CAI-NJ August 2021

FIDUCIARY DUTY... from page 15.

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do not have that luxury, as they are bound by a fiduciary duty to protect their association’s common elements. Fiduciary Duty Explained A fiduciary is a person or group of people that act on behalf of another person or group of people, putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary requires being bound both legally and ethically to act in the others’ best interests. In the community association context, the board of directors of a community association has a fiduciary obligation to the association entity and its members. Most New Jersey community associ- ation are non-profit corporations and are therefore governed under the New Jersey Nonprofit Corporation Act. The Act provides that board members “shall discharge their duties in good faith and with that degree of diligence, care and skill which ordinary, prudent persons would exercise under similar circum- stances in like positions.” [N.J.S.A. Sec. 15A:6-14]. Based on this statutory requirement, decisions of board mem- bers on behalf of unit owners must be made in good faith and with the com- munity’s overall interest. It is imperative for board members to comply with their fiduciary duty in order to protect not only the asso- ciation’s financial interests, but the personal assets of the board. In gen- eral, boards of non-profit corporations enjoy protection under the Business Judgement Rule; this rule provides that

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