Board members of a condominium or homeowner’s association have fiduciary duty to act in a way that will benefit all members of the association. The Hawaii Department of Commerce and Consumer Affairs has a document available to associations, “Condominium property Regimes: Owner Rights and Responsibilities.” Following is an excerpt of the document, which is a good starting point for association boards and their members to understand their responsibilities under the law.
Board of Directors
The association is governed by a board of directors elected by the unit owners to represent them in governing and managing the condominium. The Condominium Property Act provides that every director owes the association a “fiduciary duty” in the performance of the director’s responsibilities, to exercise the degree of care and loyalty required of an officer or director of a nonprofit corporation (HRS S 514B-1()6 (a)).
The board must meet at least once a year (HRS 514B-125 (e)). As a unit owner, you have the right to participate in all board meetings, except “executive sessions”, pursuant to owner participation rules adopted by the board (HRS s 514B-125 (a)).
The officers of the association are responsible to the board for the day-today operations of the association. Officers are normally elected by and from the board of directors. Chapter 514B prohibits any unit owner who is an employee of the managing agent from serving at the same time as an officer (although not as a director), and any director who is also an employee of the managing agent shall not participate in any discussion of the management contract ata board meeting, and shall be excluded from any executive session in which the contract or the property manager are discussed (HRS S 514B-107 (c)). No tenant, resident manager, or condominium employee can serve on the board.
Business Judgment Rule
In judging the actions of directors, courts frequently apply a test called the “business judgment rule”. The courts recognize that they should not second guess the lawful decisions of the board of directors. The board of directors is the duly elected representative of the association; its members own units in the project and have knowledge of the needs and desires of the community. The basic self-governance principle of the condominium law limits judicial inquiry into board decisions.
The business judgment rule recognizes that volunteer board members will not always make the right decision, but if they follow the right procedures and act in the interest of the association, they will usually not be personally liable for their actions on behalf of the association.
The full “Condominium property Regimes: Owner Rights and Responsibilities” document may be found at the REB website www.hawaii.gov/hirec