Reasons to Incorporate Your HOA
Homeowner associations in California may be unincorporated or incorporated, but more than 95% are incorporated for several good reasons. While unincorporated homeowner associations can exercise all of the powers of incorporated associations, following are four good reasons to incorporate your HOA:
- Incorporation provides better protection against liability in some contract and tort actions against the association.
- The California Corporations Code and case law provide well-recognized and accepted procedural and other guidelines that don't always exist for unincorporated homeowner associations.
- Commercial banks and other lenders to homeowner associations nearly always insist on incorporation prior to considering a loan to an HOA.
- Most mortgage lenders prefer to make loans to owners in incorporated homeowner associations and often reserve their best rates and terms for these borrowers.
If your association is unincorporated, and the board decides to incorporate, the membership will be required to vote to incorporate utilizing the secret ballot process. If you have legal questions, they should be directed to an HOA attorney licensed in California. If you need a referral or other information, please call us.