Do you understand COMMUNITY GOVERNANCE?
Updated: Jun 8, 2021
HOA BOARD MEMBERS: Fiduciary Duty of the Board of Directors
The members of the board of directors and each officer of the association have a fiduciary relationship with the members of the association. This fiduciary relationship imposes obligations of trust and confidence in favor of the HOA and its members.
It requires the members of the board to act in good faith and in the best interests of the members of the association. It means that board members must exercise due care and diligence when acting for the community, and it requires them to act within the scope of their authority.
The fact that the association is a not-for-profit corporation, or that the members of the board are volunteers and unpaid, does not relieve them from the high standards of trust and responsibility that the fiduciary relationship requires. When a member accepts a position on the board of directors, he or she is presumed to have knowledge of the duties and responsibilities of a board member. Board members cannot be excused from an improper action on the grounds of ignorance or inexperience and liability of board members for negligence and mismanagement.
All actions should be in favor of the association and the property owners. The board’s duties must be performed with the care and responsibility that an ordinarily prudent person would exercise under similar circumstances, and the ultimate responsibilities of these unique positions cannot be delegated to a manager, a management company, or another third party. Each board member must recognize the fiduciary relationship and the responsibilities that the board has to the association and each of its members.
BOARD OFFICERS A board generally has at least four officers: a president, vice president, secretary, and treasurer.
PRESIDENT: The president is the leader of the board and represents the board before the membership. He or she generally sets meeting agendas and presides at all meetings of the board and membership. The board president can Though he or she may have more visibility than other officers, the president’s power and authority are no more and no less than the other board members.
The President will execute contracts, orders, and other documents in the name of the association as its agent. When signing documents, the President should indicate the capacity in which he or she is signing in order to avoid any personal liability since the president’s signature, under most circumstances, will bind the association under a doctrine of inherent powers.
The President also assumes general charge of the day-to-day administration of the association and has the authority to order specific actions in the furtherance of the board’s policies.
The president serves as spokesman for the board of directors in most matters relating to general association business. Like all officers of the association, the President has an affirmative duty to carry out the responsibilities of the office in the best interests of the association. Unless otherwise specified in governing documents, the President serves at the will of the board of directors and can be removed with or without cause at any time by a simple majority of the full board.
VICE-PRESIDENT: The vice president performs all the duties of the president in his or her absence and typically shares some of the burdens of the president. The vice president may be assigned as a liaison to specific association committees.
SECRETARY: The secretary of the association is responsible for keeping and maintaining a record of all meetings of the board and the membership and is the custodian for most of the official records of the association.
The position of secretary is not simply a clerical position, the secretary is a voting member of our HOA board.
The secretary does not have the authority to bind the association or the board of directors in dealings with third parties unless the board has provided express authority for the secretary to do so. In some cases, the secretary may not actually keep the minutes of the general meetings but will be responsible for obtaining someone who will do so as a recorder or assistant secretary. As the custodian for the minutes and other official records of the association, the secretary is responsible for ensuring access to those records by the members (homeowners) of the association and their authorized representatives.
He or she also maintains or makes sure that the community association manager maintains the book of resolutions and ALL official records, including official correspondence, contracts, and membership roster.
TREASURER: The treasurer is the chief financial officer. He or she works with appropriate staff, contractors, and committees to ensure that the annual operating budget is developed and submitted for board or membership approval (whichever is required) and that the records of all association financial transactions and a roster of delinquent accounts are maintained.
The treasurer recommends action regarding collections, receives and disburses funds as authorized, ensures the preparation of periodic financial reports, ensures the association is adequately funding replacement reserves and authorizes an independent audit. If the association has a manager, he or she is likely to prepare the documents, but the treasurer is ultimately responsible for them.
When the association has a manager or management company that handles the funds on a daily basis, the treasurer’s duties will include overseeing the appropriate people to ensure that the financial records and reports are properly kept and maintained. Unless the by-laws otherwise specify, the treasurer is responsible for coordinating the development of the proposed annual budget and for preparing and giving the annual financial report on the financial status of the association.
The treasurer does not have the authority to bind the association or the board of directors in dealings with third parties unless the board has provided express authority for the treasurer to do so. As with the association’s secretary, the treasurer does not have to perform the day-to-day record-keeping functions of the association when this responsibility is transferred to a management company, but the treasurer will ultimately be responsible for ensuring that the financial records of the association have been maintained properly in accordance with sound accounting practices.
Please note: According to the Bylaws, an officer must be a member of the Homeowner's Association. A member is designated as the owner of the property and must be a named person on the property deed.
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