Condominium Property Damage & Board Fiduciary Duties
When disaster strikes, and before you hire an attorney to represent the board to pursue property damage claims on behalf of the condo association it is recommended that the board obtain competitive and multiple bids from experienced and qualified firms.
Do you serve on the board of a condominium association, or do you own a condo?
Don’t let a second disaster strike after a property loss due to hurricane or fire.
Eric O’Bell offers free and confidential consultations for board members and/or unit owners to review insurance policies, improve procedures after a property damage loss and illustrate the key fiduciary duties that condominium board members owe to the unit owners to ensure the prudent use of insurance funds to rebuild. Mr. O’Bell has extensive experience regarding the duties of board members and recently served as co-counsel on a certified class action against a condo board which alleged failure by the board to procure adequate insurance and failure manage insurance funds following Hurricane Ida.
Fiduciary / governance duties of a condo board
(including when hiring outside services)
Even though the law doesn’t automatically impose a “bid-all-attorneys” requirement, the board still has fiduciary and governance duties that bear on how it approaches hiring counsel. These duties are well recognized in the HOA/condo–association context generally.
These key fiduciary duties include:
- Duty of Care / Due Diligence — the board must make informed, reasonable decisions on behalf of the association.
- Duty of Loyalty / Good Faith / Integrity — board members must act in the best interest of the association, not for personal gain or favoritism.
- Duty of Full Disclosure & Transparency — major decisions (especially on spending, contracting, litigation) should be transparent to owners; processes should be documented for accountability.
What a board should do — as a matter of fiduciary duty and best practice – after hurricane and/or substantial property damage
Given the board’s fiduciary obligations and the need to manage association funds prudently, good practice suggests the board should do at least the following before committing to hiring outside counsel for a property damage claim:
- Evaluate multiple potential attorneys or law firms (interview, compare experience, see if firm is flexible on fees, explore track record on previous claims).
- Document the decision-making process carefully — e.g., minutes of board meeting, summary of why a particular attorney or firm was chosen.
- Disclose to unit owners (per the association’s bylaws or governing documents) that the board intends to retain counsel, especially if substantial funds might be expended.
- Confirm that the board is acting in good faith, and that counsel selected is reasonably well qualified and performing in the best interests of the association.
- Avoid conflicts of interest — board members should not steer business to friends and family or companies in which they have interest.
While not all inclusive, these steps may help satisfy the fiduciary duties of care, loyalty, transparency, and good faith, and help protect the board (and association) from claims of mismanagement or breach of fiduciary duty.
For more information or to set up a free and confidential consultation, please call our office at (504) 456-8677.