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Dwayne B.
Dwayne B., Attorney
Category: Real Estate Law
Satisfied Customers: 33554
Experience:  Began practicing law in 1992
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I understand that a homeowners association owes a fiduciary

Customer Question

I understand that a homeowners association owes a fiduciary duty to its condominium owners however; if a unit owner has a complaint that is based on a breach of that duty, how does the business judgment rule play into that? Does the complainant have to prove a breach of fiduciary duty by also showing that the HOA did not use good business judgment?
JA: Because real estate law varies from place to place, can you tell me what state the association is in?
Customer: Texas
JA: Has any paperwork been filed?
Customer: Yes, a lawsuit has been filed.
JA: Anything else you want the lawyer to know before I connect you?
Customer: No
Submitted: 10 months ago.
Category: Real Estate Law
Expert:  Dwayne B. replied 10 months ago.

Hello and thank you for contacting us. This is Dwayne B. and I’m an expert here and looking forward to assisting you today.

Expert:  Dwayne B. replied 10 months ago.

A fiduciary duty is a higher standard than "good business judgment". They really don't act together since a fiduciary duty inherently includes good business judgment as well as anything less than that. They are both "standards" by which conduct is judged.

A fiduciary duty is the highest legal duty that there is. It is stricter than a parent's duty to a child, a spouse's duty to the other spouse, etc.

If you show that the fiduciary duty was breached then inherently they didn't use good business judgment.

If your question has been answered then I'd offer my best wishes to you and ask that you please not forget to leave a Positive Rating so I receive credit for my work. Of course, please feel free to ask any follow up questions in this thread. I want to be sure that all of your questions are answered.

Customer: replied 10 months ago.
Okay, so if I understand you correctly, then the good business judgment standard is a defense that the HOA can assert and the plaintiff would have to overcome that presumption in order to show a breach?
Expert:  Dwayne B. replied 10 months ago.

Not exactly. Good business judgment is less than doing their fiduciary duty.

Let me give you an example. Let's assume there is a trust account that the HOA maintains and which they owe a fiduciary duty over. They could invest the money in savings bonds, CDs, etc. but they could not invest the money in a stock which carries any risk at all, even a stock that all stockbrokers agree is one that anyone using "good business judgment" would invest in. Their duty is to protect the trust, not make as much money as possible.

They could use "good business judgment" as a part of showing they followed their fiduciary duty but that alone is not enough.

Customer: replied 10 months ago.
I understand. Well thank you for your assistance, I appreciate the information.
Expert:  Dwayne B. replied 10 months ago.

You're very welcome.

If your question has been answered then I'd offer my best wishes to you and ask that you please not forget to leave a Positive Rating so I receive credit for my work. Of course, please feel free to ask any follow up questions in this thread. I want to be sure that all of your questions are answered.