Fiduciary Duty of Homeowners Association Board Members
Posted on 09. Aug, 2010 by briankoeberle in Real Estate
Many homeowners today are living in either planned communities or condominiums governed by homeowners associations (“HOA”). And some of these homeowners end up serving on the board of the HOA without any understanding of their fiduciary duty to the other homeowners. In short, a board member has a fiduciary duty of undivided loyalty to the association and its membership, and must avoid any conflict of interest or self-dealing. When acting as a fiduciary, a homeowner serves in a representative capacity, and must put the interests of the community first. Board members must also use sound business judgement and handle certain association matters and information with confidentiality. This includes a duty to also manage the financial and business affairs of the HOA with ordinary prudence. Concerning conflicts of interest, board members need to avoid even the appearance of impropriety. If a matter comes up before the board in which either the director or a family member has an interest, that director should immediately recuse himself or herself. Board members can breach their fiduciary duty by failing to perform the regular tasks involved in governing the association, such as holding regular meetings, keeping adequate financial and business records, properly collecting assessments, maintaining common areas, and adhering to the association bylaws. A breach of your fiduciary duty as a board members of the HOA can have legal consequences. Even if you unknowingly or unintentionally breach that duty, you may open yourself and the association up to a lawsuit by an aggrieved homeowner. Certain breaches of fiduciary duty can also negate any protection the HOA’s Officers and Directors liability policy may afford. Inexperienced board members of an HOA would be wise to consider consulting with the Community Associations Institute (www.caionline.org) on this issue.
