Condo board member personal liablity

[newhandle]

I am on a board. The board will vote on a contract which our attorney says is in clear violation of our governing documents. As a board member who will vote no based on this advice will I assume personal lialbity for this gross neglegence?

Should I resign from the board before the vote to protect my personal interests?

I am assuming the condo's D&O insurance won't cover me knowing what we know based on our attorney's advice. (Yes, despite this the President is pushing this.)

 

[NC Aggie]

I doubt you would hold any personal liability for any decision the board makes collectively, even if the board makes a decision that is a violation of the governing documents. Personal liability wouldn't come into play unless you participated in fraudalent activities or involved in embezzlement of HOA funds.

I would hope that if you feel this strongly about the issue that you vote in opposition of it.

 

[tranquility]

I don't know without a lot of research, but there is some risk for doing things ultra vires. Even with E&O insurance, sometimes definitions get a little technical and tricky. I'd see my own attorney to review the risk. I don't think it large, but, my brain is tingling about this. The answer greatly depends upon the underlying facts and the reasons behind the vote.

 

[You Are Guilty]

A) What state?

B) What is the substance of the proposed contract? There is a world of difference for potential outcomes between say, installing a laundry room in a common area versus agreeing not to permit any African Americans to purchase a unit.

C) General counsel have been known to be wrong - in a gray area, they tend to err on the side of caution so as not to unintentionally expose the Board to liability.

D) [Tranq only] BoDs have D&O coverage; E&O is for other professionals.

E) As far as E&O coverage - read your policy! (My guess is you would be entitled to at least a defense, because if not, the purpose of having D&O coverage is sort of defeated).

 

[newhandle]

The state is Colorado. Specifically, our governing documents prohibit any contract longer than 5 years. That is clear. They further says specifically (for some reason) that this applies to cable, TV, telephone and satellite companies.

We had a proposed contract with Comcast to replace the cables going to their customers in the building (under FCC, of course, they cannot get an exclusive contract to the building.) The two previous versions of the contract was 7 and 10 years (with different schedules for doing things).

Our attorney made it clear we can only do a five year contract. The president of the association will put forth another contract for 7 years not running it by the attorney.

I will vote no since I think it is in clear violation of our governing documents. I also think if it passes it is gross neglegence. If there is a legal issue later, and even if I voted no, as a member of the board am I personally liable? Or should I resign now before the vote?

 

[NC Aggie]

The state is Colorado. Specifically, our governing documents prohibit any contract longer than 5 years. That is clear. They further says specifically (for some reason) that this applies to cable, TV, telephone and satellite companies.

We had a proposed contract with Comcast to replace the cables going to their customers in the building (under FCC, of course, they cannot get an exclusive contract to the building.) The two previous versions of the contract was 7 and 10 years (with different schedules for doing things).

Our attorney made it clear we can only do a five year contract. The president of the association will put forth another contract for 7 years not running it by the attorney.

I will vote no since I think it is in clear violation of our governing documents. I also think if it passes it is gross neglegence. If there is a legal issue later, and even if I voted no, as a member of the board am I personally liable? Or should I resign now before the vote?

You've peaked my curiousity. What is the president's rationale for wanting a 7 year contract...does he not agree with the attorney's position? And exactly what rights or terms does Comcast have by signing this contract with an HOA board? It would appear to me that your community is within a service area that they have rights to provide cable television/data service to. Is this some type of maintenance contract?

 

[You Are Guilty]

I will vote no since I think it is in clear violation of our governing documents. I also think if it passes it is gross neglegence. If there is a legal issue later, and even if I voted no, as a member of the board am I personally liable? Or should I resign now before the vote?

I'd have to research CO's case law on the issue, but my guesstimate is that it would be unlikely for you to be held personally liable if you voted No. (Voting 'yes' may be problematic). Since I don't have time to research at the moment, here's a non-legal alternative that may help: Why not offer Comcast a 5 year contract with a 5 (or 2) year renewable (at their discretion) option?

And as an aside to my aside, if no one challenges the board over the proposed new contract, there is not going to be any potential personal liability. Are owners ticked off at the idea of a long term deal with Comcast? Are they ticked off enough to pay a lot of money to a bunch of lawyers to, at best, have the Comcast contract rescinded? (Usually, these two issues are the gates that keep most litigation against Boards to a minimum).

 

[newhandle]

Thanks for your input. Why the president is set on a 7 year I can't say, Comcast has ruled out a renewable 5 year since rewiring will cost them almost $20,000. As for the president's motives...well, I can only say that in his 3 years as president, this is the only time he has run up against board members who oppose him.

One owner in particular may be willing to sue and his past experience as a govt. regulator gives him the knowledge. All the owners I spoke with are opposed, but since this is a board decision and no one comes to our open monthly board meetings, they know little of this.

I think it is coming down now as I think about it to an ethical issue for me. The likelyhood of a legal challenge is small and my voting no may help, but I don't want to serve on a board which is willing to violate the governing documents. I appreciate all of you weighing in and helping me reach this conclusion. Of course if you have any further comments, I would be glad to hear them.

 

[John_DFW]

Is there documentation of who voted what, or just a final tally?

Documentation can be a big help in proving or disproving your culpability.

Sending a crr to the president stating you will vote no based on the attorneys recommendation that this does not meet guidelines would be one way to cover it if individual votes are not recorded.