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Fiduciary Duty What Board Members Should Know

 Whether they serve a co-op, condo, or HOA community, board members have a  responsibility to govern and make decisions on behalf of that community—a charge that is often referred to as the board's 'fiduciary duty.' Decisions  made on behalf of their fellow residents must be made in good faith, with the  best interests of the community always guiding those decisions. Violating this  duty can lead to legal consequences for boards and individual board members who  stray from this rule.  

 That’s why understanding the breadth and the limitations of fiduciary duty is  essential for both multifamily community board members and residents who don’t hold an office in their community. All residents must keep their elected  officials honest by paying attention to their actions, whether they are city  councilmen or condo board members. They must stay attentive to ensure that the  proper actions and methods are performed by board members. Failing to do so  could mean a special assessment is levied on everyone in the community, in  order to pay for unnecessary legal fees.  

 To pursue the best practices in governing their community, board members must  fully comprehend the concept of fiduciary duty, and allow that guiding  principle to inform all of their choices as elected members of the community.  They need to take the idea to heart, and keep it in the front of their mind,  always asking, “What’s in everybody’s best interest?”  

 Community Trust

 Defining fiduciary duty as it applies to board members means, in part, always  putting the overall interests of the community first, regardless of the issue  that the board is considering. But a selfless perspective for a community  politician is just part of the responsibility that every board member of a  co-op or condo assumes when they are appointed to their new position. The  particulars of that duty are what give some board members pause, sometimes  leading them to wrongheaded thinking.  

 “Fiduciary duty is their standard for being responsible for the association’s assets. It means having a loyalty to the association and a responsibility for  the community’s property and money,” says Marc Garrison, president of Private Holding Group, a full service real  estate management company based in Chicago. “Board members are supposed to look out for the association’s interests above all others, including their personal interests.”  

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2 Comments

  • Our condo court needs a new well if it is put near the old one on common property it would cost us $20,000. The person who lives closest to where the well would be billed has hired a lawyer and someone on the board assured this homeowner that the well would be placed in a different area. The area that they selected will cost us $60,000 to have a well put in because it has to go under the courts pavement. So basically were talking about $40,000 more to move it somewhere else still on common property but not near the person who complains unit which should only be $20,000. So we're talking about a $40,000 increase,I feel that this is definitely not in the best interest and a lawsuit would be brewing from that result. We reside in west palm beach Florida can you give me any suggestions?
  • I’ll be to the point... I would not worry about court/lawyer fees if the Unit Owner sues... check with your Declarations and CCC’s typically the Unit Owner would bear all Association costs if the Association is the prevailing party in a suit against it from a unit owner. When the unit owner bought the unit they knew the well existed where it’s located. It doesn’t matter whether they agree with that statement or not, the well was in place prior to their move-in. It would be considered reasonable by the courts to repair/replace the at its current location unless some other extreme issue exists and a unit owners dislike is not considered an extreme circumstance. Regardless of “someone” on the Board telling the unit owner otherwise has no bearing as a Board member does not carry exclusive remedy in this situation. It would be required the entire Board vote to decide where to place this well and at what cost not an individual on the Board. While a unit owner may be dissatisfied it is in the Boards requirement to act in the best interest of its community both from a fiduciary and common sense approach. There will always be dissatisfaction no matter where this well is placed. There was likely sound reasoning and Village approval by code when this Well was originally installed so Courts would likely agree the continued location and maintenance would be considered reasonable and side with the associations efforts. If your Declarations read as many do the Unit Owner would then also bear the cost of the Association’s defense costs. The Devil is always in your Decs and CC&C’s.