Tag: Business Judgment Rule

Covenant Allowed for Home-Based Daycare Businesses

Facts: An association discovered that two homeowners in the community were operating daycare businesses in their homes. The association asked a trial court for a declaration that this was in violation of the restrictive covenant, and an injunction—that is, an order from the court to shut down the businesses.

Is Home Day Care an Exception to a Home Business Ban?

Q: As the manager of a condo building, I recently discovered that a member has been operating a day care for profit in her unit. There have been a few complaints from other members about noise and an increased number of visitors to the building—mostly from pick-ups and drop-offs of children. I checked our governing documents and home businesses are banned.

Determining Whether Home Business Ban Includes Day Care

Q: As the manager of a condominium building, I recently discovered that one of the members who lives in the building has been operating a day care for profit in her unit. There have been a few complaints from other members about noise and an increased number of visitors to the building—mostly from pick-ups and drop-offs of children. I checked our governing documents and home businesses are banned.

Ethical Management: Are You Really Doing the Right Thing?

Like association board members, managers are entrusted to work within fiduciary guidelines, exercise sound business judgment, and consistently maintain the duty of care and loyalty they owe to the association. Managers who keep these responsibilities in mind are more likely to preempt member dissatisfaction and even liability.

Association Not Liable for Damaging Individual Unit Owners

Facts: An association sued two members for not paying maintenance fees. The members filed a counterclaim alleging that the association had caused monetary damage to them by “engaging in bad faith conduct” by its involvement in a lawsuit filed by a group of other members in the community who accused the association of withholding financial documents. The members asserted that they had been rejected for a reverse mortgage loan on their unit because of that lawsuit. A trial court ruled in favor of the association without a trial. The members appealed.

Use Business Judgment Rule to Avoid Unfair Enforcement Accusations

Q: During the summer months, more of our members use the outdoor amenities in the community, such as the pool and basketball courts. We’ve had to crack down on some of the behavior that we’ve seen in these areas, but because the nature of some of the behavior isn’t that serious, I’m tempted to let it go if it seems harmless. What types of risks does the association run if it fails to enforce rules consistently?

Top 10 Dos & Don’ts for Reducing Risks

Anticipating risks and then coming up with reasonable, cost-effective, and practical ways to reduce them is a large part of being an effective association manager. Because you and your staff are at the community day-in and day-out working on everything from dealing with the board to making sure that landscaping projects are going well to responding to members’ complaints or questions, you’re in the unique position of seeing potential problems before they arise.

Enforce Home Business Rules Consistently for All Members

Home businesses are being operated more often than ever before, as a cost-saving measure or because it’s more convenient for the business owner to stay at home. But some associations restrict the kinds of businesses members can operate in their homes or prohibit home businesses altogether.

Board’s Enforcement Actions Within Scope of Its Authority

Facts: A unit owner sued the association, claiming that it had abused its power by amending and enforcing the rules and regulations concerning the leasing of units, parking, and pet ownership, and authorizing the assessment of late fees for unpaid common area charges. The owner claimed that, as a result, he shouldn’t have to pay late fees for his unpaid common area charges.

Board Has Authority to Install Sewer System

Facts: Four of the 23 homeowners within a community association sued the board of directors, claiming that the undertaking of certain expenditures using association funds was outside the scope of the board's powers as enumerated in the declaration, bylaws, and house rules. Specifically, the group claimed that the expenditure of funds for the hiring of an engineer and the procurement of permits, designs, and surveys in connection with a sewer connection project is unauthorized by the governing documents.