Fiduciary Duty

One must understand fiduciary responsibility.

A fiduciary duty is a legal or ethical relationship of confidence or trust regarding the management of money or property between two or more parties, most commonly a fiduciary and a principal. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relationship one person, in a position of vulnerability, places confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

When serving on a community association’s Board of Directors each individual member must place the concerns of the community ahead of any personal prejudice, desire or agenda.  The board is charged to act in the best interest of all community members, not just a select few.

It is imperative that Board members disclose any conflict of interest regarding an issue.  For example, it may be acceptable for a Board member to place their home for sale yet remain on the Board of Directors.  However, the same Board member should disclose the fact that their home is for sale when discussing issues that will possibly affect the long-term situation of a community.  If the Board is discussing or planning adjustments to a long-range financial capital plan which will require a vote of the Board, the individual with the home for sale should probably excuse themselves from voting on this specific issue.  Why?  There is a perception that their long term financial interest is not the same as a person who does not have their home for sale and intends to remain in the community for a longer period of time.  Changes to the long-range financial capital plan will have more of an impact to the long-termers versus someone who may accept a buyer’s offer tomorrow.

When determining if a conflict of interests exists, keep this phrase in mind – If you question it, disclose it.

Fiduciary responsibility applies to all decisions that come before a Board of Directors.  Whether you are dealing with an employee issue, a vendor concern, a disgruntled homeowner or a financial concern, one must always adhere to their fiduciary duty.

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What Are Governing Documents?

We’re always talking about the association’s governing documents, but what are they?

State Law

Almost every state has statutes governing condominiums and homeowner associations. In addition most associations are subject to the state corporations’ code.

Declaration, Master Deed, or Proprietary Lease and Their Covenants and Restrictions

Planned communities are created by declarations (also known as master deeds). Cooperatives are created with proprietary leases (also called occupancy agreement). These contain the restrictions that regulate residents’ behavior, they define owner’s rights and obligations, and establish the association’s responsibilities.

Articles of Incorporation

Most associations, and all cooperatives, incorporate and have articles of incorporation that define their purposes and powers. They may specify such things as the number of directors and their terms of office.


Bylaws address association operations such as procedures for meetings and elections and specifying the general duties of the board.

Resolutions—Rules and Regulations

Board members adopt rules and regulations, and sometimes members have to approve them. Rules and regulations are recorded as board resolutions. Resolutions must be consistent with the declaration or proprietary lease, the bylaws and state law.

Association governing documents are almost always trumped by state law. But, when association documents conflict among themselves, the declaration or proprietary lease carries the greatest weight, followed by the bylaws and then the rules and regulations.

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Your Homeowner’s Association: The Upside

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Community Associations: Three Realities You Can’t Escape

All community associations have three things in common.

Membership is mandatory. Buying a home in a community association automatically makes you an association member—by law.

Governing documents are binding. Association governing documents can be compared to contracts. They specify the owners’ obligations (following the rules, paying assessments) and the association’s obligations (maintaining common areas, preserving home values).

You could lose your home if you fail to pay assessments. Associations have a legal right to place a lien on your property if you don’t pay assessments.

But, take heart! Associations also have three realities they can’t escape. Associations have an obligation to provide three broad categories of service to residents.

Community services. For example, these can include maintaining a community website, orienting new owners or organizing social activities.

Governance services. For example, establishing and maintaining design review standards, enforcing rules and recruiting new volunteer leaders.

Business services. For example, competitively bidding maintenance work, investing reserve funds responsibly, developing long-range plans and collecting assessments.

By delivering these services fairly and effectively, community associations not only protect and enhance the value of individual homes, but they provide owners an opportunity to participate in decisions affecting their community and quality of life. And those are realities we can live with.

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Committees and Community Associations


In most communities, the Board of Directors through the President has the authority to create and appoint volunteers to various committees.  Many times the Board members have to make an effort to recruit fellow neighbors to serve on committees.  The following are some suggestions which may benefit your community when using committees to assist the Board in seeking input on issues:

  • Create committees with purpose. People want to know what the expectation is of them if they choose to participate. It is the Board’s responsibility to provide clear purpose for each committee they establish. Ensure each committee member understands that they are not decision makers for the community. Their purpose is to provide recommendations to the Board of Directors for consideration. The Board may establish standing committees which are committees that are on-going or ad hoc committees which have a specific task and date for completion. Once the ad hoc’s committee task is complete the committee no longer exists.
  • Know if a committee is required. Check your Declaration to understand if specific committees are required for your community. In some situations the Declaration will require and provide purpose for certain committees, for example an Architectural Controls Committee. Other committees can be created by the Board of Directors for specific purposes. For example a Social Committee to propose, produce and facilitate social events for the enjoyment of the community.
  • Assign a Board Liaison to be responsible for each committee. The Board Liaison should be willing to attend each committee meeting to act as a resource to the committee. The Board Liaison should not Chair the committee or vote on issues. They should provide input when requested and ensure that the committee remains focused on its purpose as defined by the Board of Directors.
  • Require each committee to keep minutes and to report those minutes to their Board Liaison. GA law requires each committee established by a Board of Directors to maintain minutes as an official record of the Association. The Board Liaison should provide a monthly recap (copy of the committee minutes) of the committee activities to all Board members either prior to or during each Board of Directors scheduled meeting. This will keep the entire Board informed of committees’ activities in a timely manner. If your community has a website you could consider posting committee meeting minutes for all residents to view.
  • Never deny an Association member in good standing the right to serve on a committee of their choice. This will only create a divide between that person and the Board. We spend enough time working to disprove the perception that Boards are secretive and only allow “their friends” to participate. Denying a willing volunteer participation is not good for the community. The Board should welcome and encourage community volunteers.
  • Award committee members for their participation. Public recognition of volunteers builds rapport and may get others to become involved. Communities can do this by recognizing volunteers at the annual meeting, scheduling a volunteer appreciation party, or many other creative ways of showing appreciation for those who volunteer for your community.
  • Know when to end a committee. A committee of one is not a committee! If a standing committee, such as a Public Relations Committee, experiences a lack of participation the Board should terminate the committee. To have a committee for the sake of having a committee when no one is participating is useless.
  • If a committee is responsible for a budget line item, such as social events. The committee should provide expense recommendations to the Board of Directors for approval.  Association funds should not be expended without Board approval and oversight.

Many people find personal satisfaction in volunteering in their community. When establishing committees a Board should provide guidance, leadership and enthusiasm to those who volunteer to serve. Committees are usually a good source for recruitment of new Board members. A community made up of interested volunteers will make for a strong, healthy and happy community for all.

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Protecting People with Dementia in Your Homeowners Association

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Penny Wise Pound Foolish

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