It is well known that Association Board members (directors) have fiduciary duties to their unit owners and associations. It is almost as commonly known that the officers have the same fiduciary duties. Yet associations, directors and officers are often sued for failing to meet their duties. Unfortunately, directors and officers often contribute to their risk by doing things that enhance the likelihood of suit. For fun I thought I would write this post from that standpoint.
- I take funds or obtain benefits from the association that are not available to non-board members (free parking spot, better parking spot, quicker contractor service, use of association funds for personal reasons – even if I pay them back).
- I trust the treasurer and don’t check or compare the association financial reports against the bank statement.
- I and the other board members make decisions in secret – we don’t invite or tell the members when and where the board meetings will be held.
- I don’t follow the association documents for a whole bunch of “good reasons”: We have never done it that way. It no longer makes sense. It’s easier this way. The documents are too difficult to understand/follow.
- I have the board enter into contracts with businesses that I, my family members or my friends have an ownership interest in.
- I have the board decide not to hire professionals (engineer, accountant or attorney) to deal with construction, financial, tax or legal issues that arise to save the association money.
- I don’t have the association purchase insurance or enough insurance or the right insurance to protect itself. General liability & Property, Worker’s Compensation, Directors & Officers, Fidelity/Crime? We don’t really need all of these anyway.
- I “help” the members and association by not having a reserve study or reserve fund set up because the owners can pay for common element replacements when they occur.
- I take advantage of some fact that I learned because of my director/officer position and don’t offer it to the association.
- I have the association fix water damage without locating the cause of the problem to save the association money.
- I don’t have the board establish a document destruction policy that complies with the law, thereby increasing the risk and costs to our association.
- The board and I don’t run objectively fair elections.
- Rather than only keeping a record of actions taken at meetings, I demand that the minutes of the meeting capture the essence of every comment at the meeting.
Yes, this is a baker’s dozen!
Solution: Change. Seek professional help. Attend educational seminars on best practices in the association industry.
For more information on the common mistakes boards make, read this white paper.