One of the major responsibilities that the HOA board is tasked with is maintaining its fiduciary duty. But what does that mean? Simply put, fiduciary duty is acting in good faith and within the best interest of the community as a whole. It is making decisions that do not specifically benefit one person or group of people, but rather support the entire organization. When tough issues arise, it is maintaining an ethical process to come to a solution.

Each member of the board is responsible for upholding their fiduciary duty to the organization and its members. Some ways to support that include:

  • Understanding the HOA’s governing documents and ensuring that they are fairly and consistently enforced. That means not penalizing one homeowner for something but letting another one slide for the same issue. The rules apply the same to everyone.
  • Creating and maintaining an effective budget process. The board should have a system in place for how expenses are tracked, managed, and approved.
  • Building a strong reserve account to prepare for major expenses and reduce risk of administering a special assessment.
  • Setting reasonable HOA fees that align with the organization’s day-to-day expenses as well as contributions to the reserve fund. While low fees are attractive, increases are necessary to keep up with the economy and rising costs.
  • Excusing oneself from matters that are a conflict of interest (and disclosing that they are) so that a non-biased decision can be made.
  • Maintaining confidentiality regarding sensitive information.
  • Only making decisions that are within the scope of authority of the HOA and do not conflict with state or federal regulations.

If questions arise, the board must be able to show that it did everything in its power to make a decision that it believed was in the best interest of the community. Otherwise, the board may run into issues with liability.

A good way for the board to protect itself is to have liability insurance and also to ensure that all available information is collected before making decisions. Avoid making rush decisions before an issue has been thoroughly discussed and multiple perspectives have been taken into consideration.

Working with a legal professional as well as a trained community manager can help HOA board members to better understand and uphold their fiduciary duty. Kuester provides HOA boards with resources, training, and current insight regarding a variety of issues and can support them in acting within the best interest of the community. Contact Kuester today for more information.

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