CAI-NJ August 2021

FIDUCIARY DUTY... from page 16.

to be protected under the Business Judgement Rule, boards must act with- in their fiduciary duty and not out of a self-dealing, apathetic, arbitrary or fraudulent manner. Similarly, if board members are sued for decisions they made, the association’s Director’s and Officer’s liability insurance policy will

generally provide defense and indem- nification if they acted in accordance with their fiduciary duty. Fiduciary Obligations for Aging Infrastructure As this fiduciary duty relates to replace- ment of aging infrastructure, most forms of association governing documents, including the model by-laws found in New Jersey Condominium & Community Association Law (Gann 2019), provide as follows: “It shall be the affirmative and perpetual obligation and duty of the Board to perform the follow- ing: [t]o cause the General and Limited Common Elements to be maintained according to accept- ed standards and as set forth in the Master Deed, including, but not limited to, such maintenance, painting replacement and repair work as may be necessary... All repairs and replacements shall be substantially similar to the original application and installation and shall be of first class quality...” Of importance, the direction given to boards in the model by-laws is affir- mative and not optional. Governing documents intentionally state that a board “shall” (not “may”) maintain, repair and replace defective building elements. Single family homeowners may fix problems with their homes; however, because of the fiduciary duty, community association board members shall fix them. Therefore, when a building system is aging and in need of repair or replacement, simply ignoring the prob- lem is not a viable option for a board that complies with its fiduciary obliga-

if a board makes a decision using its best judgement and reasonable due diligence, the board will be indem- nified by the corporation if its deci- sion is ever challenged. However,

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