Academy/Board Authority & Fiduciary Duties
Abuse of authority
The board's power is real, but it has edges. Here is how to tell when a decision has stepped past them.
Abuse of authority is a board or director acting beyond what the law, the governing documents, or a valid vote actually permit: exceeding granted power, acting alone instead of through the full board, or deciding arbitrarily. It strips away the legal protections, like the business judgment rule, that normally shield good-faith board decisions.
What it actually looks like
Two patterns cover most of what shows up in practice. The first is ultra vires action: a decision the board, or an individual acting for the board, was never granted the power to make in the first place, whether because it conflicts with the declaration and bylaws or because it belongs to the membership, not the board. The second is a director or officer treating themselves as the board. Corporate power belongs to the board acting as a body, not to any one person.
"All corporate powers shall be exercised by or under the authority of the board of directors of the nonprofit corporation, and the activities and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of its board of directors."
Source: D.C. Code § 29-406.01, Council of the District of Columbia
Where an association has adopted Robert's Rules of Order as its parliamentary authority, that rule has teeth: collecting individual approval by text or phone call is not a substitute for a vote taken at a meeting.
"The personal approval of a proposed action obtained from a majority of, or even all, board members separately is not valid board approval, since no meeting was held during which the proposed action could be properly debated."
Source: Robert's Rules of Order Newly Revised, FAQ, Robert's Rules Association
Why it costs you your legal protection
The business judgment rule and the courts' general deference to board decisions were never a blanket shield. Both depend on the decision being made within the board's actual authority, in good faith, and after reasonable investigation. Step outside your authority and the shield does not apply, no matter how well-intentioned the decision was.
"[The business judgment rule] does not apply to protect corporate actions that exceed the scope of the corporation or board's authority or that violate the organization's governing documents."
Source: The Business Judgment Rule and Common Interest Communities, Colorado Lawyer / Colorado Bar Association
That same source notes courts have also refused to defer to decisions singling out individual owners for different treatment, and to decisions made without adequate investigation. Abuse of authority is not one clean-cut act; it is any of several ways a decision falls outside the protection the board would otherwise get.
The warning signs
Watch for a board acting on a matter the declaration reserves to the membership, a decision made without reading the report, bid, or reserve study a director had in hand, and enforcement that is not applied the same way to everyone. Whether that last pattern is a recognized legal defense, and under what name, varies by state. Kansas, for example, writes an explicit standard into statute.
"The board of directors may not be arbitrary or capricious in taking enforcement action."
Source: Kan. Stat. Ann. § 58-4608(c), Kansas Legislature
Two related lessons in this Course go deeper on the enforcement side specifically: selective enforcement and avoiding favoritism.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Three directors text the board president "yes, approve it" about a $40,000 roof contract. No meeting is called. Is the contract validly approved by the board?
A board switches the community's landscaper without reading any bids, checking references, or asking the property manager for input, purely because a director's neighbor recommended the company. An owner sues over the decision. What happens to the board's usual legal protection?
A Kansas HOA has ignored a fence-height violation from three different owners over the years, then suddenly cites a fourth owner for the same violation right after a personal dispute with that owner. Under Kansas's enforcement standard, is this a problem?
Sources
- D.C. Code § 29-406.01, Council of the District of Columbia
- Robert's Rules of Order Newly Revised, FAQ, Robert's Rules Association
- The Business Judgment Rule and Common Interest Communities, Colorado Lawyer / Colorado Bar Association
- Kan. Stat. Ann. § 58-4608(c), Kansas Legislature
Related elsewhere in the Academy
Board Authority & Fiduciary Duties
Next: learn what happens when a board does have the authority but still treats owners inconsistently. See selective enforcement.
Whether a specific act counts as abuse of authority, and what remedy an owner has, depends on your state's nonprofit corporation code and common-interest-community act, and on what your own declaration and bylaws actually grant the board. Whether individual director sign-off outside a meeting is invalid depends on whether your association has adopted Robert's Rules or a similar parliamentary authority.