Academy/Board Authority & Fiduciary Duties
Reliance on experts
When leaning on an attorney, accountant, or engineer protects the board, and when it doesn't.
When a board faces a question outside any director's own expertise, such as a structural, legal, or accounting question, consulting a qualified expert and reasonably relying on that advice is part of making an informed decision. That reliance can support the board's liability protection. But it only works if the board actually made the inquiry the circumstances called for; ignoring red flags first strips the protection away.
Reliance protects informed decisions, not blind trust
"The expert told us it was fine" is not, by itself, a shield. California's director reliance statute conditions protection on the director acting "in good faith, after reasonable inquiry when the need therefor is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted."
"in good faith, after reasonable inquiry when the need therefor is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted"
Source: Cal. Corp. Code § 7231(b), California Legislature
Two directors who already knew the reserve study was outdated and shortfall was likely cannot later claim they reasonably relied on an accountant who said the fund looked fine. Reliance stops being reasonable the moment a director has knowledge that should have prompted more questions.
What counts as a reasonable expert to rely on
The same statute lists who a director may lean on: an officer or employee the director reasonably believes competent, counsel or an accountant on a matter within their expertise, or a committee the director does not personally sit on. This exact list comes from California's nonprofit corporation code; other states impose an analogous duty-of-care standard through their own statutes, worded differently. Check your own state's nonprofit corporation act for its version.
Notice the limit built into "matters within their expertise." A landscaping vendor's opinion on whether a special assessment is legally required is not expert reliance, it's the wrong expert. The California Supreme Court's Lamden decision reinforces the same idea at the board level: courts defer to a board's discretionary decision only when it was reached "upon reasonable investigation, in good faith and with regard for the best interests of the community association."
Delegating to a committee doesn't end the board's accountability
A board can hand a technical question to a committee it creates, an architectural review committee sizing up a roof replacement, for example. But delegation is not an exit ramp.
"those carrying out such decisions do so at their own risk, as the assembly has no obligation to ratify their actions"
Source: Robert's Rules of Order Newly Revised, Official Interpretation 2020-1, Robert's Rules Association
That line describes what happens when a body acts without waiting for approval, but the underlying point holds for ordinary delegation too: the board remains the accountable authority, so a board that never reviews what its committee decides has not made an informed decision, it has made no decision at all.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
The board's accountant says the reserve fund looks fine, but two directors already know the reserve study is eight years old and flagged a shortfall. The board approves the budget without asking questions. What happens to its reliance protection?
The board creates a landscaping committee and lets it approve vendor contracts on its own from then on, without ever reviewing its decisions. A contract goes bad. What is true?
A director with no legal background is unsure whether a proposed contract clause is enforceable. Under the reliance framework, what should the board do before voting?
- Cal. Corp. Code § 7231, California Legislature
- Lamden v. La Jolla Shores Clubdominium Homeowners Assn., 21 Cal.4th 249 (1999), California Supreme Court
- Robert's Rules of Order Newly Revised, Official Interpretations, Robert's Rules Association
- The Business Judgment Rule and Common Interest Communities, Colorado Bar Association
Board Authority & Fiduciary Duties
Next up: the practical question of exactly when a board should pick up the phone and call a professional.
Which reliance protections apply, and their exact wording, vary by state; the statute quoted here is California's, documented as an example, not a nationwide rule. Check your own state's nonprofit corporation code and your governing documents for what counts as reasonable reliance for your board's votes.