When you buy a condominium, you're not just buying a home—you’re also becoming part of a community governed by a board of directors. These board members have a fiduciary duty to act in the best interest of the association, manage its finances responsibly, and treat all owners fairly. But what happens when they don’t?
Breaches of fiduciary duty are serious and can jeopardize the health of the entire condo community. Here's what you need to know.
What Is Fiduciary Duty?
Board members are legally obligated to act in good faith, with loyalty, and in the best interest of the association. This means avoiding conflicts of interest, maintaining transparency, and making decisions that benefit the community—not themselves. In Illinois, the Condominium Property Act reinforces these principles by requiring board members to discharge their duties "in good faith" and with "the care an ordinarily prudent person would exercise."
Signs of a Breach
According to Cooperator News, some common red flags of fiduciary breaches include:
- Self-dealing: When a board member profits personally from a board decision (e.g., awarding contracts to companies they own or are connected to).
- Misuse of funds: Spending association money without proper approval or documentation.
- Lack of transparency: Refusing to share financial records or meeting minutes with unit owners.
- Discrimination or favoritism: Treating some owners differently based on personal bias or relationships.
What Can Owners Do?
If you suspect misconduct, there are several steps you can take:
- Request Information: Illinois law gives owners the right to review certain association documents. Start by requesting access to financials, contracts, or board meeting minutes.
- Mobilize Your Neighbors: You're more likely to get answers and results if you're not alone. Talk to other owners and attend board meetings together.
- Vote Them Out: If the board refuses to act in good faith, use your voice at the ballot box. Most condo bylaws allow for the removal and replacement of board members through a community vote.
- Consult an Attorney: If the breach involves significant financial harm or legal wrongdoing, consult an attorney who specializes in condominium law. Legal action should always be a last resort, but it's sometimes necessary to protect your investment.
Prevention Is the Best Policy
Condo communities thrive when there's trust between the board and the owners. Electing qualified, ethical board members, encouraging transparency, and fostering owner engagement are essential to preventing issues before they arise.
If your association is facing challenges related to board governance, financial oversight, or fiduciary responsibility, Haus Financial Services can help. Our team provides expert financial management and advisory services tailored specifically for condominium associations. We work with boards and unit owners to ensure transparency, accountability, and long-term financial health.
