How to Have an Educated HOA Board that Limits the HOA’s Legal Risk
How to have an educated HOA board that limits the HOA’s legal risk. It isn’t that difficult. It only requires that board members invest the effort to get an HOA education. We live in a litigious society, and many people view HOA’s as “deep pockets”. So, many people will be quick to sue an HOA. It’s the boards’ responsibility to make decisions that follow the law and the governing documents. If the board complies with the law and governing documents, they reduce the HOA’s legal risk.
There are many sources of HOA board member education in every state. Below are a few:
In 2013, Florida passed a law that new HOA board members must take an approved education class. The director must provide a certificate of education within one year of election.
Four Subjects HOA Board Member Must Understand
STATE LAWS
Two Arizona Law Titles affect Arizona Planned Communities. Most HOA’s are non-profit corporations, and planned communities. Thus, an HOA director must have a working knowledge of Title 10 and Title 33.
GOVERNING DOCUMENTS
The governing documents consist of CC&R’s, Articles of Incorporation and the Bylaws. All board members must have a working knowledge of those governing documents.
FINANCE
An HOA educated board is responsible to administrate the HOA funds. Each board member should study the financial statements, budgets, and current reserve study.
BOARD MEETINGS
All HOA board members must know the adopted parliamentary procedures. Also, they must know the rules of decorum to have peaceful, productive meetings.
Fiduciary Relationship and Responsibility
The HOA board members have a fiduciary duty to the members of the association.
Each board member must act in good faith and in the best interests of the members of the association.
Each board member must be familiar with the fiduciary duties.
Sub section A of ARS 10-3830, below, spells out the directors’ fiduciary duties
Arizona Law, ARS 10-3830 General Standards for Directors
A. A director’s duties, including duties as a member of a committee, shall be discharged:
1. In good faith.
2. With the care an ordinarily prudent person in a like position would exercise under similar circumstances.
3. In a manner the director reasonably believes to be in the best interests of the corporation.
B. In discharging duties, a director is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by any of the following:
1. One or more officers or employees of the corporation whom the director reasonably believes are reliable and competent in the matters presented.
2. Legal counsel, public accountants or other person as to matters the director reasonably believes are within the person’s professional or expert competence.
3. A committee of or appointed by the board of directors of which the director is not a member if the director reasonably believes the committee merits confidence.
4. In the case of corporations organized for religious purposes, religious authorities and ministers, priests, rabbis or other persons whose position or duties in the religious organization the director believes justify reliance and confidence and whom the director believes to be reliable and competent in the matters presented.
C.A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection B unwarranted.
D. A director is not liable for any action taken as a director or any failure to take any action if the director’s duties were performed in compliance with this section. In any proceeding commenced under this section or any other provision of this chapter, a director has all of the defenses and presumptions ordinarily available to a director. A director is presumed in all cases to have acted, failed to act or otherwise discharged such director’s duties in accordance with subsection A. The burden is on the party challenging a director’s action, failure to act or other discharge of duties to establish by clear and convincing evidence facts rebutting the presumption…
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