CAI-NJ Feb. 2019

Why Hire a Professional? The Benefits of Hiring Professionals to Guide

O N E DO THING BETTER

the BoardWhen Conducting the Association’s Business By: Steven J. Morris, P.E., R.S., NAFE, Morris Engineering, LLC/ME Architecture, LLC & Damon M. Kress, Esq., Shareholder, McGovern Legal Services, LLC As the old saying goes, “A man who represents Himself has a fool for a client.” For community associations, deciding against hiring a professional, whether it be an attorney, accountant, engineer or other contractor who is particularly familiar with the issues the association is addressing, could undermine one of the primary protections afforded to corporate board members, the “business judgment rule.” The “business judg- ment rule” prohibits courts from “second-guessing” decisions by a corporation’s board unless the decision is unau- thorized by the controlling documents, or is the product of fraud, self-dealing, or unconscionable conduct. Papalex- iou v. Tower West Condominium, 167 N.J. Super. 516, 527 (Ch. Div. 1979). In Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150 (2011) the New Jersey Supreme Court explained that corporate board members who rely upon the guidance of experts and other professionals, when making decisions for the corporation, enjoy the benefits and protection of the “business judgment rule” if shareholders subsequently challenge the propriety of the decision. The Supreme Court has since held that decisions by board members for community associations are similarly protected by the “business judgment rule.” Committee for a Better Twin Rivers v. Twin Rivers Homeowners’ Ass’n, 192 N.J. 344 (2007).

A Guide Needs to Know the Terrain Even if the board feels they have people with expertise on the board or serving on a committee, community associations are unique terrain in which to operate. An engineer on the board that spent her career designing bridges, may not appreciate, or know how to deal with preparing to execute a siding replacement project that will dis - place people’s cars from their driveways. It may sound like a trivial issue, but if not properly addressed, logistical issues like parking can doom a project. Conflicts of interest Anyone giving professional advice to a board must represent the best interest of the association as a whole. If a member of the asso - ciation is giving advice that could affect their property or cost them money personally, there would automatically be the opportunity for a perception of, if not an actual, conflict of interest. Staying up to date Professionals who regularly practice in the community association field are required to participate in continuing professional education that helps keeps them up to date on changes in laws, practices, codes and standards. Volunteers may have been experts in the past, but may not be familiar with the latest practices, technology or stan - dards, which could result in harm to the association

Love Thy Neighbor • Sometimes a board has to express dissatisfaction with, fire, or in worst cases sue a person that provided professional services to the community. This can be very difficult to do if the person who provid - ed those services is a friend and/or neighbor. • It’s easier to hold a paid professional to timelines and due dates than it is a neighbor. • If bad news needs to be delivered at an open meeting, the pro - fessional can present the news and then go home at the end of the meeting; board members and volunteers have to live with neighbors that may be upset by the news and may blame the “messenger”. Protect the association & yourself • Professionals typically carry Professional Liability Insurance that can help protect themselves and their clients in the event the profes - sional makes an error that results in damages to the association. • The Association’s Directors and Officers Insurance (D&O Coverage) is there to protect the board members. As explained above, reliance upon the guidance of expert advice helps protect the board and the association if litigation arises over the association’s decisions.

Interested in writing for the Do One Thing Better Section of Community Trends® ? Contact Jaclyn Oskierko at jaclyn@cainj.org for more information.