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If you are going to be serving on your HOA board, or you are currently serving on the board, you need to understand Fiduciary Duty.
Though the term is typically used in the legal and governmental system, it can also be applied to any professional relationship, including the relationship between board member and homeowner. Below is a breakdown of Fiduciary Duty and what is has to do with HOA's.
What is it?
Fiduciary duty is defined as “a legal duty to act solely in another party's interests” (Cornell’s Legal Information Institute). It is the relationship between lawyer and client, guardian and ward, or patient and doctor. In such a relationship, there is a fiduciary, who is the one serving, and the beneficiary or principal, who is the one being served. In the case of a doctor and patient, the doctor would the fiduciary while the patient is the principal. Fiduciary duty is upheld highly throughout the U.S. governmental system, and if it is honored and used properly, should be a liaison of honesty, loyalty, and trust. There are a couple different kinds of fiduciary duty that can be found in everyday occurrences, not just in the legal or governmental system.
What types of Fiduciary Duty are there?
There are two main types of fiduciary duty: Duty of Care, and Duty of Loyalty. Both are vital to the relationship, yet both should be simple to follow.
Duty of Care- Duty of care in simplified terms means that the fiduciary should be using the utmost care and diligence when dealing with it’s principal. Under the duty of care, the fiduciary should be making reasonable decisions, listening to their beneficiary’s concerns and resolving any issues in an orderly and timely matter. Duty of Care basically puts the principal in the center of the universe for the fiduciary to serve and care for.
Duty of Loyalty- Duty of loyalty is to be loyal and undivided from the attention of your company or organization. Under this duty, you should be putting the interests of your beneficiary first with no competition. Failure to do so is a violation of your fiduciary duty, and most of the time, can end in legal consequences. The most important thing to remember when deciding whether something is within your boundaries as fiduciary, is that you are here to serve your beneficiary, not the other way around.
What does Fiduciary Duty have to do with HOA’s?
Since the relationship between an HOA and its homeowners is a business relationship (at least it should be), it is mandatory that the fiduciary duty of the board members and any other HOA official is outlined and enforced. As board members, you are charged with maintaining public facilities, handling homeowner's money, and keeping up the property appearance for other potential homeowners. These obligations should be easier to defend with the knowledge that your homeowners are trusting you to be loyal and caring with their best interests in mind. You must put the homeowner's needs first, as you are a representative for the HOA. Fulfill your fiduciary duty, and the homeowners of your HOA will thank you.
Fiduciary duty isn't so much a duty as it is common sense. Be loyal, attentive, and caring for your beneficiary, whoever it may be, and your will have satisfied your place as fiduciary.
*The Information on this website is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose.
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