Unincorporated association to an Incorporated

Our association has been advised to change from an unincorporated association to incorporated HOA.

In Texas does this involve a vote from the membership, because it involves amending the bylaws?

Below is an opinion from a law firm in California. While it is in my state, it might give you an idea of the pros and cons of being incorporated.

Separate Existence. Associations may be incorporated or unincorporated. (Civ. Code §4800.) An unincorporated association has a legal existence separate from its membership and can be sued in the same way that an incorporated association can be sued. White v. Cox (1971) 17 Cal.App.3d 824. As a separate entity, an unincorporated association owes a duty of care to its members. (Ritter & Ritter v. Churchill.)

Powers. By statute, unincorporated associations may exercise all of the powers of incorporated associations (Civ. Code §4805)), including the power to initiate and defend litigation. (Civ. Code §5980.) The powers of a corporation are defined in Corporations Code §7140. Following are some of the benefits of incorporation:

Procedural Guidelines. Although unincorporated associations have all of the management powers of an incorporated association, they still lack certain benefits and protections given to incorporated associations. Corporations are well-recognized and understood. They have the Corporations Code and case law, both of which provide procedural guidelines and protections not afforded unincorporated associations.

Liability Protection. Incorporation offers clearer protections against the membership's vicarious personal liability in contract and tort actions against the association. Because the cost of incorporation is minimal and protections can be significant, incorporation is usually preferable.

Bank Loans. Associations will from time-to-time need to finance a large repair project in the common areas. Banks will readily loan to incorporated associations. Unincorporated associations will have more difficulty.

Who told you that??? While would agree that potentially in most states HOA should be a Non-Proffit Corporation ... keep in mind from past posts you are still under Developer control. Therefore, is this another issue which your developer needs to fix and dig out of his own hole he made himself.

You are going to have a difficult time right now doing much until the developer sells a few more homes. Here is info on unincorporated nonprofit associations:

https://www.sos.state.tx.us/corp/forms/208_boc.pdf

It looks like the two status are somewhat similar, but your issue is the developer is still in control. Remember when I told you patience is a virtue??? Keep in mind you are possibly going to need to pay attorney in future, so careful about spending too much now on items you possibly cannot control yet. Also, the developer has a number of issues he needs to dig himself out of ... I personally would make developer fix his problems before taking over responsibility or liability.

Did you pull the contracts between the Developer and the County??? Was their items in that contract whereby the developer is required to finish the roads per the County specs??? I personally estimate you are going to spend a lot of money on an attorney and court to get the developer to build a "second entrance" when the Local County Government already approved what is currently being built and is potentially per your statements only one entrance. I would be willing to bet you will LOOSE that battle ... why, because unless what is already approved violated the local ordinances in effect at the time of approval ... sorry, that contract in effect at that time potentially should not be overridden. The Developer and the County entered into a contract and the homeowner's later cannot override a prior agreement.

Potentially it will be a cold day down below before you will receive an injunction against the developer to stop building per a legal and valid contract the developer received to build from the local County Government meeting their regulations. However, if you want to spend time and money on that effort ... good luck because I estimate you will need it.

I have served for a number of years on my local Planning Commission and some items you have stated are confusing. Generally a developer will file a Site Improvement Agreement (SIA) with the local government which must go through their channels. This generally is initially reviewed by the government's Planning Commission at an appropriately called meeting (after notices given to surrounding residents and signs posted) and then final approval from the City or County Government via their Council Meetings. That filed SIA must follow the local governments subdivision regulations and potentially other local ordinances. The information is sent to the Planning Commissioners and Government officials prior to their meetings so they can review ahead of time and make a decision at their appropriately called meetings.

When the developer submits his paperwork the local government generally also requests essentially ernest money (which is generally quite a bit of $$$) which is placed into an escrow account to insure the developer abides by what has been agreed to in the SIA contract. This is so that if the developer does not follow through with the agreed contract the local government has $$$ they can access to help complete the project or fix items not appropriately completed.

What you are now describing is potentially what we call a Phased Community. If a developer owners a large amount of land they will sometimes build in various "Phases". However, the drawback is each Phase must meet the different regulations and development fees in effect at the time of the next phase being approved. When those regulations change and fees increase the developer does not like it ... but they made their choice to defer to a later date.

The developer can potentially build what has already been approved, but if he is looking to expand then he potentially needs to get his next Phase approved. However, I would contend the County should not approve (and Owners can attend the Planning Commission and County Council meetings) to voice their opinion on the subject until he makes good on what has already been promised to both the County and the Current Owners.

I still would contend there MUST be some contract between the Developer and the County. Did you go to your local County Records Department and research or ask them about any documents on file??? On your local County Records website look up under HOA Name, Developer Business Name or Personal Name, and County Name for the date range starting before development was approved. I bet there should be a contract filed.