Condo board not liable for extra costs

‘Business judgment rule’ absolves them of personal liability.

Q: Our condo is having some work done, and the job will cost substantially more than what the board told us. Now it looks like there will be another special assessment to cover the additional costs. I think the board members who chose this contractor should have to pay the difference from their own pockets due to their incompetence. Are the owners on the hook for this?

A: I know you must be frustrated, but I don’t think you have a case.

While board members have a duty to act in the best interests of the association, they have discretion in how to carry out their roles. Community associations are nonprofit businesses and are governed by rules similar to nonprofit companies.

A longstanding doctrine called the “business judgment rule” absolves directors of any liability for business decisions made in good faith and in the best interests of the company they work for.

As it relates to community associations, members of the board won’t be held responsible as long as their decisions are in the scope of the association’s authority and are not “arbitrary, capricious or in bad faith” essentially lawyer-speak for “unreasonable.”

In your situation, if it was reasonable for the board to have hired a contractor - and assuming a proper vote was taken - the board members wouldn’t have any personal liability for the additional costs.