In shared interest developments, homeowners associations and their board members serve as the adults in the room when it comes to day to day operations of the community. They manage a wide range of duties such as handling repairs and maintenance of common areas and management of monetary funds. But as Uncle Ben said, “With great power comes great responsibility”. Board members are no exception. They are subject to legal responsibilities and other duties.
The Scope of the Legal Responsibilities of HOA
Think of your community as a car. The board is the operator of that car. Their goal is to lead the development to it’s preferred destination safely. But on the road to that objective, they must abide by traffic laws that govern all of those operating vehicles.
The legal responsibilities of the Homeowners Association originated from the law of the state in which the association operates. In every state, the law declares that the board members of the incorporated HOA act in the interest of its affiliates.
Fiduciary duties apply to HOA’s even though they are typically non-profit organizations made up of volunteers because of their incorporated status. Comprehending your obligations and duties as an HOA board member will go a long way to keeping you out of a courtroom.
These legal responsibilities usually fall under three categories.
Let’s discuss further.
What are the different types of HOA legal responsibilities?
Below are the three types of homeowners association legal responsibilities:
1. The Duty of Care
The duty of care states that HOA board members must make informed decisions when voting on community matters. This guideline sounds like common sense, but it is imperative to research the best solutions before voting or moving on issues that concern your members. This duty also comes into play when penalizing someone for violating a covenant with the HOA. Before issuing the fine, you must comb through the CC&R’s to see if a penalty is warranted. You must also use reasonable judgment and elude erratic or illogical actions. For example, you can’t stop someone from paining a part of their property simply because you don’t like the color.
2. The Duty of Loyalty
The duty of loyalty declares that when making choices, an HOA board member must act in the best interest of the association as a whole instead of working for their benefit. This obligation includes steering clear of any conflicts of interest that may arise. A great example of a conflict of interest would be hiring a commercial power washing company that is owned by a friend or family member. The duty also states that the board protects the personal and private information of its members, including financial matters.
3. The Duty to Act Within the Scope of Authority
This responsibility requires the HOA board to fulfill the functions it is obligated to perform; however, it prohibits members from making decisions without the authority to do so. The influence of the HOA board is granted to them by state laws and the CC&R’s of the association. If the laws or governing documents do not allow your HOA Board the power to ratify new rules and regulations, any limitations the HOA utilizes may be void.
It’s vital that HOA board members are responsible and smart people who are up for challenges that may come whether legal or not. If you’re a homeowner planning to be a board member, you should consider the responsibilities we discussed above.