Serving on the board of a homeowners’ association is often a thankless job. Board members volunteer their time to make decisions that affect the entire community, frequently balancing competing viewpoints while ensuring the Association complies with its governing documents and applicable law. Recognizing the challenges of volunteer service, Arizona law provides important protections for directors who act in good faith and in the best interests of the Association. These protections, however, are not unlimited.
One of the most important concepts every Board member should understand is that the legal protections afforded to volunteer directors are tied to the manner in which they perform their duties. Directors generally receive the benefit of the “business judgment rule,” which recognizes that courts will ordinarily defer to Board decisions when those decisions are made in good faith, with reasonable care, and in what the director reasonably believes to be the best interests of the Association. In other words, directors are not expected to make perfect decisions, they are expected to make informed, honest, and objective decisions.
This protection is closely tied to two fundamental fiduciary duties: the duty of care and the duty of loyalty.
The duty of care requires directors to make decisions with the level of attention, diligence, and prudence that an ordinarily careful person would exercise under similar circumstances. This means becoming reasonably informed before voting, reviewing relevant materials, asking questions when necessary, relying on qualified professionals when appropriate, and participating meaningfully in Board deliberations. Directors are not expected to be experts in every field, but they are expected to exercise reasonable judgment and avoid making decisions without adequate information.
Equally important is the duty of loyalty. Every director has an obligation to place the interests of the Association above personal interests, individual relationships, or private disputes. A director’s role is to represent the interests of the Association as a whole, not any particular homeowner, neighborhood faction, committee, or group of residents. Decisions should always be guided by what best serves the community and by the authority granted to the Board under the governing documents.
This principle extends beyond formal Board meetings. Individual directors should exercise caution before speaking or acting in ways that could reasonably be interpreted as representing the Association. Unless specifically authorized by the Board, a director generally has no greater authority than any other homeowner to speak on behalf of the Association or to advocate positions as an official representative of the Board. Even when a director is participating in a matter in a purely personal capacity, identifying oneself as a Board member or allowing others to believe that one’s views reflect the position of the Association may create confusion regarding the Association’s official position.
Similarly, directors should be mindful of becoming personally involved in disputes between homeowners unless the Board has formally authorized such involvement. Community associations exist to enforce their governing documents and manage the common areas, not to take sides in private disagreements, unless the Association itself has a legitimate interest that falls within its authority. When individual directors become advocates in disputes involving individual owners or residents, they risk creating the appearance that the Association has endorsed one party’s position or that Board decisions may be influenced by considerations outside the interests of the community as a whole.
The appearance of partiality can be just as damaging as actual bias. Homeowners expect Board members to approach matters objectively and to evaluate issues based upon the governing documents and the facts presented. Maintaining that confidence is essential to effective community governance.
Fortunately, avoiding these concerns is relatively straightforward. Directors should allow the Board to speak through its official actions, resolutions, and designated representatives. When participating in personal matters, directors should make clear they are acting solely as private individuals and not on behalf of the Association. Questions regarding litigation, legal proceedings, enforcement matters, or public statements should be directed to the Board for discussion or to the Association’s legal counsel when appropriate.
Volunteer directors perform an essential service for their communities, and Arizona law provides meaningful protections for those who faithfully carry out that responsibility. Those protections are strongest when directors remain focused on their obligations, avoid conflicts between personal and Association interests, and remember that the authority of any one director exists only as part of the Board acting collectively. By adhering to these principles, directors not only reduce potential legal risk but also strengthen homeowner confidence in the integrity and effectiveness of the Association’s governance. If you have any questions regarding these materials, please reach out to the firm for assistance. Call us toll free at (800) 743-9324 or email moc.walbdhc@ofni.
The information contained in this article is not intended to be legal advice and is provided for educational purposes only.