Rent Real EstateAre Homeowner Association Board Members Overly Liable?
Volunteers serve on the homeowner association Board for a variety of reasons.
Retirees may have time to give to the community, others serve to protect their
assets while others serve to fill a void. Regardless of the reason, volunteer
board members have liability exposure for actions taken or not taken.
Board members are responsible for association finances, policy making and
signing contracts. These responsibilities involve the fiduciary duties of care,
loyalty and honesty which are elements of the "Business Judgment Rule".
Some do"s and don"ts to keep you out of trouble:
Never use association funds for personal reasons, even as a loan. Many
embezzlers started out as "borrowers".
Never misrepresent authority, such as negotiating with a contractor when that
authority belongs to the Board as a whole or the Board President.
Stay informed about association business by reading all related correspondence
and minutes.
Use consultants when expertise is called for. Guessing at complex solutions
only creates complex problems.
Attend all board meetings. If unable to attend, make sure the meeting minutes
reflect the reason for absence.
Voice dissenting opinions to board votes when appropriate and make sure the
dissent is recorded in the meeting minutes. Be familiar with the governing
documents and, when in doubt, consult with a knowledgeable attorney.
If you inadvertently stumble, a suit may be filed against the Board and you
personally as a member of a board. All is not lost! Bylaws typically provide
that the association will indemnify (protect and defend) board members if the
conduct meets certain standards like reflected in the Business Judgment Rule.
The association should have a Directors and Officers Liability insurance policy
that provides for legal defense. This is extremely important. If your board is
not covered, contact the association insurance
carrier as soon as possible.)
Liability exposure should not be taken lightly. Prevent overexposure by
understanding the obligations, limitations and scope of authority. Add a little
common sense and proper liability insurance, and you’re covered!
For more information on this subject, see www.Regenesis.net.