Tag Archives: failure

Because I Said So, That’s Why!

For those of you who have served, or currently serve on a board of directors or an architectural review committee, have you ever felt like the evil parent telling your child “no”? No matter how you put it, the child continues to argue that he/she should be able to carry out the “forbidden” activity, until everything comes to a head and the child is sent off to his/her room.

Unfortunately, when it comes to the architectural review process for associations, resolution of a dispute is not as easy as putting your foot down and sending an owner to his/her room. To the contrary, the architectural process is closely scrutinized by courts and owners in the communities.  Therefore, before denying (or approving) a request, it is imperative that the architectural review committee dot its i’s and cross its t’s.

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Steering Clear of Fiduciary Dangers What Boards of Directors Need to Know

Why do directors have a fiduciary duty?

A fiduciary duty arises out of a relationship in which one person or entity is entrusted to control the decisions or interests of another. For example, the common estate planning device of an inter vivos trust sometimes provides for a lending institution to be the trustee and to control the funds within the trust. In such a relationship, the lending institution would be a fiduciary and have fiduciary duties to the beneficiaries of the trust. Similarly, the board of directors of a homeowners’ association exercises control over the affairs of its membership, and based on this special relationship, the directors of the association owe a fiduciary duty to its members. Most jurisdictions have either enacted statutes or have specific case law on point which provides that directors of non-profit corporations are fiduciaries.

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Lifting the HOA Veil

In real estate sales, sellers are required to disclose any material fact that any prudent buyer would want to know before completing a purchase. Property located over a toxic waste dump would be an obvious example of disclosure and the need for it. There are less catastrophic issues, like roof condition or a leaking crawlspace but the idea is the same.
 
Anything that could negatively impact the value or marketability of the property needs to be divulged before closing. While there are usually statutory disclosure requirements of single family house sellers, these same disclosures are generally not required of homeowner association home sellers. This is a huge problem and here’s why:

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