Don't Let Your New Board Members Get Your Association Into Fiduciary Hot Water!

Well-meaning but uninformed new board members can spell t-r-o-u-b-l-e for a community association when it comes to handling fiduciary duty. A simple, but effective, method for nipping this potential problem in the bud is accomplished with a letter (you know, those antiquated old pieces of paper that folks used to communicate with before the advent of E-mail).

Soon after new board members are elected to the board, send them a letter explaining what their fiduciary duty to the association is, and what conduct is expected of them related to such.

Here's a few easy guidelines:
(1) Explain the concept of fiduciary duty.

(2) Make sure that board members act in the best interests of the association. No favoritism, or currying votes with the community at-large. Decisions are to be made for the benefit of the association as a whole.

(3) Be careful and seek advice from experts when necessary. For example, if board members must decide on repair or replacement of a pool and there are no knowledgeable pool construction experts on hand, they should consult one prior to making a decision.

(4) Act within the scope of authority. Make sure that board actions are sanctioned by association's governing documents (the by-laws and/or declarations) any applicable state or local laws. Board member decisions at odds with either source of authority constitute a breach of fiduciary duty.

(5) Act in good faith. Discriminatory, malicious, or arbitrary decisions are to be avoided at all costs. Remember, board members serve the entire community and not just a few fortunate residents; good faith simply means that the decision to create and enforce a rule must be based on an honest judgment on what's best for the association as a whole.

(6) Avoid these common mistakes. Fiduciary duty means that newly-elected board members cannot do the following,

(i) Take personal advantage of business opportunities that should benefit the entire community.
(ii) Do business with the association unless the deal is disclosed and approved.
(iii) Grant special privileges or show favoritism, or expect it in return for kind.
(iv) Accept gifts from vendors or others doing business with the association.

The above list is by no means exhaustive, but is meant as a strong foundation for ensuring that your new board members don't get your association into fiduciary hot water!

*Thanks to Community Association Insider, and contributors David L. Berkey, Esq., and Steven J. Shore, Esq.