Fiduciary Responsibility

Many come out here accusing a BOD with improper Fiduciary Responsibilty when they disagree with how a OD did something/ I thought it might help all to look at what Fiduciary Responsibility is:

The term fiduciary refers to a relationship in which one person has a responsibility of care for the assets or rights of another person. A fiduciary is an individual who has this responsibility. The term "fiduciary" is derived from the Latin term for "faith" or "trust."

A fiduciary relationship exists with individuals who handle money or property for others. In a corporation, the board of directors, as a body, has a fiduciary responsibility for the decisions they make with regard to corporate assets and the rights of stockholders.

The fiduciary responsibilities of a corporation's board members includes:

Avoiding conflicts of interest

Acting in the interest of the company rather than the member's personal interest

Providing oversight to assure that all company business is transacted legally

Making decisions to protect the assets of the corporation.

Bad decisions, decisions made that some disagree with, etc. are not improper or misuse of one fiduciary responsibility as many on here like to charge is.

I think my thread about breach of fiduciary responsibility is one of the more resent ones. Let's see what you think about my situation.

We have a president and 2 at large members over a 69 single family homes. He does not hold meetings (last one 2010). He does not enforce any of the CC&Rs. He's breaking 2 of them himself. It seems we were due a Reserve study in 2012 and it was never done. I had an appraiser come in they said my property value is taking a huge hit because of the apathy. The president will not respond to emails and I've knocked on their door with cars in the driveway, yet no answer.

Well said Missy, Thank You! This is an old argument for members to make when they see a violation that they perceive as not being taken care of properly.

Carol those are the aspects of providing fiduciary duty. Members think it's the BOD responsibility or the HOA's to keep or improve "home values". If the board makes a bad decision, the first thing out of everyone's mouth is "My home values are going to go down" etc...(Besides I am going to sue).

Pointing out that if you bring a subject up to the HOA it doesn't mean it's the BOD/HOA's responsibility to act. The very act of NOT acting may be the correct response. That may be the best fiduciary duty a HOA can do. Otherwise, every request and demand of the members would open up the HOA to non-stop lawsuits.

It seems Renee thinks her BOD is not doing their Fiduciary Duty based on her home price dropping due to their apathy.

As the OP this was one of he reasons I posted. To discuss what people think Fiduciary Responsibility is and what it is not.

I wish we could edit! Maybe if I explained myself in more detail. Since we bought this house in 2010, the property values in the area have continued to fall due to the recession. Three like houses had sold for 100,000 less, so if my house was now valued that low, I wanted to pay less property taxes! The "property value" word was mine, not his. He made a mention of the community things he saw that made my home "less desirable". I don't know the word or term he used. Usually less desirable can be equated with less money, so I made the leap in terminology myself. Evidently it means something a little different to y'all in here than just general layman term.

To expand on my question, what if the HOA board only filed a lawsuit against a member, thinking that the member would back down and give the HOA what they were suing for but the member didn't. The HOA board didn't think the member would follow thru with the lawsuit because of the expense of hiring legal counsel etc. Where does taking a gamble with HOA funds fall into fiduciary duty?

Having been sued by my HOA (the case was settled at the final hour), the HoA developed an attitude of "we are going to get them." The HOA used whatever legal tactics their lawyer could come up with to make more of the issue than their really was. Every time they petitioned the court for one thing or another they lost. Which of course cost the HOA a lot of money. I would just caution board members to be as objective as possible, gather all of the facts, keep your personal feelings aside, and do what is truly in the best interests of the members. Don't embellish or lie to try to further your position because in the end it comes back to bite you.

Maybe this does not fall into breach of fiduciary duty but just some things to keep in mind when your HOA board is contemplating a lawsuit against a member.

Just remember that attorney's advise their clients. The decision of what to do or not do is the Boards. The Board needs to listen to their attorney but do not need to follow every bit of advice provided.

Sometimes, just like medical opinions, it's good to get second or third legal opinions before deciding on a course of action.

"Every time they petitioned the court for one thing or another they lost. Which of course cost the HOA a lot of money."

Your mention of attorney or Board actions ending up costing the HOA "a lot of money" makes me question whether there was ever a special assessment upon the members to pay attorney fees. I have read so many posts where that seems to be the consensus, just wondering how it was handled with your HOA. I apologize if you have answered this in another thread.

No they didn't. Special assessments have to have 2/3 member approval. I doubt that a special assessment would ever pass in my HOA particularly when the members found out the reason. I suspect that one of the board members actually stepped in and paid some of the legal bills out of his own pocket. I don't know that for sure but I have strong suspicions of this. They also held the belief that the court would order us to pay their legal bills.

Actually I believe that is true. Their attorney was quite interested in a settlement long before the BOD finally saw the writing on the wall.

Iowa has 8 judicial districts and within those districts the 8 judges get assigned to various cases in that district. It means that the area attorneys will be arguing their cases before the same 8 judges. The attorneys walk a fine line. They are employed by their clients but they don't want to antagonize the judges because they want the judges to favor them. The BOD was constantly filing motions and using delay tactics and the chief judge of the district left the courtroom at one point and admonished their attorney again. He said "I don't want to hear anymore about it." His voice was very stern.

Renee, you need to hold the ENTIRE board accountable, not just the president. This is 2014 – if you haven’t had any meetings since 2010, it’s time to put pressure on the board to do so, with the first topic being a possible recall. Apparently talking to the president doesn’t work – have you tried talking to the other homeowners and approaching the Board as a group?

I agree with what John said about fiduciary duty – the Board is elected by the homeowners to run the Association. When we brought our homes, it was (and remains) our top priority. Making decisions about your individual home isn’t the same as making one as a HOA board member because there’s a lot more at stake. That’s why fiduciary duty is so important – whether you’re on the board or not, everyone needs to understand the association isn’t a social club; it exists to manage the assets (common area) which all homeowners jointly own.

As a now former board member, I felt the best thing I could do was educate myself on the issues, ask lots and lots of questions and then make a decision. No board is perfect – sometimes you will make decisions others won’t agree or the decision won’t turn out as you hoped. That’s when you need to admit a mistake has been made, fix it and learn from it.

Just because the decision backfired doesn’t mean the Board is incompetent or failed in its fiduciary duty. Nothing in life is guaranteed – sometimes you make the best decision you could, based on the information you had at the time and it still backfired. That doesn’t mean you failed in your fiduciary duty. If however, you didn’t do your due diligence, such as consult with your attorney or obtain three bids and checking references before selecting a contractor, that’s more likely to get you in trouble.

As a homeowner, your job doesn’t end when you send off your assessments check or participate in board elections. Just like the school board, city council or state legislature, you have to hold people accountable and if you don’t have a clue as to what the Board is doing, it’s your responsibility to ask. If you don’t understand the answers or don’t get any answers, you need to pursue the issue and since there’s strength in numbers, get your fellow homeowners involved.

My experience to date with HOAs is that most board members do not understand this responsibility. My board believes they are defacto security guards and will let the property go unaddressed because that is not as exciting.