end owners count.1State of Texas. Texas Property Code PROP 209.00591 – Board Membership
The fallback trigger applies when the declaration does not specify a total lot count. In that situation homeowners must be allowed to elect at least one-third of the board no later than the tenth anniversary of the date the declaration was recorded.1State of Texas. Texas Property Code PROP 209.00591 – Board Membership
One point worth being clear about: these triggers guarantee only one-third of the seats. The developer can hold the other two-thirds until further milestones in the declaration are met or the development period ends. Full homeowner control of every seat typically happens later, on whatever schedule the specific declaration sets.
Condominiums Follow a Different Statute
If the community is a condominium rather than a platted subdivision, the Texas Uniform Condominium Act applies instead of Chapter 209, and the thresholds are lower. At least one-third of the board must be elected by unit owners once 50 percent of units have been conveyed to buyers other than the developer. Developer control must terminate entirely within 120 days after 75 percent of units are conveyed, at which point unit owners elect the whole board of at least three members, and the new board must elect officers within 31 days.2State of Texas. Texas Property Code PROP 82.103 – Board Members and Officers
Calling and Noticing the Transition Meeting
Once a trigger is met, the developer must call a meeting so homeowners can nominate and elect their representatives. Written notice must go to each member no earlier than 60 days and no later than 10 days before the meeting, and the notice must state the date, time, location, and subject. For votes conducted outside a meeting, the association must give at least 20 days’ notice before the ballot submission deadline.3Texas State Law Library. Meetings and Voting – Property Owners’ Associations
If the developer is slow to act, put the demand in writing and cite the specific Property Code section along with the date the trigger was met. A paper trail matters if the dispute later goes to court.
What the Developer Must Turn Over
After the transition meeting, the outgoing developer-controlled board must transfer every piece of association property and every record to the new board. The handover should include:
- Financial records: budgets, bank statements, general ledgers, and a full accounting of funds collected and spent during the developer control period
- Bank accounts held in the association’s name, with signatory authority transferred to the new officers
- All active vendor contracts, including those with landscapers, management companies, and security firms
- Insurance policies on common areas and association operations, with declarations pages showing limits and expiration dates
- Governing documents: the recorded declaration, bylaws, articles of incorporation, architectural guidelines, and any amendments
- Architectural and engineering plans, including site plans, plats, and construction drawings for pools, clubhouses, and drainage
- A current roster of lot owners with contact information and assessment histories
Inventory what you receive against this list and send a written request for anything missing. If a developer cannot produce certain records because they were never properly kept, document that gap. It can matter later.
First Priorities for the New Board
The decisions a new homeowner-led board makes in its first few months shape the community’s finances and legal position for years. Four tasks deserve immediate attention.
Independent Financial Audit
Hire an independent CPA to audit the books covering the entire developer control period. Texas law does not expressly require a post-transition audit for subdivision HOAs, but skipping it leaves the new board exposed. The audit confirms that every assessment was collected, deposited, and spent on legitimate association expenses, and it sets a clean baseline so the new board cannot be blamed for shortfalls that originated earlier. Developers sometimes hold assessments artificially low to make homes easier to sell, and the audit will show whether operating and reserve accounts are where they should be.
Reserve Fund Evaluation
Texas does not require subdivision HOAs to conduct a formal reserve study, but commissioning one early is sound practice. A reserve study catalogs major common-area components (roofs, parking lots, pool equipment, fences), estimates remaining useful life, and calculates the annual contribution needed to pay for replacements without special assessments. Industry guidance generally points to keeping reserves at least 70 percent funded relative to future liabilities. Developer-era budgets often allocate little or nothing to reserves, which leaves catch-up work for the new board.
Common-Area Inspection Before the Defect Deadline Runs
This is where new boards most often lose money by moving too slowly. Hire a licensed professional engineer to inspect every common-area improvement: streets, drainage, retaining walls, pools, clubhouses, playgrounds, and irrigation. The inspection should flag incomplete work, construction defects, and code violations the developer is responsible for correcting.
The urgency is the statute of repose. A construction defect claim in Texas must be filed no later than 10 years after substantial completion of the improvement. If the contractor provided a written warranty meeting certain minimum standards (one year for workmanship, two years for mechanical systems, and six years for major structural components), the deadline shrinks to six years. That shortened period applies to residences, defined as detached single-family or two-family homes and townhouses up to three stories, and does not apply to condominiums.4State of Texas. Texas Civil Practice and Remedies Code 16.009 – Persons Furnishing Construction or Repair of Improvements
The clock starts at substantial completion, not at the date of transition. If a clubhouse was finished five years before transition, the window for discovering a defect and filing suit is already half gone. The inspection should happen within the board’s first 90 days.
Contract Review
Developers often sign vendor contracts during the control period that favor their related companies or lock the association into unfavorable terms. Review every inherited contract for auto-renewal clauses, above-market pricing, and provisions that restrict the board’s right to terminate. Contracts between the association and companies affiliated with the developer deserve extra scrutiny.
Records Retention the New Board Inherits
Any Texas property owners’ association with more than 14 lots must adopt and follow a document retention policy. The Property Code sets minimum retention periods:
- Governing documents (declaration, bylaws, covenants, and amendments): permanent
- Financial books and records: seven years
- Tax returns and audit records: seven years
- Board and member meeting minutes: seven years
- Current owner account records: five years
- Contracts of one year or longer: four years after the contract expires
If the developer never formalized a retention policy, adopt one at an early board meeting. Records inherited from the developer period are subject to the same timelines, so confirm the retention window has lapsed before destroying anything.
Federal Tax Filing
An HOA is a taxable entity. Most associations file IRS Form 1120-H, which is designed for homeowners’ associations and taxes only non-exempt income (such as vending revenue or facility rental fees) at a flat 30 percent rate. Membership dues and regular assessments are treated as exempt function income and are not taxed. To qualify for Form 1120-H, the association must meet three tests each year: at least 60 percent of gross income must come from member assessments, at least 90 percent of expenditures must go toward managing and maintaining association property, and no part of the net earnings can benefit any individual.6Internal Revenue Service. Instructions for Form 1120-H
A new board inheriting an association that never filed, or that filed the wrong form during the developer period, should bring in a CPA familiar with HOA taxation to clean up back filings before the IRS does it for them.