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Post by Dick Tracy on Jul 10, 2014 0:18:34 GMT -5
(For Your Information)....
YOU AS A FIDUCIARY
by Neal Culloh, Esquire
Managers and directors of condominiums and homeowner association are used to hearing that
they owe a "fiduciary" duty to the members of their associations. What does this really mean?
Generally speaking, a fiduciary is a "trustee" with respect to the trust and confidence involved
in a given undertaking, and the scrupulous good faith and candor which it requires.
"Fiduciary Duty" is a duty to act for someone else's benefit while subordinating one's personal
interests to those of the other person's. That means, while serving as a manager or director
for a community association, your own interests must be subordinate to the interests of the
association. One's own interests must always take back seat behind the interests of the
association in conducting association affairs. The law implies a standard of duty to fiduciaries
which is higher than any other standard of duty. In fact, as a fiduciary, you bear the highest
standard of duty implied by law.
Practically speaking, this means that managers and directors must be scrupulously honest in
the conduct of their duties. Moreover, if one acts in his or her own personal self interest
before that of the association, despite being scrupulously honest, one runs the risk of
breaching that fiduciary duty. If fact, one's role as a fiduciary is fraught with potential risks
and liabilities. Because of the special trust and confidence imposed on a fiduciary, and the
reliance of members, directors and managers, one always runs the risk of being accused of
a breach of fiduciary duty despite one's best good faith effort to avoid doing so.
For this reason, Clayton & Culloh always recommends that directors have "Director and
Officer" liability insurance to insure against the risk of liability based on breach of fiduciary
duty. Generally speaking, a breach of fiduciary duty occurs when one, through acts or
omissions, violates the terms of the fiduciary relationship. Those terms may be express terms,
such as those found a Declaration of Covenants and Restrictions, Bylaws, or Articles of
Incorporation, or may by implied by law. Taking "kick-backs" from a contractor, for example,
or other self-dealing in the conduct of the association's affairs, or using one's position as a
Director for personal gain, are all breaches of fiduciary duty and can expose the individual
director, and the association, to liability and damages.
"Is this the right thing to do?" is a question frequently asked by Directors and Managers. The
answer is never an easy one, but will often be found by looking to the best interests of the
association and membership as a whole.7
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Post by Retain to Refrain on Jul 10, 2014 5:05:48 GMT -5
Neal Culloh, Esquire
I see a need to contact the above when this office opens today. |
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Post by Dick Tracy on Feb 18, 2016 22:07:24 GMT -5
Is SLohA's Board of Directors Doing Their Fiduciary Duty & Do They Have Your Trust?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
YOU AS A FIDUCIARY !
by Neal Culloh, Esquire
Managers and directors of condominiums and homeowner association are used to hearing that
they owe a "fiduciary" duty to the members of their associations. What does this really mean?
Generally speaking, a fiduciary is a "trustee" with respect to the trust and confidence involved
in a given undertaking, and the scrupulous good faith and candor which it requires.
"Fiduciary Duty" is a duty to act for someone else's benefit while subordinating one's personal
interests to those of the other person's. That means, while serving as a manager or director
for a community association, your own interests must be subordinate to the interests of the
association. One's own interests must always take back seat behind the interests of the
association in conducting association affairs. The law implies a standard of duty to fiduciaries
which is higher than any other standard of duty. In fact, as a fiduciary, you bear the highest
standard of duty implied by law.
Practically speaking, this means that managers and directors must be scrupulously honest in
the conduct of their duties. Moreover, if one acts in his or her own personal self interest before that of the association, despite being scrupulously honest, one runs the risk of breaching that fiduciary duty. If fact, one's role as a fiduciary is fraught with potential risks and liabilities. Because of the special trust and confidence imposed on a fiduciary, and the reliance of members, directors and managers, one always runs the risk of being accused of a breach of fiduciary duty despite one's best good faith effort to avoid doing so.
For this reason, Clayton & Culloh always recommends that directors have "Director and Officer" liability insurance to insure against the risk of liability based on breach of fiduciary duty. Generally speaking, a breach of fiduciary duty occurs when one, through acts or omissions, violates the terms of the fiduciary relationship. Those terms may be express terms,such as those found a Declaration of Covenants and Restrictions, Bylaws, or Articles of Incorporation, or may by implied by law. Taking "kick-backs" from a contractor, for example, or other self-dealing in the conduct of the association's affairs, or using one's position as a Director for personal gain, are all breaches of fiduciary duty and can expose the individual director, and the association, to liability and damages.
"Is this the right thing to do?" Is a question frequently asked by Directors and Managers. The answer is never an easy one, but will often be found by looking to the best interests of the association and membership as a whole.
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Do You think SLohA Directors, Managers and The Management Co.
are asking each other:
"Is This The Right Thing To Do?"
IMO Our Leader's Actions Speak Very Loud... No !
