Being on the board of directors for your Homeowners Association is admirable. You are taking on tons of work to help keep your community at its best. This role also comes with responsibilities that can put the HOA at risk for liability. Hearing the word liability can be scary. But you can take steps to help reduce the chances of your board being held liable. If you are worried about personal liability, don’t worry. There are usually protections in state law, the HOA governing docs, and the organization’s insurance policy. So we are going to focus on the liability of the board.
The responsibilities of board members are outlined in the governing documents for each Association. They usually include these things on behalf of the community:
- Maintaining the common areas
- Obtaining needed insurance
- Preparing budgets and managing the rest of the finances
- Hiring and overseeing outside contractors
- Enforcing the rules of the governing documents
We’ll go over some ways to limit some of the most common risks these responsibilities bring.
HOAs are considered to be nonprofit corporations. And this is one time the corporation part of the law applies more to the organizations. Even though the board consists of volunteers, they still have the same fiduciary duties applied to any corporation under state law. These fiduciary duties are broken into three parts: the duty of care, the duty of loyalty, and the duty to act within its authority scope. This means the community is trusting you with much stuff, but don’t worry, you’ll be able to handle it. You probably do all of these things naturally. What do they mean?
- Duty of care means the board member will make informed decisions. They will know and review the bylaws and CC&Rs when issues come up;
- Duty of loyalty means the board member will act ethically and for the good of the community;
- The duty to act within the scope of its authority is exactly what it sounds like – the board members only taking actions they are allowed to take as outlined in the HOA governing documents.
Operating as a board member following these three duties will help reduce the HOA’s overall liability.
Common Areas and Amenities
Your HOA offers fabulous amenities: a pool, fitness center, golf course, and more. Using all of them without having to pay a fee each time is part of what attracts homeowners to the community. While they are an asset, the board wants to make sure those things don’t wind up costing the HOA due to liability.
First, you want to make sure everything is up to regulation and functioning correctly. Check the bylaws, local laws, and state laws that apply to your amenities. Also, check out that everything is in good physical shape. Damaged or deteriorating equipment poses a risk of injury.
Preventing injuries is the next step. Identifying potential hazards will allow you to find ways to avoid them by making everything as safe as possible. Try and think through any risks for injury for all of the amenities your HOA offers. For example, clubhouses could have a fire risk if there is a grill, stove, or oven inside. Pools have a variety of threats like slipping and falling, diving board injury or drowning. Fitness centers, playgrounds, and everything else should be considered.
Once you know the risks, one way to prevent those accidents is to create rules, like banning smoking and alcohol, having gates that lock at a certain time, and which amenities guests can use. The rules need to be communicated clearly and posted visibly. They should be sent to all the residents to cover your bases of making sure everyone is aware of what is not allowed.
Neighbor to Neighbor Harassment
In 2017, the Fair Housing Act (FHA) imposed new regulations regarding what the HOA is responsible for in neighbor to neighbor harassment. These could change again, but for now, you should know what is required.
The regulations only require that HOA boards take prompt action to end harassment of a neighbor by another neighbor. They do not have to resolve every conflict between neighbors. The FHA considers conflict harassment if the complainant can prove:
- It was based on race, color, religion, sex, familial status, national origin, or disability;
- The harassment was severe and pervasive;
- The HOA knew that the harassment was happening; and
- The HOA could have ended the harassment.
These conditions are specific but subjective. If a harassment claim is raised, you should consult your lawyer to determine if the HOA is liable under these new regulations. Investigating and handling the issue quickly and thoroughly is the best way to limit the HOA’s liability.
Being a board member for your HOA comes with much responsibility for ensuring the community is happy and healthy. These responsibilities come with risks, but being informed about your duties and carrying them out obligations will go a long way.