Being on the board of directors for a homeowners association comes with a lot of responsibility. The board is responsible for making sure the entire community is running well. This includes making sure all of the homeowners are following the rules, making sure the community is well-kept and safe, and handling all of the association’s finances. Sometimes the list of duties can seem almost overwhelming. And while it is a volunteer position, there are legal responsibilities board members have. To help boil things down, we will go over the top three legal duties of HOA board members.
State law describes the fiduciary duties of homeowners association boards. And even though associations are nonprofits, and the board positions are optional, there are still legal responsibilities the board members take on. They are similar to the responsibilities for a board of directors for a corporation. There are three main duties for HOA board members: The Duty of Care, The Duty of Loyalty, and The Duty to Act Within the Scope of Authority.
The Duty of Care
First, The Duty of Care basically means that board members must make careful, well-informed decisions. In order to carry this out, they need to be as familiar as possible with all of the governing documents of the association. And when necessary, additional research should be done before taking action such as voting on an HOA matter. This is probably something most board members would do anyway.
For example, before fining a homeowner for violating a rule, board members must be familiar with all relevant governing documents. The board members should also be familiar with the details of that specific situation. They should use sound judgment and avoid random or irrational decisions. For instance, a board member can’t fine a homeowner for painting their door blue just because they personally don’t like the color. If there are no rules on what color doors can be, the board cannot take any action. So, in order to know what is and isn’t allowed, board members must be very familiar with all of the governing documents.
The Duty of Loyalty
Next, The Duty of Loyalty covers a couple of things related to protecting the community. First, it means that every board member acts fairly, in good faith, and for the interest and benefit of the community as a whole. Board members never should act for any personal gain of themselves. Also, decisions for the benefit of the entire community over the interests of one individual homeowner need to be made. For example, if a resident’s dog’s constant barking is in violation of the noise rules, the board can’t ignore neighbor’s complaints just because they don’t want to irritate that homeowner.
Second, The Duty of Loyalty also means board members have to work to avoid conflicts of interest. An example would be avoiding votes on vendors if the board member has a relationship with them. Another example would be avoiding appointing friends or family to positions they are not qualified for. Board members have to be careful to avoid even an appearance of conflicts of interest. It is best to err on the side of caution and spare yourself from possibly troublesome votes…if there’s any question about it.
Last, The Duty of Loyalty means that, board members are required to protect residents’ confidentiality when appropriate. For instance, if a homeowner has approached the board to work out payments for late fees, members should not share this information with their friends or neighbors.
The Duty to Act Within the Scope of Authority
And lastly, the third main HOA duty for board members: The Duty to Act Within the Scope of Authority. This is the idea that the board must carry out duties that are required in the governing documents. But the board should. not make decisions on things outside of that scope.
This also connects back to the Duty of Care. Board members must know what’s in the documents in order to carry out what is required. Being well-versed in what the articles of incorporation, bylaws, CC&Rs and other governing documents include is an important part of being a board member. If the governing documents do not allow the board the power to adopt new rules and regulations, any new restrictions might be invalid.
In conclusion, there are legal duties written into state law that HOA board members must follow. The organization still follows guidelines similar to corporations and their boards, even though it is a nonprofit. HOA boards have a duty to take care of and protect the community. Just like boards of directors have a duty to protect the company.
If you have volunteered to be on your community’s board of directors, these rules likely won’t be too challenging. Even if they are serious. These three main duties for HOA board members will actually probably be second nature. Again, they primarily mean that the board’s required to make informed decisions. And to know and understand the rules and regulations of the association. And lastly, that they’re required to act in the best interest of the community. They should not make decisions outside of their scope of authority.