By Anton Kelly
Recently we wrote about the fiduciary duty of trustees and directors of Home Owners’ Associations (HOAs). This duty is a duty of care and skill and it is owed to the association itself in the broadest sense. But what are the skills necessary for the performance of this fiduciary duty? What qualifies an individual to serve as an executive in a home owners’ association?
While specific skills are not mentioned, the Companies Act identifies conditions which disqualify individuals or make them ineligibleto serve as directors of companies. Additionally, the Act specifies the standards of conduct required from directors. We can look at both these areas for guidance on the qualities needed by executives of HOAs, whether they are companies or common law associations.
The following points summarise the conditions in the Act that disqualify individuals from serving as directors:
• Persons prohibited by a court or public regulation
• Minors
• Un-rehabilitated insolvents
• Persons removed by a court from an office of trust on account of dishonesty
• Persons convicted and imprisoned or fined more than R1000 for theft, fraud, forgery, perjury and the like.
The following points summarise the specifications that the Act makes regarding the standards of conduct of directors:
• Directors must exercise the powers and functions of a director
• In good faith and for proper purpose in the best interests of the company
• With the proper degree of skill, care and diligence
• Directors must give the board any relevant information unless bound by legal or ethical obligation not to do so.
• Directors must not use the position or information gained by acting as a director
• To gain advantage for themselves or anyone other than the company, or
• To knowingly cause harm to the company.
Using these points we can see that HOA executives need above all to be honest and motivated to make the necessary efforts to work for the best interests of the association – and that includes educating themselves in specific areas if necessary. The best interests of the HOA are most likely to be the maintenance of the values of the individual properties in the HOA at the highest possible level. This involves good management of the financial, physical and administrative elements of the development.
Thus in addition to honesty and motivation, executives should have some understanding of and skills in managing money, be practical people who have at least some understanding of building maintenance operations, and be good organisers and methodical administrators.
Even though service providers like managing agents, accountants and attorneys might do the actual work, ensuring that those functions are properly performed is the fundamental fiduciary duty of the executives and they can only perform that fiduciary duty if they are adequately equipped.
Article reference: Paddocks Press: Volume 7, Issue 7, Page 1Anton Kelly is one of the course conveners of the Home Owners’ Association Management course. For more information please contact Emma on emma@paddocks.co.za or 021 447 4130.
This article is published under the Creative Commons Attribution license.