This obligation applies to HOA boards, even if volunteers staff it. First, from where does this fiduciary duty from the Board to its members arise? In most jurisdictions, homeowners’ associations are considered non-profit corporations as they are most often created by filing incorporation documentation in the state of jurisdiction.Įach state requires the members of corporate boards to act in the best interest of the corporation with a fiduciary duty to do so. The fiduciary duties an association board owes to its members might not be that intuitive-let us dig a little deeper. The amount of reasonable care required by a fiduciary is based on an objective, customary standard. As a fiduciary, she would not be permitted to spend another’s assets with such a patent disregard for the reasonable due care necessary it is not a defense that she is treating the asset as if it was her own. Say, for example, our fiduciary spends her own money wildly and irresponsibly. If a person is assigned a fiduciary role, she is required to treat the assets/monies with the customary due care that another reasonable fiduciary would practice in her place. Often, lay folks will interpret this as a simple requirement of the fiduciary as just needing to treat another’s financial interests as she would treat her own.
When someone is assigned a fiduciary duty, whether by law or assigned by contract, this person must act in the best financial interest of another. Note the important helping verb above, must.
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