Suing HOA for Breach of Fiduciary Duty

Read on to learn how to protect yourself when serving on the board of your homeowners’ association.

HOA Board’s Fiduciary Duties Under Corporate Law

Every state’s corporation law imposes a fiduciary duty on the corporation’s board of directors, obliging them to act in the best interest of the corporation.

Subject to some limitations, this fiduciary duty applies to HOAs even though HOA board members are usually volunteers.

A Board member’s fiduciary duties involve these components:

The Duty of Care

A HOA Board member must make informed decisions, which might require a bit of research before you act or vote on an HOA matter. HOA Board members must use sound business judgment, and avoid arbitrary actions. 

The Duty of Loyalty

This requires the HOA Board members act fairly, and for the benefit of, the HOA as a whole.

Duty to Act Within the Scope of Authority

This duty requires the HOA Board to perform its obligated duties, but prohibits the Board from making decisions or acting on matters when lacking the authority to do so.

Protection from Personal Liability

You can avoid a breach of fiduciary duty by fully informing yourself before making decisions. Additionally, some forms of protection from personal liability are available from your state law, your development’s governing documents, and/or your HOA’s insurance.

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