August 9, 2019

Courts Affirm Condo Board's Decision as Valid Exercise of Business Judgment

A condominium association's board agreed to allow a unit owner to install a heat pump on the condition that he sign a document to protect the association.  The unit owner argued in a lawsuit that imposing that condition breached the board's duty to exercise ordinary and reasonable care.  The board responded that the business judgment rule protected its decision.  The trial and appellate courts agreed with the board.

The business judgment rule requires boards to act in good faith and with such care as an ordinarily prudent person in a like position would use under similar circumstances.  Under this rule, a court will not substitute its judgment for that of the board unless there is evidence of fraud, dishonesty, or incompetence (i.e. failure to exercise proper care, skill, and diligence).  

The appellate court noted that the board sought and followed legal advice to create an agreement for heat pump installations.  The court considered this persuasive evidence that the board exercised ordinary and reasonable care.