Unit owners who serve as members of condominium boards typically do so out of a sense of responsibility to their condominium communities. Serving on a condominium board can be a challenging but rewarding experience. When a person begins serving on a condominium board, he or she automatically takes on a duty known as a “fiduciary duty.” Most people have heard of fiduciary duty, but what does it mean? Understanding fiduciary duty is important for condominium board members as they carry out their activities on the board.
The fiduciary relationship is one in which one person has an obligation to act for the benefit of another. A person who owes a fiduciary duty is known as a “fiduciary.” A fiduciary is an individual in whom one or more people have placed the utmost trust and confidence to manage and protect property and/or money. In the context of a condominium, board members owe a fiduciary duty of loyalty to the condominium trust (or association, as the case may be) and must refrain from promoting their own interests in a manner that is harmful to the condominium trust or association. It is important to note that under Massachusetts law, a board member’s fiduciary duty is owed to the trust or association—not to any particular unit owner individually. Accordingly, the board member has a duty to act in the best interests of the condominium trust or association as a whole, even though sometimes the board’s action may not necessarily be in the best interest of an individual unit owner. Under this duty, for example, the board is entrusted to enforce the condominium’s rules and regulations against violators for the benefit of the greater good.
Understanding fiduciary duty is also important for unit owners in newer condominiums where the condominium board is still controlled by the condominium developer. Even the condominium developer and board members appointed by the developer are charged with the same fiduciary duty to the trust or association when they serve as members of the condominium board. When developers are board members, they wear two different hats—one as the person or entity that is interested in developing the condominium, and a second as a board member who must place the interests of the condominium before his or her interests as a developer. Wearing both hats creates an inherent conflict of interest when the best interests of the condominium are harmful to the best interests of the developer. For example, if a defect is discovered, such as a roof leak caused by improper construction, the best interests of the condominium are served if the developer repairs the roof at its own expense. Under the law, the developer has a fiduciary duty to place the interests of the condominium first, and it should repair the construction defect without charge to the condominium. Unit owners should seek advice from legal counsel if issues arise concerning a developer’s fiduciary duty to the condominium during the time when the developer or its appointees control the condominium board.