In this week's tip, we ask our experts whether an online question from a board member give them pause.
The board member asked: “We're currently looking at a sunshade project for our playground equipment. We have two bids. A couple of our board members are advocating for building a shade structure ourselves (with no professional vendor). I have some real hesitations about this in terms of liability.”
We guessed our experts would, too—and we weren't wrong.
For Danielle Wang, of counsel at the law firm of Sands Anderson PC in Williamsburg and Richmond, Va., and the leader of its community associations team, a question like this will always come down to whether the board is fulfilling its fiduciary duties.
“For me, in a situation like this, the big issue is going to be fiduciary duty,” she says. “If the board chose not to pay a contractor to build this structure, would it be a breach of their fiduciary duty to the association?
“To start with, if they did it DIY and owners instead of contractors would be paid for their labor, to me, that would be a clear conflict of interest,” says Wang. “Beyond that, there are a broad range of and endless number of things that could trigger a breach of their fiduciary duty. Here, it's judgment. Would it violate the business judgment rule for a board to decide to do this project without professionals?
“In Virginia, there are three issues that factor into the business judgment rule,” she explains. “Did the board make the decision in good faith? Are they exercising reasonable care? And is this decision in the best interest of the association? In my opinion, a DIY
sunshade that could fall on small children may not be exercising reasonable care. And in terms of liability, it may not be in the best interest of the association.
“Therefore, the decision may not be protected by the courts should there be
a lawsuit,” Wang predicts. “And if that were the court's finding, plaintiffs who were harmed could hold the directors individually liable. I also think the optics of a sunshade structure falling on kids would be incredibly damaging in court.”