So, you think you want to become a Board Member of your Homeowner’s Association? Then you will want to make sure you clearly understand your duties—including your fiduciary duties.
The Laws Governing Duties of Homeowners’ Association Board Members
In Georgia, where we practice, the law governing the creation and operation of homeowners’ associations (“HOA”) and the duties and responsibilities of board members, is Georgia’s Property Owners’ Association Act (referred to as the “Property Owners’ Act”). State law sets the rules for homeowners associations and their members.
The board of directors is the administrative and governing arm of the HOA.
The Property Owners’ Act, and an HOA’s governing documents (articles of incorporation, bylaws, Covenants, Conditions & Restrictions (“CC&Rs”) govern the activities of the board members.
The board of directors (or simply, “board”) is responsible for managing all aspects of the association. It can delegate management of certain activities to other persons or businesses, such as a property management service, but it must retain ultimate control.
In Georgia, board members are given wide discretion in how they manage their communities. Yet each board member has obligations and duties that it owes to the HOA members. Of particular interest for this post are the fiduciary duties that a board member owes to the community’s homeowners.
First, let’s explain what a “fiduciary” is. Broadly speaking, a fiduciary is someone who is in a position of trust who acts for another person. A fiduciary relationship often exists where one person is handling the money or property of another for that other person’s benefit. Put another way, a person who is in a position of trust and empowered (whether by contract, agreement or court order) to act for another, is generally a fiduciary.
A fiduciary has (not surprisingly) fiduciary duties. When a party is assigned a fiduciary duty, whether by law or contract, he is legally required the act in the best interests (financial or otherwise) of another.
Board Member Fiduciary Duties
In the context of an HOA, board members have several fiduciary duties that they owe to the homeowners who form the HOA. Briefly, these are:
- A duty of care
- The duty to use sound business judgment, and
- A duty of good faith and loyalty.
Board members have the duty to enforce the HOA’s CC&Rs. Their failure to do so could be a breach of the duty of care they owe to members.
Similarly, board members must use their sound business judgment when it comes to making decisions for the community and investing community funds.
Finally, the board members have a duty to act in good faith while acting as fiduciaries for their communities. Board members need to be very careful to not engage in “self-dealing” when it comes to making decisions on behalf of the community that might also benefit the specific voting board member.
There is far more involved in HOA board member responsibilities than our brief explanation above, but what we hope to convey is that the decision-making power of a board member in an HOA is an important and weighty responsibility.
If You Have Questions, Call Us
The rights and duties of HOAs, board members, and homeowners is a complex and often confusing area of law. If you have questions or problems with your HOA or in governing your community, contact us. Our attorneys have worked with HOAs and POAs throughout the Atlanta Metro Area, and we can help you, too. To schedule your free phone consultation, call us at: 770-888-7707 or e-mail your inquiries to firstname.lastname@example.org.