What Happens When the Builder Turns a New 55+ Community Over to the Owners?

In New Jersey, control of a new 55+ community's association passes from the builder to the owners in steps tied to sales: owners elect at least a quarter of the board within 60 days after 25% of the homes have closed, at least 40% after half have closed, and the whole board within 60 days after 75% have closed. At that point the builder hands over the association's documents, money and contracts, and the owners' board takes over the budget, the reserves and the rules.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. Several 55+ communities in Monmouth and Ocean County are still being built, such as K. Hovnanian's Four Seasons at Manalapan Crossing. If you buy early in one of them, you'll live through this handoff. Here's how it works under the Department of Community Affairs' rules.

Who runs a new 55+ community while it's being built?

The builder, through the board members it appoints. Those appointees are liable as fiduciaries to the owners, and while the builder controls the board, the association's annual audit has to be available on site for owners to inspect and copy (N.J.A.C. 5:26-8.2).

Until the association starts charging common expenses, the builder pays the costs of the common elements. Once fees start, the builder pays a full share on every unsold home it has registered, unless it chooses to subsidize the budget, which has to be disclosed in the public offering statement (N.J.A.C. 5:26-8.6).

When do owners take over the board?

On a fixed schedule, whatever the community's own documents say (N.J.A.C. 5:26-8.4):

1. 25% of homes conveyed: within 60 days, owners elect at least 25% of the board.
2. 50% conveyed: within 60 days, owners elect at least 40% of the board.
3. 75% conveyed: within 60 days, the builder's control ends and owners elect the entire board.

The percentages are figured on every home that will be in the association, not only those built so far. The builder can keep one board seat as long as it's still selling homes in the regular course of business, and it can hand over control earlier if a majority of owners agree.

On the age side, federal rules let a newly built 55+ community wait until 25% of its homes are occupied before it has to meet the 80% test (24 CFR 100.305). The basics of that test are in the 80/20 rule explained.

What does the builder have to hand over?

Everything the association needs to run itself. When owners take control, the builder must deliver the master deed, the declaration, the documents that created the association, the bylaws, the minute book, the rules, an accounting of association funds and the funds themselves, personal property, insurance policies, government permits, a membership roster and every contract and agreement.

Two protections help the new board. Contracts the builder signed with itself or an affiliated company before owners could elect a majority can't run longer than a year at a time, and the association can stop renewing them (N.J.A.C. 5:26-8.5). And the builder can't use its votes on unsold homes to change what the homes may be used for or shrink the common elements.

There's an obligation running the other way too: until the last home is sold, an owner-controlled board must keep up the same level of maintenance and services and can't take action that would hurt the builder's sales.

What happens to the money and the reserves?

• Working capital. New owners may pay a one-time working capital contribution at closing, capped at nine times the monthly fee at that time. While the builder controls the board, it's held in a separate account and used for start-up costs, not to keep the fees artificially low.
• Reserves. The builder-controlled budget has to fund adequate reserves based on a reserve study by an independent licensed engineer or architect, kept in a separate account. Once the first owner joins the board, reserve withdrawals need a signature from the builder's side and from an owner-elected member (N.J.A.C. 5:26-8.7).
• The first owner-run reserve study. For associations formed after January 8, 2024, a capital reserve study is due as soon as practicable after owners elect a board majority, and no later than two years after (NJ DCA).

What should you check if you're buying during the build-out?

• How many homes have closed, so you know where the community is on the 25-50-75 schedule.
• Whether the builder is subsidizing the budget, and what the fee becomes at full occupancy.
• The reserve study and how the common elements, from the clubhouse roof to the pool equipment, are being funded.
• Which rules may change once owners take over. Some state protections, such as the law limiting how associations restrict rooftop solar panels, don't apply while the builder controls the association.

For the bigger choice between new and resale, read new construction vs. resale in a NJ 55+ community and buying new construction when you downsize. If you'll sell first, get a free home value to set your budget.

Frequently Asked Questions

When does the builder turn over a 55+ community in New Jersey?

Owners elect the entire board within 60 days after 75% of the homes are conveyed, with partial owner seats at 25% and 50%.

Can the builder keep a board seat after turnover?

Yes, one seat, as long as it still has homes for sale in the regular course of business.

What is a working capital contribution?

A one-time charge some new owners pay at closing to give a new association cash flow. In a builder-registered development it can't exceed nine times the monthly fee.

Can owners end contracts the builder signed with its own companies?

Those contracts can't run more than a year at a time, and the association can stop renewing them at the end of any one-year term.

Who pays for the reserve study while the builder is in control?

The builder. It isn't a common expense while the builder controls the board.

This is general information, not legal, tax or lending advice. Rules come from N.J.A.C. 5:26-8, the NJ Department of Community Affairs and 24 CFR 100.305, opened October 11, 2026. Your attorney reviews the public offering statement and governing documents.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• Association paperwork and fees when you buy or sell
• What the association fee pays for
• Monmouth County's 55+ communities, town by town, newer community pages such as Venue at Woodlands, and every adult community on the map
• Have a question this didn't answer? Send it to Dennis Mark.