Q&A: An Owner's Fiduciary Duties?

Q I believe that owners have a fiduciary responsibility to the association, as  they are held in a public trust of that association just like board members.  The responsibilities and duties of owners in a homeowner association are  outlined in and associations' bylaws. Legally speaking, would the  responsibilities of owners be considered 'fiduciary?' Can you please give some  clarity on the legal nature of duties, or responsibilities, held by members in  a homeowners' association?  

 —Honorable Homeowner  

A “Quite simply, neither unit owners in a condominium, members of a homeowners  association nor shareholders in a cooperative owe the other residents/owners  any fiduciary duty,” says attorney Stewart Wurtzel, a partner with the Manhattan-based law firm of  Tane Waterman & Wurtzel, P.C. “While unit owners may live together in a common community, it does not make them  partners. Since the responsibilities among the residents of all three building types are  the same for the purposes of this question, we will refer to all shareholders,  unit owners or homeowner association members as "unit owners" regardless of the  type of community in which they live.  

 “A fiduciary duty arises out of a position of trust, which is why board members  owe their members a fiduciary duty. Board members are trusted with managing the finances of the corporation. A fiduciary has an obligation to those whom he serves to act in good faith and  in the unit owners’ best interests. A fiduciary owes the unit owners his undivided and unqualified  loyalty and may not act in any manner contrary to the interests of the unit  owner. A person acting in a fiduciary capacity is required to make truthful and  complete disclosures to those to whom a fiduciary duty is owed and the  fiduciary is forbidden to obtain an improper advantage at another's expense. These restrictions and obligations are placed on every board member or director.  Unit owners are not held to this same standard because there is no position of  trust in which they are placed as against their neighbors.  

 “Unit owners are simply required to comply with the building's governing  documents and ordinary principles of law, such as negligence or housing  maintenance codes. They can be sued by the board for breaching those obligations, such as, by  creating unreasonable noise, allowing garbage to accumulate in the apartment or  failing to pay maintenance. In addition, neighboring unit owners may have the  right to get an injunction against a neighboring unit owner who has created a  nuisance that interferes with their peace and quiet. But unlike a fiduciary, a unit owner is not barred from profiting at another  unit owner's expense. For example, one unit owner who happens to be a real estate broker can act as  the sales agent for another unit in the building, even though a board member,  in his fiduciary capacity, may well have a conflict of interest in the same  situation.”      

 

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