Does HOA need to be incorporated?

By From page C2 | July 28, 2012

Q: We moved into our home seven years ago. We were told that we had a homeowners association and we were given a set of the C,C&Rs governing our development. We went to an association meeting and were told that the association isn’t incorporated. We have some renters in our home who won’t follow the rules. Is there anything the association officers can do about this? Also, under the law, is it even possible to have a homeowners association that isn’t incorporated?

A: I’m not entirely sure I understand the first part of your question, so I’m going to try and provide answers to several different questions and hopefully I’ll hit on the information you’re looking for.

Homeowners associations are becoming the norm for new housing developments, not that there’s a lot of those right now.

An HOA is a type of “city council” that exists only by the agreement of all the homeowners. Like a city council, its purpose is to govern the day-to-day management of the development.

Some HOAs, like in Fairfield’s Rancho Solano or Eastridge, have broad sweeping powers and relatively large budgets with which to manage streets, fences, street lights, security, green space, etc.

They can fine homeowners for parking their cars on the street at night or painting their home an unapproved color. They typically have a private security force to monitor the security of the development as well as serve as a surrogate police force capable of breaking up parties and even making arrests.

Others are not given all of those powers or money, and simply set rules regarding the operation of the development while having very few tools to enforce those rules. Typically, these types of HOAs leave any enforcement to the individual homeowners who are left with no option other than to ignore the problem or file a lawsuit against their neighbor.

The powers given, or not given, to an HOA are mostly contained in the C,C&Rs which functionally serve like a type of civil code defining what the HOA can and cannot do.

When it comes to making tenants follow the rules, regardless of the type of HOA, ultimately the property owner or landlord is responsible to the neighbors and the association.

No HOA has the ability to fine a tenant. The liability for imposed penalties such as fines is inherited by the landowner as a result of his ownership in the land itself.

So the answer to the question I think you’re asking is: No, the officers of the association, incorporated or not, can’t be relied upon to supervise your tenants. That’s your responsibility as the homeowner.

To answer the second part of your question regarding incorporation: No, I guess an HOA doesn’t technically need to be incorporated.

If the C,C&Rs lay out the existence of the HOA, and each homeowner’s deed requires the homeowner to adhere to the C,C&Rs, then it’s possible to have a defacto association that operates without the benefit of the corporate structure or protections. But I can’t imagine why anyone would want to do so.

Without being a corporation, what you’re left with is one big partnership. That means each homeowner is individually liable for anything the HOA does. If an employee, for example, sues the HOA for back pay or sexual harassment or discrimination, then every homeowner is equally liable as if they had been the employer. That’s because, just like in any business partnership, they are. That’s the nature of partnerships. Everybody is responsible for every other partner’s actions.

If I were you I would look closely at the C,C&Rs and see if they don’t require the HOA to be incorporated. My hunch is they do.

If so, ultimately, the homeowners can sue the officers to make them incorporate.

Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like to have answered in this column you can contact him at [email protected]

Tim Jones


Discussion | 1 comment

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  • PatrickMay 31, 2013 - 12:10 pm

    Couldn't you just draft by laws that offer you the same protection as a corporation i.e. no individual homeowner can be sued for anything the HOA does

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