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Sterling
Green
A United Community
Channelview, Texas
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A SIMPLE RULE TO GUIDE YOUR
BOARD OF DIRECTORS
The Board of Directors for any Community Association really has a singular duty to its members: make (the right) decisions on behalf of the community. Of course, that's just stating the obvious really. What standard or guideline can the Board utilize as a template for what to do when taking action on Community issues?
It's called the business judgment rule. Comprised of three prongs, the
business judgment rule is a measuring stick used by the courts to
determine if a Board acted properly in the face of litigation resulting
from its action(s). This rule requires that the Board (1) act in good
faith, (2) exercise due care, and (3) do so without generating any
conflicts of interest. Although these facets seems easy enough to master
and abide by, many an Association find themselves in hot water because
they failed to base their decisions on what's best for the Community and
not just the Board (or a few vocal members).
There are a few questions that Board members can ask themselves to take
stock of the business judgment rule and ensure that conduct comports
with its requirements: (1) would you make this same decision if you were
not personally affected? (2) have you done all necessary research to
make an informed decision for the Association's benefit? (3) are you
able to make an unbiased decision, avoiding any conflicts of interest
personally or professionally?
Adhering to the above guidelines can increase the chance that your Board
decisions are sound ones and not liable for second-guessing or
litigation by disgruntled homeowners down the road.
*Thanks to Nicole L. Washington, CMCA, AMS as printed in Common Ground
Jan/Feb 2006
Posted by: Ron Martin
This information is believed to
be accurate, but is not guaranteed.