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Can an HOA Board Run its Own Construction Projects?

Many HOA boards run their own projects and it can sometimes feel like you are not getting all the information and updates. As frustrating as this can be, HOA boards are entitled to run their own projects. Typically management is the face of the owners, which means the decisions they make are for the community. As a board, they are entrusted with making decisions that will benefit and member and owners feel secure in this.

Conflict of Interests

HOA boards can oversee the construction and maintenance of any project but with owners being used to the management doing this, there can be some conflict. A lack of communication between the boards and management only makes the situation worse. Any conflicts of interest become difficult to clear up. Conflicts of interest can occur when a board member’s decisions are influenced by personal interests rather than those of the association or HOA community. Decisions made this way are a direct breach of the board’s fiduciary duties and the director of the board loses protections of the Business Judgement Rule. An example of this would be if a board awards a roofing contract to a family member of the director. A contract like this can be void. Sometimes board members vote on matters that result in a benefit to them but it is not a conflict of interest because it also benefits the membership. An example would be voting for added security patrols for which the director and the community will both benefit.

Potential Liability

The conflicts between boards and the association do not create personal liability in the following cases:

  • The director makes full disclosure of the conflict
  • The director gets no influence on the vote by leaving the room during the discussion of the topic
  • All transactions are just and fair and reasonable as to the association at the time it is authorized and approved.

Failure to Relay Information

In some cases, the board has not relayed information to management and they are left in the dark on projects. This can be problematic because if owners call to get information about the changes affecting them, management will not know the answers. This leads to both management and owners being in the dark and fearful of what could be happening. HOA boards can run their own projects but it is essential to avoid conflicts of interest and avoid the risk of liability. The board can run projects but they need to ensure that management is kept in the loop and is aware of the project details, timelines, and dates. Management also enjoys having memos from the board director whenever any updates and changes occur along the way. Communication is the best way to ensure everyone is in agreement and that all projects are run above board.

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