Tag: Business Judgment Rule

Telecommuting has become commonplace in many industries, with workers being encouraged to work from locations other than their company’s office. Small business owners might try to save money initially by finding a solution to running their operation other than leasing commercial space that locks them into a lease and rent. And parents of young children sometimes decide to watch other children to bring in additional income. Seemingly diverse types of workers often have one thing in common: Their homes must sometimes double as work space.

Facts: The association and its management company were responsible under the association’s governing documents for maintaining the common areas of a condominium building. But the management company failed to waterproof areas of the building, leading to water intrusion and deterioration. The board of directors spent reserve funds for purposes other than the repair, restoration, replacement, or maintenance of the common areas.

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.

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.

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.

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.

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.

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?

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.

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.