HOA Boards: When Good Judgment Goes Wrong

HOA boards wield significant power, but they're not above the law. The Business Judgment Rule (BJR) shields them from lawsuits when mistakes happen, but it's not a carte blanche. Courts typically side with HOA boards, but only when they play by the rules.

The Power of the BJR

In 1999, a homeowner sued their HOA over termite issues. The court ruled that boards have the right to make decisions, even if homeowners disagree. This rule applies to a wide range of decisions, not just maintenance. It's crucial because it allows boards to govern without facing lawsuits every time someone complains.

Limits of the BJR

However, the BJR isn't a free pass. Boards can't ignore the law or their own rules. In 2010, an HOA tried to make a homeowner fix a sewer pipe. The court denied the request, stating the HOA was trying to avoid its responsibilities. Boards also can't cherry-pick which rules to follow. In 2008, an HOA attempted to exempt certain palm trees from height rules. The court again said no, as the HOA was ignoring its own regulations.

Boards must also adhere to building codes. In another 2008 case, an HOA tried to make a homeowner fix a common area problem. The court ruled against the HOA, as it was trying to avoid fixing something it was responsible for. Inaction isn't a decision. In 2011, an HOA repeatedly repaired the same sewage problem without addressing the root cause. The court found this inadequate.

Conclusion

While the BJR grants HOA boards considerable power, it's not unlimited. Boards must follow the law, their own rules, and take meaningful action to address problems. Otherwise, they may find themselves in court.