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What happens if Homeowners Association isn’t incorporated?

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What happens if Homeowners Association isn’t incorporated?

I have just joined the board of directors for my homeowners’ association and have found that although we claim to be a nonprofit corporation in our bylaws, we do not have articles of incorporation in our records or on file with the Secretary of State as is required. What are the legal ramifications of this? We've been operating this way for more than 10 years.

Homeowners’ associations, such as those that require membership by all owners of units in a building or of lots in a specific subdivision, are usually creatures of separate statutes covering condominiums, planned unit developments, or other types of community living arrangements. Such statutes normally allow, but don’t require, that the associations be incorporated. If they aren’t incorporated, they nevertheless continue to exist as unincorporated associations, which is probably what you are. Your bylaws, although misdescribing your status, will probably set forth the terms of your internal governance.
If you are in one of the handful of states that has adopted the Uniform Unincorporated Nonprofit Association Act or the Revised Act, you probably have essentially the same rights and responsibilities as a nonprofit corporation. (See Ready Reference Page: “Revised Uniform Unincorporated Nonprofit Association Act Provides Clarification for Rules of Conduct”) If you are an unincorporated association in a state that has not adopted one of those Acts, you may be in legal no man’s land with respect to your rights and responsibilities to the extent that they are not spelled out in the statute authorizing your existence or the real estate documents covering your property.
You should consult with an attorney familiar with common ownership real estate in your state to confirm your status and to discuss whether, if you are an unincorporated association, it would be worthwhile converting to a corporation. Many HOAs survive very well as unincorporated associations, but if you have a choice, it is worth considering the pros and cons of each form.
Monday, August 25, 2014

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