Tuesday, January 15, 2013

Boards Behaving Badly


Popular media outlets are great in spotlighting contentious homeowner association issues, leaving an impression that very few communities are properly governed.  This contradicts numerous nationwide surveys conducted by various institutions, showing the majority of communities are actually great places to live.
 
That said, a recent case of abusive behavior should make all take notice.

The community of Ventura Homeowner Association, located in San Antonio, Texas, experienced years of Boards exceeding their authority.  One situation was so bad that the community forced Board President, Lisa Pfeiffer, to resign in 2010.  She had barred homeowners from all board meetings, spent more than $100,000 to sue several homeowners and then rigged her own re-election.  After her expulsion, lawsuits were filed on both sides (Pfeiffer sued the Association for $4 million on claims of that her removal was an act of discrimination – this claim was eventually dropped).

Following failed attempts at mediation, in late-December 2012, the Association obtained a judgment against her.  Besides an award of $208,000 owed by Pfeiffer, the co-defendant in the case, former attorney for the Association Susan Rice, was hit with additional $50,000 in exemplary damages.  The court concluded that both Pfeiffer and Rice had violated their fiduciary duty to the Association.

Fiduciary duty is the requirement to act in good faith for the benefit/interest of the Association.  The person is entrusted with the care, protection and use of community assets.  This duty also includes the sometimes painful and politically unfavorable obligation to increase the budget to address safety issues or items that would otherwise degrade the value of the community.  Examples of appropriate fiduciary behavior include:
  • Not taking advantage of your position to further your own needs 
  • Acting honestly and industriously 
  • Never using privileged information to provide an advantage to family or friends 
  • Providing adequate information upon request by homeowners and not misleading them 
  • Never knowingly placing the Association in a potentially litigious situation

False dealings by a few bad Boards places a magnifying glass on all the rest of us – conduct yourself as to always be above reproach!

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