Board of Directors' Fiduciary Duties

 

Fiduciary Duty to Investigate Defects Timely and Pursue Claims:

The scope of a director’s duties shall include:

(A) Whether to conduct an investigation of the common interest development for deficiencies prior to the expiration of the applicable statute of limitations.

(B) Whether to send notice under SB 800 or commence a civil action against the builder for defects in design or construction. California Civil Code Section 5800(f)(1).

A board of directors can be held liable for breach of fiduciary duty and negligence for failing to timely pursue a construction defect claim against a developer. Smith v. Superior Court 217 Cal. App. 3d 950 (1990).

A board does have discretion on how to repair and maintain common areas as long as they conduct “a reasonable investigation…” Lamden v. La Jolla Shores Condominium Homeowners Association, 72 Cal. Rptr. 2d 906 (1999).

Fiduciary Duty to Repair, Replace and Maintain:

Unless otherwise provided in the CC&Rs, the association, acting through its board, is responsible for repairing, replacing and maintaining the common areas. Any claims of negligent maintenance by the builder as contributing to common area property damage may greatly reduce the potential recovery (against the builder) by the Association. California Civil Code Section 4775(a).

Association Standing:

An association has standing to institute, defend, settle or intervene in litigation, arbitration and mediation in its own name without joining in the individual owners for claims involving:

(a) Enforcement of the governing documents;

(b) Damage to the common areas;

(c) Damage to a separate interest that the association is obligated to maintain or repair; 

(d) Damage to a separate interest that arises out of, or is integrally related to, damage to the common area.


California Civil Code Section 5980.