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M A R C H , 2 0 1 7
1. BOARD MEMBERS’ STANDARD OF CARE
Since condominium associations are organized as non-profit corporations under N.J.S.A.
15A:1-1
et seq.,
the New Jersey Nonprofit Corporation Act is quite instructive on a board
member’s standard of care:
Trustees and members of any committee designated by the board shall discharge
their duties in good faith and with that degree of diligence, care and skill which
ordinary, prudent persons would exercise under similar circumstances in like
positions.
[N.J.S.A. 15A:6-14.]
Accordingly, the overriding scheme of the Condominium Act requires board
members, as fiduciaries, to make decisions for the protection of the whole
condominium and each of the constituent owners; not to act discriminatorily,
THE BUSINESS
JUDGMENT
RULE
How Individual Board Members Can Avoid
Personal Liability For Actions
of the Collective Board
By Gene Markin, Esq.
Stark & Stark
© iStockphoto.com
CONT I NU E S ON PAGE 22
L
ike directors of corporations, association board members
enjoy various legal protections in the execution of their
duties. First and foremost is the business judgment rule,
which shields Board members acting in good faith from
personal liability. Only when the actions of the board are
in contravention of the association’s governing documents or
the Condominium Act, or are fraudulent, unconscionable or
self-serving does personal liability attach. Generally, as long
as board members act reasonably and in good faith to make
informed decisions, they will be insulated from personal liabil-
ity should those decisions turn out bad
or be challenged.