Condo Media - May 2014 - 26

HOMEOWNER'S CORNER

Community Association Fundamentals
Basic Principles and Fiduciary Responsibility

n 2012, CAI research indicated
there were an estimated 323,600
association-governed communities
in the U.S., and 24 percent of U.S.
homes are in community associations.
Even with so many people living in
community associations, many - owners and renters alike - don't really
understand the fundamental nature
of common interest communities. In
addition, many others, including the
media and government ofﬁcials, lack a
true understanding of the community
association (or condominium) concept.
CAI developed the following 10 basic
principles that answer three essential

questions: What's the basic function of
a community association? What are the
essential obligations and expectations of
homeowners? What are the core principles
that should guide association leaders?

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26

CONDO MEDIA * MAY 2014

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Associations ensure that the
collective rights and interests of
homeowners are respected and
preserved.
Associations are the most local
form of representative democracy,
with leaders elected by their neighbors to govern in the best interest
of all residents.
Associations provide services and
amenities to residents, protect property values, and meet the established
expectations of homeowners.
Associations succeed when they
cultivate a true sense of community,
active homeowner involvement,
and a culture of building consensus.
Association homeowners have the
right to elect their community
leaders and to use the democratic
process to determine the policies
that will protect their investments.
Association homeowners choose
where to live and accept a contractual
responsibility to abide by established
policies and meet their ﬁnancial obligations to the association.
Association leaders protect the
community's ﬁnancial health by using established management practices and sound business principles.
Association leaders have a legal and
ethical obligation to adhere to the
association's governing documents
and abide by all applicable laws.
Association leaders seek an effective
balance between the preferences of
individual residents and the collective rights of homeowners.

Association leaders and residents
should be reasonable, ﬂexible,
and open to the possibility -
and beneﬁts - of compromise.

Fiduciary Responsibility

From time to time, you may hear that
the board of the association operates in
a ﬁduciary capacity for the homeowners. Or you may read about the board's
ﬁduciary responsibility in the governing documents. Fiduciary duty simply
means the board has an ethical and legal obligation to make decisions in the
best interests of the entire association.
Fiduciary duty includes a duty of
loyalty to the association, which means
that board members should never use
their position to take advantage of the
association. They should never make
decisions for the association that beneﬁt
themselves at the expense of the association and its members.
Fiduciary duty also includes the duty
to exercise ordinary care. This means
board members must perform their duties in good faith and in a manner they
believe to be in the best interest of the
association, with such care as an ordinary
prudent person in a similar position under similar circumstances would use.
Board members fulﬁll their ﬁduciary
duty by:
* Developing and using a formal budgeting process, and establishing and
adhering to budgetary guidelines
* Making sure the budgeting process
reﬂects the wishes of the association
members
* Collecting sufﬁcient fees to adequately operate the association
* Soliciting bids and negotiating appropriate contracts
* Authorizing expenditures. CM

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Condo Media - May 2014

Table of Contents for the Digital Edition of Condo Media - May 2014