Understanding Fiduciary Duty What Board Members and Residents Should Know

 Being elected to the board of a co-op or a condo comes with a great deal of  power, and with that power also comes a great deal of responsibility. Whether  they serve a co-op or condo community, trustees and board members, in their  position of power, have a responsibility to govern and make decisions on behalf  of that community often referred to as the board's “fiduciary duty.” Decisions made on behalf of their fellow residents must be made in good faith  and with the best interests of the community firmly in mind. Violating this  duty can lead to legal consequences for boards and individual trustees or board  members who stray.  

 Fiduciary Duty in a Nutshell

 The fiduciary duty in the co-op and condo board context arises out of the  special relationship that exists between directors of the boards and the  shareholders and unit owners who place their trust in these directors. A  fiduciary relationship can be formed in other types of relationships such as  lawyer/client, broker/client, or even clergyman/congregant.  

 “As board members they are elected officials, so they have various powers and  responsibilities,” explains Frank A. Flynn, Esq., managing partner of Downing & Flynn in Boston. “So when they are engaging in the use of their powers and responsibilities, they  have a duty that’s higher than their self-interest. Those higher responsibilities are what’s called their fiduciary duties. Board members are unit owners, too. It’s not about what’s best for them as a unit owner, it’s about what’s best for the condominium association as a whole and that’s where their fiduciary duties come about.”  

 In more practical terms, “Fiduciary duty is a duty of loyalty to the organization, and in this case the  condominium community,” says attorney Charles A. Perkins of Perkins & Anctil, LLP in Westford, Massachusetts.  

 “The most general fiduciary duty that generally applies across the board is that  the board members have a fiduciary duty to maintain, repair and restore the  common areas of the complex,” says Dedham, Massachusetts-based attorney Pamela M. Jonah of Goodman, Shapiro & Lombardi LLC. “The upkeep of common areas is their [board members] big thing.”  

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10 Comments

  • Thank you for this article. It is nicely written and understandable. Unfortunately, it does not offer much hope for a person like me, a condominium owner in a three unit condominium where dipping into the treasury for personal uses is an ongoing fact of life. Where else could one steal from the organiational funds without even a slap on the wrist. Something wrong with the laws that allow this. No matter how you slice it, it'sl theft.
  • Great article. I wish it includes specifics about how long HOA in MA are required to keep books/recods on file. I am an owner and I like to know how far back can I request copies of HOA books and records and business receipt for purpose of auditing finacial activities. Can I ask for copies of the last 5 years? thanks
  • MIKE: I am not a lawyer, but I did happen to read that records must be kept for seven years. See Section 10 (c) of Chapter 183A of the Massachusetts General Laws. https://malegislature.gov/Laws/GeneralLaws/PartII/TitleI/Chapter183a/Section10
  • HELLO I am a homeowner in an HOA in maryland (65 homes). My wife has an at home daycare watching 3-5 children. All of which is legal, and confirmed by the HOA and their attorney. The HOA board is attempting to change the bylaw by going door to door to see if the homeowners supports such a revision to the bylaw.. We have attempted to contact the board for discussion as to what their activities are as we dont know what information they are handing out or telling people, yet they wont speak to us. requests have gone unanswered. We are currently NOT in violation of any bylaws. Here is my question: There are several at home businesses in the neighborhood, which ARE violations of the by laws (I dont agree with that bylaw) and nothing is being done to shut them down. Again I dont have a problem with at home businesses. The HOA board is lobbying to have the bylaw changed to ultimately put my wifes home daycare out of business. they are expending a lot of their time and energy, and potentially HOA resources to lobby for this change, yet they are doing nothing to address the current and active violations for which they are aware. Is this considered harassment, or selective enforcement, or breach of fiduciary duty. any help or response would be greatly appreciated. We feel harrassed and singled out. Thanks
  • Question. If a board member breach his fiduciary duty by falsely using management company's address, does it have to go to civil court? Or can a homeowner or another board member take it to a small claims court?
  • In my condo group, the trustees have turned over annual fees of over half a million dollars annually to a long term manager (an original trustee) who has a contract that gives him control over all but 1.2 percent of the funds and has had no audit of funds for 13 years. Can trustees turn over complete control over all funds to a contractor - who as trustee wrote the basic documents that provide exclusivity to his firm? He also has established his real estate business as the exclusive seller of all condos- he did it when he was a trustee. Is this legal?
  • Just found out that Condo is charging different dues. Can this be done? We all have the same % of interest in the association.
  • property management company used our special assessment for other expenses. Heat was 101 F to 107F in our units windows were open when temp was 4F outside Officers did not do their fiduciary duties Are there any good condo pro bono attorneys around that would help 2 lovely senior citizens???? We are being specially assessed and meetings are not notified to all owners. Condo by laws are not followed. I paid all UNDER PROTEST. Now I do not know where to proceed. please help
  • Can an outgoing group of Condo trustees limit, reduce or undermine the fiduciary responsibilities of the incoming trustees by agreeing to a multi year contract with the property manage that exceeds the two year terms of the incoming trustees, leaving them bereft of and control over a half million dollar budget under a multi year contract with the property manager? Secondly, two of the four of the outgoing trustees are not registered in the registry of deeds (MA) a requirement of the Master deed, yet they vote on contracts and budgets. Are these votes binding on owners? Several requests for minutes of trustee meetings have been met with refusals to share minutes of trustee meetings where budgets and contract extensions were discussed Finally, the owners voted at a quarterly meeting (Late July) to have the trustees engage independent counsel to analyze the operating contract of the long term property manager. They have not done so As of December 28), but the contract will automatically renew within 30 days (for three years if the property manager is not noticed). Can they be liable for any negative outcomes or expenses for not implementing a vote of the owners? A concerned incoming trustee (Anonymous)
  • Thank you for all your comments. I live in a 10-unit, everyone-gets-along- mostly-over 65 condo. One of our Directors (a Master Gardener) loves to do the gardening & landscaping around our old schoolhouse building which is lovely and appreciated. Is there any law that says we cannot pay him (being a Director) - a stipend for all his work?