January 2024

MANAGEMENT TRENDS... from page 42.

Duty of Care: According to the Community Associations Institute (CAI), the board is “…required to discharge their duties in good faith and with that degree of diligence, care, and skill that ordinary, prudent persons would exer cise under similar circumstances in like positions.” (See, CAI’s Standards of Care in Community Associations). Pragmatically, this duty doesn’t require the members of the board to be experts in community association governance, but as a board member, you are required to act reason ably in consideration of information available to you and in consultation with your professional advisors. In many cases, boards are reluctant to contact their legal counsel for advice, or they fail to give adequate weight to the recommendations of the association’s manager, engineer, or auditor. These are professionals who are required to be experts in their field and taking their advice into consider ation is an important way to ensure that you are acting with the “diligence, care and skill” required. Duty of Loyalty: Perhaps the duty that impacts com munity association boards more frequently than the others, a duty of loyalty requires that as a board (and board

Another essential reference is the annual budget, which provides a roadmap for the coming year. Board members (both new and existing) should use this as a key guideline and be familiar with what is planned for the coming year. One of the most important documents underlying the annual budget is the Capital Reserve Study. When updat ed every three to five years, the reserve study provides a critical strategic plan for financing and keeping the asso ciation’s assets in good condition. On the other hand, not giving adequate attention to the reserve study can lead to serious problems, including disrepair and catastrophic failure. Adequately funding according to your engineer’s recommendation will provide protection from the need for special assessments of owners in order to provide for the replacement of key components that otherwise were not adequately planned over time in the reserve schedule. Using these references as a guide, boards can fulfill their primary responsibilities, which include:

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JANUARY 2024