To form an association, all that is needed is a recorded declaration of covenants, conditions and restrictions (CC&Rs) against all lots in the development. If there is no common area, the CC&Rs form a non-Davis-Stirling deed restricted development. To form a Davis-Stirling association, there must be common area, which makes it a common interest development (CID). Each form of development can either be incorporated or unincorporated. In the 1960s and 70s most developments were unincorporated. Now, most associations are incorporated. To incorporate, an association must file articles of incorporation with the Secretary of State and adopt bylaws and then file statements of information with the state.
ARTICLES OF INCORPORATION
Content. Articles of Incorporation are only a few pages long and (i) identify the corporation as an association formed to manage a common interest development under the Davis-Stirling Common Interest Development Act, (ii) state the business or corporate office of the association, and (iii) state the name and address of the association's managing agent, if any. For more information see Sections 7130-7135 of the Corporations Code.
Filed with State. Articles of Incorporation are filed with Secretary of State.
Amending Articles. Articles of Incorporation may be amended as provided for in the amendment provision contained in the Articles. For more information about amending Articles, see Sections 7810-7820 of the Corporations Code.
Benefits. Unincorporated associations will frequently incorporate so as to establish the authority of a corporation (Corp. Code § 7140) as well as the protections offered by corporate status. For more about corporations, see Corporations Menu.
Corporate Seal. Because of the frequent board turnover and informal record-keeping of many associations, the corporate seal is often lost. If that occurs, there is no need to replace it. Incorporated associations are not required to have a corporate seal. Contracts signed by boards do not need a corporate seal to be valid. (Corp. Code § 7140(a).)
Purpose of Bylaws. Bylaws establish policies and procedures for the governing of an association. They set qualifications for the election of directors, their number and term of office, their powers and duties, the appointment of officers, when and how meetings are held, quorum and voting requirements, appointment of committees, etc.
Unrecorded. Bylaws are not recorded nor are they filed with the Secretary of State. However, "Statements of Information" are filed with the State.
Unsigned. Bylaws and articles of incorporation are supposed to be signed by the person who incorporates the association (normally the developer or someone retained by the developer to set up the association). Sometimes the documents are not signed. The lack of a signature does not invalidate the documents but it can impact HUD/FHA and Fannie Mae certification of the association for loans. If that happens, the current board of directors can "ratify" the existing documents as the official documents of the association and sign them. It should be done by board motion recorded in the minutes of the association.
Recommendation: Boards should look at the last page of their bylaws and see if they are signed. If not, legal counsel can prepare a certification. Once that is done, the board should adopt a resolution authorizing the president and secretary to sign the certification, which is then added to the bylaws.
Bylaw Amendments. See "Amending Bylaws."
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.