It is not uncommon that unit owners in residential developments structured as Homeowners Associations or Condominium Associations volunteer to run for office and serve on the Boards that govern those entities – Boards of Directors for HOAs and Boards of Managers for Condominiums. The people seeking such positions are often motivated in the same ways that motivate those who run for election to school boards or local village and town governing boards. Some particular issue, concern or cause motivates them to participate and try to make a difference.
They may want improvements to the buildings and grounds (better landscaping and recreational facilities), better maintenance (better quality snow-plowing and cleaning of common areas), revised rules and regulations to address current issues (i.e. pets or parking spaces), better financial management (pursuing people who fail to timely pay their monthly common charges or assessments resulting in legal costs and increased charges to those who do pay). The “cause” that motivates participation may be one which personally affects the individual who runs for office but that individual, once being elected to the Board, can not single-mindedly pursue that cause to the detriment of the community as a whole. WHY?
While a unit owner, upon election to a Board, does not cease to be a unit owner, he/she also – as a Board member – becomes a fiduciary, and, as such, has a fiduciary relationship with, and responsibility to, all the unit owners. Black’s Law Dictionary (7th edition) defines a fiduciary relationship as, “A relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship.” Black’s further defines “fiduciary duty” as “A duty of utmost good faith, trust, confidence, and candor owed by the fiduciary to the beneficiary.” In the case of the operations of Condo and HOA Boards the Board Members are the fiduciaries and they owe their duty to all the unit owners as the beneficiaries.
We rather easily understand the concept of a fiduciary duty when thinking about relationships between lawyers and clients, stockbrokers and customers, Executors and beneficiaries under a will, a trustee and the beneficiaries under a trust and maybe even, in some circumstances, between a doctor and a patient. We also know very clearly (or we certainly should) that there is no such duty between a car salesman and a prospective car buyer nor someone calling you on the telephone seeking your contribution to some supposedly “local” charity of which you have never heard.
As a Board Member, you can still pursue the “cause” that stimulated you to run for office but you can not pursue your personal “betterment” at the expense of the unit owners as a whole. You are certainly entitled to both speak and vote your opinions regarding all matters that come before the Board but you must consider the beneficial or detrimental “effect on the whole” in casting your vote rather how the pending issue might effect you personally. That also does not mean that intelligent people of good will and intent cannot disagree on how and whether any particular action has an “effect on the whole.” It essentially means that you should not focus on voting for or against proposals based on how it will affect you (or your “gang of friends” in the community) but rather on what impacts it will have on the community as a whole.
We often refer to people who regularly volunteer their time in a variety of local organizations as being “community-minded.” As a Condo or HOA Board Member, focus your efforts on being “community-minded” and you will never have to worry about fulfilling your fiduciary duty to all the other unit owners.
Gerald A. Lennon is a partner on the Real Estate Team. He can be reached by phone at 845-778-2121 toll free or 845-778-2121 and by email.