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October 9, 2007
Board Members Out of Control??
Here is a question that is fairly common: "We have 2 Board members that have conflict of interest and special interest written all over them. They have an agenda that is only out to benefit and protect their neighbors and friends that live in the association. What recourse do the rest of the members have to stop them before they do serious harm? They are ruthless and out of control and scared of no one."
If a Board seems out of control, the recourse for owners is to address the specific issues that are occurring which in the above case could include:
1. Inconsistent Enforcement of Rules - this is a legally actionable cause of action and the number # source of Directors and Officers liability insurance claims in HOAs.
2. Conflict of Interest - if this is in fact occurring, it could mean serious consequences, and is also a legally actionable cause of action. However, sometimes when owners believe actual conflicts of interest exist, the requirements for pursuing a claim are not there. If a board member benefits financially from some action of the board (approval of a contract with the board member's family member or company might be an example), it is not a conflict of interest if it is disclosed.
3. Breach of Fiduciary Duty - Board members serve a position of trust and are responsible for the assets of others so they have fiduciary responsibilities to the members. If the board members actions causes losses to members, there may be a cause of action in this regard as well.
Posted by Beth Grimm at October 9, 2007 9:44 PM