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Congratulations! You’re a Board Member! Now What?

On Behalf of | Jun 1, 2019 | Community & Condominium Associations

You don’t get any perks – no benefits – no vacation pay or health insurance – not even a reserved parking space near the clubhouse. That means you must be doing it because you want to make a difference. Maybe, you’re concerned with how the current Board or property manager is doing things.  Maybe, you like the way things are going and you want to make sure they continue on the same course. Maybe, no one else volunteered or just maybe, you thought it was a good idea to get involved in your community closest to home.

What is a Fiduciary?

Whatever the reason, you’ve been elected to serve on your condominium association’s board of directors. How hard can it be? Well, did you know you are a “fiduciary?”  Do you know what that means and what you’re supposed to do in order to be a “good” fiduciary?  If you answered no, don’t worry. A lot of people don’t know what it means. A fiduciary or fiduciary duty is a special relationship that imposes legal obligations on those that take on the role of managing the assets of others. It is often hard to define. The most famous statement of what that duty is comes from a respected New York judge who in 1928 stated, “Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.” Did that clear things up? Probably not. Perhaps an easier way to define the fiduciary’s role is to say that the fiduciary has a duty to treat the assets in the fiduciary’s care better than that person would treat their own assets. If you choose to make a risky investment with your own money, that’s fine, but if you are doing it for others, you need to tread lightly. You need to be careful, do some research and act reasonably when you act as a fiduciary for others. If you don’t, there may be consequences.

Fiduciary Duties under the Condominium Act

Condominium board members have been fiduciaries for the members of their association since condominiums began in New Hampshire.  However, in 2016, the New Hampshire legislature made it abundantly clear that board members owed a heightened duty of care to the association and its unit owners by stating in the Condominium Act “the board of directors shall have a fiduciary relationship to the members of the association.” In case that is not clear enough, the legislature went further.  “Officers and members of the board of directors … shall exercise the degree of care and loyalty to the association required of an officer or director of a corporation organized [under New Hampshire law].”

That’s the law, but what does it mean? Well, unit owners who may feel harmed by the actions of the board now have an express section of the law to cite in support of any perceived harm. The allegedly harmed owner can claim “I was treated unfairly compared to my neighbor” and file a lawsuit against the association and the individual members of the board of directors for breach of a fiduciary duty. Yikes!

Steps to Take to Help Avoid Getting Sued

If you’re like most people, getting sued doesn’t sound like fun, especially when you’re getting sued for trying to help. So, what can you do to minimize that risk?

  • Read and understand your association’s condominium documents;
  • Read and understand the sections of the Condominium Act that govern board behavior;
  • If you don’t know the answer, don’t guess.  Instead, find professionals who can help – property managers, contractors, accountants, or lawyers;
  • Give fair attention to competing points of view;
  • Be respectful of all persons, even the “crazy and unreasonable” unit owner; and
  • After careful thought and debate, do what you believe is right for the Association.

You won’t always get it “right” and you will rarely make everyone happy.  But that is not the duty of a fiduciary.  Instead, you must be fair, reasonable and not motivated by self interest.  If you do that, you will fulfill “an honor the most sensitive” and be beyond reproach. After all, your condominium association needs people like you to survive and thrive.