Business Judgment Rule Homeowner Association

The business judgment rule can be a great protection for condo and hoa boards but only if the board is following the documents.

Business judgment rule homeowner association. The business judgment rule protects directors from personal liability if a homeowners association board errs. The rule is spelled right out in the state s law. If a resident is unhappy with a decision made by the board and was to sue the association the business judgment rule defense can assist the board to prove that they had acted in good faith when making the decision in seeking the court to rule in their favor.

Generally courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development are consistent with the development s governing documents and comply with public policy. Under the business judgment rule board members are presumed to have acted in good faith and in the best interest of the association as long as they ve taken the steps that a reasonable person would have taken in similar circumstances. Alexander reveals that should an association be sued the business judgment rule is a powerful tool in their defense.

The courts grant hoa boards broad rights over homeowners by currently holding that the board is the best decider of what s. Association s protected by the business judgment rule this case involved a dispute between a homeowner member of a property owners association owner and the association association over a decision by association s directors not to take legal action against another homeowner under the business judgment rule. Commentary association protected by business judgment rule against disgruntled litigious homeowner a recent ruling by florida s fourth district court of appeal involved just such a dispute.

The declaration for an hoa stated that the board had the discretion to raise the maximum annual assessment without a vote of the homeowners as long as it was in an amount equal to 150 of the rise if any of the cpi for the preceding month of july. In the context of homeowners associations the california supreme court has adopted a rule which it termed as analogous to the business judgment rule. The rule of judicial deference the rule of judicial deference aka business judgment doctrine generally requires courts to defer to decisions made by hoa boards even if a reasonable person would have acted differently in the same situation.

Courts repeatedly have given deference to decisions made within the business judgment.