You ran for the board on the platform of remodeling the clubhouse that has become outdated. What you haven’t shared with the members of the association is that your daughter is getting married next year and the clubhouse would be the perfect place for a reception.
The association has never charged for members to use the clubhouse for gatherings and you know that this will be a great way to save some money on the reception, but the brown plaid furniture will never go with your daughter’s theme for her reception.
Now that you’re on the board and have taken the time to review the association’s financial situation you see that while other board members agree with you that the clubhouse does need to be updated the reserve fund doesn’t call for any upgrade work for three years.
Additionally, the association is in the middle of a re-roofing project that has uncovered dry rot and the actual expenses are exceeding the projected budget for the project.
The bottom line for you is that you need the clubhouse to be updated before the impending nuptials. You push for the manager to gets bids for the next board meeting and lobby other board members about the importance of the upgrade to the property values of the association. Prospective buyers will be unwilling to purchase with the current state of the clubhouse.
You’re so excited at the next meeting when the manager brings all the proposals from vendors to complete the upgrades and you have two of the other five board members who are voting your way. The wedding invitations are ready to print and just waiting for your okay on the address of the reception. No harm done, everyone will benefit from the new and improved clubhouse right?
Board Members Are Fiduciaries
As an association board member you are a fiduciary of the association and are entrusted with the assets of the association, both the money and the property. You’re held to a higher standard and must act with care and loyalty to the entire association, not personal interest.
Fiduciary Duty: A duty to act for someone else's benefit, while subordinating one's personal interest to that of the other person. It is the highest standard of duty implied by law (e.g., trustee, guardian). -Black's Law Dictionary
This is just one example of what a self-serving board member looks like. There are many situations where directors should keep their fiduciary duty in mind.
Boards can adopt an ethics policy and make sure that the directors are following to avoid these situations. Your property manager and legal counsel can help you to prepare this type of policy.
Director's and Officer's Insurance
Your association should also have Director’s and Officer’s Insurance coverage which protects Directors from being personally responsible for acts and omissions that are performed in good faith, that are not willful, wanton or grossly negligent.
The question to ask yourself is, “did this director act in good faith?” Did they act wantonly? This director may believe that what they have done is in the best interest of the community, and that it’s not a big deal that they are personally benefiting from the outcome. You be the judge.