Board members can’t expose homeowners association to unnecessary risk
Question: Our gated association has several swimming pools, tennis courts and lakes with boats. These amenities belong to the titleholders and are free of charge for owners, guests and renters because the fees are included in our monthly dues.
For years, at least three times a week, one board director has been using the tennis courts for his personal gain, charging patrons for tennis lessons. Without association approval, he conducts classes of a dozen people per class and charges upward of $50 per hour for private lessons. He keeps that profit while using our amenities, facilities and resources for free.
Our association advertises his tennis lessons on the community TV and pays maintenance for court upkeep including lighting, parking and lavatories. Why should owners finance this advertising and maintenance? When asked to stop using these facilities, he said he’s a board member and owner and can use them any time for free. Can our association be sued in case of injuries to his guests/patrons? Do owners have any recourse against this board member?
Answer: It is a breach of fiduciary duty for board directors to create situations exposing the association to unnecessary liability risks such as allowing a titleholder to use common property for personal financial gain and advertise the lessons on the association’s TV system. Association funds that are spent advertising the personal business of one owner could constitute an unauthorized use. Those funds, however, could potentially be recovered from the individual directors who authorized the misuse, but likely only after a lawsuit.
Any injury can result in a lawsuit against the board director/tennis instructor and the association, and such injuries are not limited to the tennis courts. Generally, owners cannot be sued individually. But should someone be injured while using association common property amenities, and the injury results in a judgment against the association exceeding the insurance policy’s limits, all titleholders are obligated to pay the necessary special and emergency assessments to fulfill that award.
Owners also are required to fund additional ancillary costs including attorneys hired by the board and any judgment if the damages incurred are not covered by insurance or exceed the coverage limit. The insurer may have the right to deny coverage because of the commercial nature of the tennis instructor’s activities and for his excessive use of the facilities.
Although the board director/tennis instructor has the right to use the courts for his own personal enjoyment, he may not have the right to dominate the courts for his financial benefit or conduct a business on association common property. Because owners paid to use amenities through their association fees, the deprivation of that use and enjoyment is the basis for a lawsuit against the individual director.
Review your association’s covenants, conditions and restrictions (CC&Rs) for language explaining whether or not titleholders have priority over owners’ guests for amenity usage. If the association’s CC&Rs limit titleholder access to amenities, it does not mean the association and/or the tennis instructor is absolved of liability or that his business may continue unabated. Any argument the instructor might make about students being his “guests” is negated by the fact that these patrons are paying him to use the common property.
Send questions to P.O. Box 10490, Marina del Rey, CA 90295 or e-mail noexit@mindspring.com.
