Home Owners Association

November 2001

TO: Board Member
FROM: C. Guy Bond
DATE: November 6, 2001
RE: Monthly Musings - #14, Officers and Directors 101

All community associations have the rights, powers and duties of a corporation. Corporations are operated by their directors and officers. Association members are like shareholders. They have an interest in the corporation but do not run the association. The elected Board operates the Association.

Fiduciary duties imposed upon board members include two components, undivided loyalty and reasonable business judgment. Undivided loyalty means that each board member must act in the best interests of the association. For example, a board member should vote for a needed increase in assessment or for greater reserves even though the board member personally cannot afford it if the increase will benefit the association. Similarly, a board member should vote for matters that are necessary or appropriate for the association even though a minority of owners do not agree.

Reasonable business judgment in conducting the affairs of the association is the second requirement of director fiduciary duty. Each director must: (i) understand the association business, (ii) actively participate in association business and (iii) determine what is required for the association to operate and then vote prudently. Reasonable business judgment also means obtaining competent advice in areas that require expertise. Engineering, architecture, law and reserve planning are all areas that require a high level of training. The board is not elected to guess at highly complex issues but to use prudent judgment based on competent input. While that input may cost money, the consequences of uninformed decisions are usually much more costly.

In addition to these fiduciary standards, the board is responsible to:

• Provide for the operation, care and improvement of the common elements.

• Prepare, adopt, and distribute the annual budget.

• Levy, collect and spend assessments according to the approved budget.

• Hire and fire personnel necessary for the maintenance and operation of the property.

• Obtain adequate and appropriate kinds of insurance.

• Adopt rules and regulations regarding the use of the common area.

• Keep detailed and accurate financial records of the property operation.

• Enforce provisions of the governing documents, rules and regulations

Board officers are appointed by the directors themselves. The directors vote on all contracts and policies while officers execute specific duties authorized by the governing documents and the directors. Each association should have at least a President, Secretary and Treasurer. These officers typically perform the following duties:

President. Conducts board and annual meetings; handles the day to day activities of the association (deals with management, vendors); signs contracts approved by the board;
Vice President. Handles the duties of the President in the President's absence;
Secretary. (Unless performed by management). Maintains the association business records (corporate papers, contracts, correspondence, communications, insurance, owner files); records meeting minutes; responsible for producing newsletters.
Treasurer. (Unless performed by management). Maintains all of the financial records and documents of the association; May or may not be signatory on financial accounts of the association; Responsible for all financial accounts (checking, savings, CDs, etc); Reports income and expenses to the board.

Ideally, the directors and officers provide the leadership to adequately protect and enhance the association's and owners' property through prudent administration. This requires careful planning and regular communication.

Patterson, Bond & Latshaw, P.A., 3010 S. Third Street, Jacksonville Beach, Florida 32250 publishes this newsletter. Our phone number is (904) 247-1770; e-mail is gbond@pbl-law.com. This newsletter was adapted, in part, from the Regenesis Report.

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