A Simple Rule to Guide Your Board of Directors

The Board of Directors for any Community Association really has a singular duty to its members: make (the right) decisions on behalf of the community. Of course, that's just stating the obvious really. What standard or guideline can the Board utilize as a template for what to do when taking action on Community issues?

It's called the business judgment rule. Comprised of three prongs, the business judgment rule is a measuring stick used by the courts to determine if a Board acted properly in the face of litigation resulting from its action(s). This rule requires that the Board (1) act in good faith, (2) exercise due care, and (3) do so without generating any conflicts of interest. Although these facets seems easy enough to master and abide by, many an Association find themselves in hot water because they failed to base their decisions on what's best for the Community and not just the Board (or a few vocal members).

There are a few questions that Board members can ask themselves to take stock of the business judgment rule and ensure that conduct comports with its requirements: (1) would you make this same decision if you were not personally affected? (2) have you done all necessary research to make an informed decision for the Association's benefit? (3) are you able to make an unbiased decision, avoiding any conflicts of interest personally or professionally?

Adhering to the above guidelines can increase the chance that your Board decisions are sound ones and not liable for second-guessing or litigation by disgruntled homeowners down the road.

*Thanks to Nicole L. Washington, CMCA, AMS as printed in Common Ground Jan/Feb 2006