Fiduciary Duty

Most homeowner associations are non-profit corporations and as a director you have a fiduciary duty.

You have a legal obligation!

• Act in good faith

• Govern with the care an ordinarily prudent person in a like position would exercise under similar circumstances

• Govern in a manner to be in the best interests of the corporation

 

Board Member Responsibilities

• Participate in all meetings

• Respect parliamentary procedure

• Maintain confidentiality of executive session meetings

• Accept the board’s decision even if in disagreement

• Promote the interests of the association and avoid conflict

• Disclose financial conflicts of interest

• Ensure finances are well managed

• Uniformly enforce the covenants and governing documents

• Place the interests of the association above personal interests

• Resign from the board if unable to accept these responsibilities

 

Board Authority

Now it's some point in time individually or collectively as part of the board, somebody is going to ask you the question “what gives you the right to do such and such” and in fact your authority comes from the general statutes in the covenants of the association and some of those things that you have authority to do include:

• Creating and amending the bylaws

• Adopt the budget

• Impose Assessments and special assessments

• Enforce the covenants

• Levy fines

• Place a lien on properties

• Enter into contracts for services

• Incur liabilities

• Borrow money

• Sue and be sued

• Act with emergency powers in special situations

• Do all things necessary and convenient not inconsistent with the law to further the activities of the affairs of the corporation

 

Board Member Liability

Directors are generally not liable for actions taken when performing the duties of their office consistent with fiduciary duty.

It is critical that an association maintain directors & officers Insurance.

If the association is a claimant or defendant in a lawsuit, and to the extent that the d&o insurance does not cover the legal fees or judgement, the costs will be borne by all the members.

 

Actions That Can Expose a Board to Liability

• Failure to govern in accordance with the laws and governing documents

• Failure to provide due process

• Inconsistently enforcing the covenants or rules

• Having a conflict of interest

• Failure to meet in executive session when appropriate

• Curbside conversations that imply you have individual authority

• Publicly disclosing the names of members with delinquencies

• Email exchanges that become discoverable in a lawsuit.

 

Chain of Governing Laws

1. Federal Laws:

Examples include the Fair Housing Act, Americans with Disabilities Act, and more.

2. State General Statutes:

Examples include the Indiana HOA Act and the statutes governing NonProfit Corporations.

3. Local Government Ordinances:

Examples include ordinances governing abandoned vehicles, animal control and on-street parking.

 

Chain of Governing Documents

1. The Association's Declaration of Covenants, Conditions and Restrictions (CC&R's)

2. The Plat which is a recorded map/survey of property lines, common areas and easements.

3. The Article of Incorporation

4. The Association's Bylaws

5. Other Association Rules, Regulations and Resolutions

 

Know Your Governing Document Provisions

Examples of Covenant Provisions:

• Membership Classes

• Declarant Control Period

• Rights/Responsibilities

• Assessments/Liens

• Easements

• Architectural Control

• Covenant Restrictions

• Amendments

• Covenant Term/Dissolution

 

Examples of Bylaw Provisions:

• Annual Meeting

• Board Meetings

• Special Meetings

• Board Size

• Board Terms

• Elections

• Quorums

• Proxies

• Amendments

 

For personalized training please contact our Board Support Team at board@yourhoahelp.com