What Is Fiduciary Duty? It's Mandatory For Florida Condo & HOA Board Members

The fiduciary responsibility of Board members is clearly established by both the Florida Condominium Act (Florida Statutes Chapter 718) and the Homeowners Association Act (Chapter 720).

While Fiduciary Duty is difficult to strictly or legally define, nor can a precise list of specific duties be compiled, the responsibilities addressed and actions performed by fiduciaries are understood by both parties in the relationship. A person acting as a fiduciary (similar to a Trustee) has the responsibility to act and make decisions that are prudent, well-informed, financially, legally, and ethically sound, and intended to produce the best possible outcome for the person or people who will benefit from those actions (similar to Beneficiaries).

In very basic terms, the goal of effective Owners Association governance is to protect, maintain, and potentially grow the value of property in it. Responsible Board Administration is an important part of achieving this.

Fiduciary Duty is an ethical and moral concept rather than an easily defined set of tasks or actions, and usually involves making sound financial decisions for others. In practice, it is often easier to notice a violation of Fiduciary Duty than to describe behaviors that fulfill it.

How does all this relate to the ongoing function of a Florida Residential Owners Association?

The responsibilities that go along with being on a Board of Directors cannot be waived, paused, rejected, or abandoned. Board members cannot view being elected as having any “trial period” to see if they want to be fiduciaries to the entire Association. The relationship starts as soon as they are elected or appointed.

For their entire terms as Directors, Board Members are obligated to put the Association's collective interests above their own.

The primary ways for serving Directors to be released from Fiduciary Responsibility are to:

• Resign from the Board
• Finish an elected term without seeking re-election
• Sell their property and move out of the building or community (most Governing Docs require Directors to be property owners)
• Be removed from office by an Association recall vote

Fiduciary Duty is understood and offered to all Association Members when a property owner volunteers to run for a seat on the Board of Directors. That offer is acknowledged and accepted by the other owners when they elect a candidate into office as a Director of the Association. Owners who are appointed to temporarily fill a vacant seat and become Board Members before the next election also accept full Fiduciary Responsibility to the Association.

One of the best ways for new Board members to understand their relationship with owners is to attend one of the (free online 2-hour) certification classes presented by some of the better Florida law firms. This earlier article goes into more detail: First step in becoming an Association Board member? Education. (https://thefloridarealestateblog.com/ )

Association elections are closely regulated in Florida because the outcome results in an acknowledged, trusted relationship between new Board Members and every owner in the Association, not just the ones who voted for that new Director and may share a particular viewpoint or opinion.

Because ALL members of the Association have entrusted Board Members to act and make decisions on their collective behalf, Directors cannot give favoritism to any individual member or special interest group within the Association. They must evaluate the well-being of the entire Association as a whole and make decisions accordingly. The most vocal members/owners cannot be given greater influence when it comes to Board decisions.

What might be examples of a Condo or Homeowners Board Member breaching (violating) his or her Fiduciary Responsibility to the Association? In Florida, it could involve one or more of the following:
• Mismanagement of Association Funds
• Intentionally Under-Budgeting for Common Expenses
• Not maintaining the property's Common Elements/Areas
• Selectively or Improperly Enforcing Association Rules and Regulations
• Making decisions without seeking expert or legal input when needed
• Making certain decisions outside a properly-noticed Board meeting that owners can attend
• Conflicts of interest (personal benefit from a Board decision)
• Spreading misinformation to promote a personal or Board-favored agenda
• Showing favoritism to certain owners

Note that some of the above actions are also violations of Florida's Condominium Act or Homeowners Association Act and/or an Association's own Governing Documents.

The primary consideration for proper Board Member behavior is full, accurate, and good-faith compliance with Florida Statutes and the Association’s own Governing Documents.

Florida Residential Owners Associations and their Boards often lose sight of how significantly Fiduciary Responsibility guides and influences their actions, Governance, and Internal Politics. When Board Members might be seen as straying from their Fiduciary Duties, it is often up to the rest of the Association to remind them and get things back on track.

While it may be difficult to specifically define Fiduciary Duty, you will very likely recognize a breach of it when one happens, so pay attention and participate in the business of running your Association.

When in doubt about whether or not a Breach of Fiduciary Duty has occurred, speak with your Association's Attorney (not Manager or Management Company) before making any accusations or assertions.

Editor's Note: Christopher Carter is NOT an attorney. He does not give legal advice. For interpretation and application to specific circumstances of anything you read in this article, you must speak with a Florida-Licensed attorney.

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