Who's Responsible At Your Condo? Fiduciary Duty Is Mandatory for Condominium & 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 (FS Chapter 720). That's the mandatory part.

Fiduciary Duty is defined as such: fi•du•ci•ar•y du•ty - noun phrase - 1. A fiduciary duty is a legal or ethical relationship of trust wherein a fiduciary is obligated to act in the best interests of one or more other parties (person or group of persons), often known as the principle or beneficiary. Typically, a fiduciary duty occurs in the context of prudently managing money or other assets on the behalf of another.

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 and well-informed while also being financially, legally, and ethically sound. A fiduciary's behavior and actions are expected 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 residential Owners Association governance is to protect, maintain, and potentially increase 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.

The responsibilities that go along with being on a Board of Directors cannot be waived, paused, rejected, or abandoned. Accepting a seat on the Board doesn't come with a “trial period” to see if newly-elected Directors really want to be fiduciaries to all Association owner/members. The relationship starts as soon as they are elected or appointed.

For their entire terms as Directors and Officers, Board members are obligated to put all Association member/owners' 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 owner/members.

Association elections are closely regulated in Florida because the outcome results in an acknowledged, trusted relationship between new Board members and every owner/member in the Association, not just the ones who voted for that new Director because they 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 HOA Director breaching (violating) his or her fiduciary responsibility to Association? In Florida, it could involve one or more of the following:

• Mismanagement of Association funds
• Intentionally under-budgeting for common expenses or reserves
• Not maintaining the property's common elements/areas
• Selectively enforcing Association rules and regulations
• Making decisions without seeking expert or legal input when needed
• Making decisions outside of a properly-noticed Board meeting that owners can attend
• Conflicts of interest (personal benefit from a Board decision)

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

The accepted standard for Board member behavior is full, accurate, 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 the group's decisions, governance, and internal politics. When Board members might be seen as straying from (or openly disregarding) their fiduciary duties, it is up to the rest of the Association to remind them and get things back on track.

Unfortunately, unless there is accompanying criminal behavior or direct violation of Florida Statutes, the only remedy usually available for breach of fiduciary duty is civil litigation (a lawsuit against suspected or accused Directors). Neither Florida's Department of Business and Professional Regulation (DBPR) nor its Division of Condominiums, Timeshares, & Mobile Homes (CTMH) will pursue claims of fiduciary breach unless the behavior also violates specific Sections of the Condominium Act (FS Chapter 718).

HOAs are not regulated by the DBPR, so improper acts by HOA Board members often remain unchecked. Reported criminal behavior by Association Boards can be prosecuted by local and State law enforcement agencies if there is enough evidence.

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

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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