Owners invest heavily in their property. Many save for years for a place of their own and many others spend their savings for renovations. None of these owners would appreciate a negligent board whose actions—or inaction—diminished their investment. Fewer still would accept, “I’m just a volunteer,” as an excuse.
Boards, having authority over and responsibility for the property of others, become fiduciaries. Fiduciaries hold a special relation of trust, confidence and responsibility in their obligation to others and must adhere to strict fiduciary standards—including what’s called the business judgment rule—in performing their duties. Fiduciary standards comprise two parts: duty of loyalty and duty of care.
- The duty of loyalty prevents board members from using their positions to take advantage of the association. Board decisions must not benefit any individual at the expense of the whole association.
- The duty of care means that board members must perform their duties in good faith, in a manner that they reasonably believe to be in the best interest of the association, with the same care an ordinary, prudent per- son, in a similar position and under similar circumstances, would use.
Fiduciary duty requires boards to act for the owners as a whole when conducting association business.
- Act within the bounds of their authority
- Act in good faith
- Consult with experts in the relevant field
- Get sufficient information
- Base decisions on what’s best for the association