The Fiduciary Duty of Board Members: No "Playing Favorites" Allowed
A homeowner association board of directors has a fiduciary duty to the association and its members. That fiduciary duty requires the board members to act in good faith and for the benefit of the association as a whole. Board members also have a duty of loyalty and a duty to deal impartially with beneficiaries, or members. Board members should remember the role of their fiduciary duty to the association when considering or making requests that affect the individual, private interests of any board member. One Colorado case provides a useful illustration for how boards might handle potential breaches of the fiduciary duty.
In Woodmoor Improvement Association v. Brenner, 919 P.2d 928 (Colo. App. 1996), one of the defendant-homeowners served on the board of directors during the time period when the association's architectural committee approved the installation of a satellite dish on the homeowners' property. A subsequent board of directors interpreted the association's covenants as prohibiting satellite dishes such as that installed on the Brenner's property. The association brought several claims against the homeowners in an attempt to force the removal of the satellite dish. One claim asserted that Mr. Brenner breached his fiduciary duty to the association because he sought approval for the satellite dish while serving on the board of directors. The Colorado Court of Appeals held that the board member did not breach his fiduciary duty where he properly submitted his request for approval to the architectural committee and he did not participate in the decision-making process that resulted in the approval of his request.
Thus, Woodmoor Improvement Association serves as a reminder that individual board members must adhere to the normal process for obtaining homeowner association board or committee approval. A board member may shield herself from the liabilities associated with a breach of fiduciary duty by abstaining from the decision-making process on board or committee actions that directly affect her interests.