16RC
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Expose
Pilgrim
"Always Seek The Truth"
Posts: 43
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Post by Expose on Sept 12, 2016 2:27:49 GMT -5
Community Association Directors and Officers
Owe a Fiduciary Duty to Their Members
by: Rob Samouce
08/01/2001
Many new directors elected to a Condominium or Homeowner Association Board often ask what is the level of responsibility to the owners that they must follow in carrying out their association duties. Section 718.111(1)(a) of the Condominium Act provides that; “The officers and directors of the association have a fiduciary relationship to the unit owners.” Section 720.303(1) of the Homeowners’ Associations Act states that “The officers and directors of an association have a fiduciary relationship to the members who are served by the association.”
But what is the make-up of a fiduciary relationship? The answer to this question as pertaining to whether specific instances or acts of directors were carried out in a fiduciary manner or not can enter a gray area pretty quickly. As a good guideline however, Jack Holeman, a property manager who wrote a question and answer column for East Coast Florida newspapers for many years, said:
“A fiduciary relationship simply means a relationship of trust and confidence. An association, and its board, maintain the common property of, and do business as agent for, the folks who own the complex, i.e., the unit owner members. The unit owners therefore can expect to have complete trust in these elected leaders. It follows that, as trusted agents, the law holds such boards and officers to a higher standard of “trust” than would apply in usual business transactions. Board members must ALWAYS act in good faith and in the best interests of the unit owners, while ALWAYS operating within the scope of their authority. In other words, they can be trusted to act prudently and responsibly in every circumstance when dealing with and for the unit owners of the association.
I must add, that since board members and officers are not necessarily required to be educated and expert in all areas needed to manage a community association they can, and should be expected to, rely heavily upon the expertise and advice of consultants such as attorneys, engineers, accountants and managers prior to making many decisions concerning handling the money, property, and lives of the resident owners.”
This definition of fiduciary duty follows the general standards for directors contained within Section 617.0830 of the Florida Not For Profit Corporation Act that all not-for-profit Florida Corporation must follow.
In review of reported Florida cases that concern allegations of breach of directors’ fiduciary duty, almost all cases concluded with no personal liability on the part of the Directors. At most, usually any liability for negligence on behalf of the directors stuck to the Association, but not the directors. To find personal liability on behalf of the directors, the cases required that there had to be a showing of intentional misconduct (such as crime, fraud, recklessness or self-dealing); not mere negligence. These findings follow Section 617.0843, Florida Statutes which provides immunity from personal civil liability to directors unless they breached their fiduciary duty and the breach was criminal, self-dealing, with malicious purpose, in a manner exhibiting wanton and willful disregard of human rights, safety, or property, with reckless conscious disregard of a risk or with knowledge of high probability to cause harm.
It is good to have this immunity under the law for mere negligence on the part of a director or many directors would not take the risk of serving on the board. However, the director can still be sued and in order to further protect the director from the costs associated with defending such suits, associations should carry Directors and Officers Liability Insurance and should also indemnify their directors for simple negligence in their governing documents.
Although directors can and should rely heavily on experts in areas which they do not possess personal expertise, it is important for directors to remember that they must also follow the advice of the experts or they could loose any personal protection they have by statute, indemnity or insurance. Not following their experts’ advice could be considered an intentional reckless act.
A few reported cases where directors were found personal liable for their acts include County Manors Association, Inc. v. Master Antenna Systems, Inc. where directors intentionally took over control of a condominium antenna system being provided by a third party to the owners, disconnected parts of the system and moved the system into storage. In B & J Holding Corporation v. Weiss the initial directors and officers of the condominium association (appointed by the developer) were found personally liable when they deliberately failed to collect the maintenance payments due from the developer.
Even if personal liability may not attach for fiduciary breach acts of a director or officer, mere negligent fiduciary breach acts can be costly for the director or officer to defend and costly for Association both in defense and damage awards. Therefore, go forth directors and officers and use your best efforts to carry out your unpaid duty to your members in a fiduciary manner.
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Another Law Suit? It Maybe in the pipeline...
The revitalized Covenants will most likely be reaffirmed by the DEO, it has been cH allenged and scheduled for a hearing later this month. I do not believe the DEO will not overturn their own approval.
With the Covenants back in place there would be a basis to S u e the association for breach of fiduciary, regarding the commercial activity permitted by the BODs.
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Post by Admin on Sept 12, 2016 10:21:43 GMT -5
Expose posted:
Nice Article. We ALL need to reminded what to expect from our BOD. They are not simply well-meaning volunteers. They have a very special job and they are permitted to make "business missteps" but they are NOT permitted to violate the Owners' trust! Especially for their own benefit whether that be monetary, privilege, status or ego.
I believe that this is why we have seen no "lease agreement" in a year--director(s) fear of discovery of breach/self-dealing. Perhaps the attorneys have advised SLohA it is a bad idea. Perhaps a more cautious BOD is taking the attorney's advice. This makes the most sense. IF that is the case, for the BOD to continue the charade of telling owners that a "lease agreement" is pending--is fraud. And that is breach of fiduciary. SLohA must come clean at some point.
The BOD should hope that they get lucky and that this KCNet thing runs its course before a pissed-off owner and name-building pro bono HOA attorney wannabe decides to whack SLohA upside the head with a breach lawsuit.
The hearing for the DEO Petition is two weeks away on Sept 26.
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