Illinois court spells out HOA BOD fiduciary duties

First, let me point out to many HOA directors that the HOA is not a social club, but is a binding contractual relationship between the BOD and the members.

BOUCHER v. 111 EAST CHESTNUT CONDOMINIUM ASSOCIATION, INC., 2018 IL App (1st) 162233 (Appellate Court) concerning the fining of a member while withholding material facts.

¶ 35 Directors of a condominium association owe fiduciary duties to unit owners similar to the duties corporate directors owe to shareholders, insofar as the unit owners trust the directors to use the owners’ money for maintenance, repair, and improvements to the building. The unit owners and residents also entrust the board to make decisions on behalf of all members of the association concerning the conduct of association members in and around their homes. . . . The high degree of trust the members must accord to the association imposes on the directors very strict fiduciary duties, particularly with respect to decisions concerning the unit owners’ and residents’ conduct in their home.

¶ 36 Thus, each board member here has strict duties to treat the unit owners “with the utmost candor, rectitude, care, loyalty, and good faith—in fact to treat [them] as well as [he] would treat himself.” . . . . When investigating charges of misconduct against a unit owner, the duty of candor imposes on the board members an obligation “of full, fair, complete, and timely disclosure of material facts.”

¶ 38 The Anderson court found that a condominium association did not properly assess fines upon a unit owner because the association failed to provide the unit owner with an opportunity to be heard in a fair manner. The Anderson court held that before imposing fines, the association had a duty to give the accused unit owner “an opportunity to know the facts on which the agency is asked to act, to cross-examine witnesses and to offer rebuttal evidence.”

¶ 48 The business judgment rule permits a trier of fact to presume that a corporate board made its decisions “on an informed basis, in good faith and in an honest belief that the actions taken are in the best interest of the company.”

¶ 52 While the declaration may limit liability for business decisions made in good faith, it cannot limit liability for violations of the duties of honesty, candor, full disclosure, loyalty, and good faith.

Published in: on August 22, 2018 at 12:11 pm  Comments (1)  

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One CommentLeave a comment

  1. Excellent post. Thanks George for making everyone aware of what is happening and how BODs who do not meet their fiduciary duties can and will be held personally responsible and liable. The abusive practices must cease. Being on a Board is a responsibility, not a right. It is certainly not appropriate for any BOD to abuse the position for personal agendas. I recently read that while an insurance company may represent a BOD in a legal matter, it will not pay for them if they are found guilty of violating the law or their fiduciary duties.


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