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A Community Association Manager's Fiduciary Duty

A question often asked by community association managers, especially those new to the business, is what is a fiduciary duty and do I owe that duty to the association(s) I work for? As per Section 718.111(a), Florida Statutes, the officers and directors of a condominium association owe a fiduciary duty to their unit owners. Fla. Stat. § 718.111(a) (2013). However, the statute does not specify whether a community association manager or management company contracted by the board, owes a fiduciary duty to the association as well. A fiduciary duty is a legal duty to act solely in another party's interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals. 

Although one would think the issue would be well settled, the most recent change in the community association statutes did not make it as clear as one would have hoped. According to Section 718.111(a), Florida Statutes, the legislature intended that the statute not "provide for or remove the fiduciary relationship between any manager employed by the association and the unit owners." However, this year, the legislature codified community association manager standards.  It is imperative that association managers take the time to read, know and understand these standards.  The principles of an agency relationship are seemingly established with this new statutory standard.  Section 468.4334 provides in its entirety as follows: 

"(1)        A community association manager or a community association management firm is deemed to act as agent on behalf of a community association as principal within the scope of authority authorized by a written contract or under this chapter. A community association manager and a community association management firm shall discharge duties performed on behalf of the association as authorized by this chapter loyally, skillfully, and diligently; dealing honestly and fairly; in good faith; with care and full disclosure to the community association; accounting for all funds; and not charging unreasonable or excessive fees.

(2)(a) A contract between a community association and a community association manager or a contract between a community association and a community association management firm may provide that the community association indemnifies and holds harmless the community association manager and the community association management firm for ordinary negligence resulting from the manager or management firm's act or omission that is the result of an instruction or direction of the community association. This paragraph does not preclude any other negotiated indemnity or hold harmless provision.

(b)     Indemnification under paragraph (a) may not cover any act or omission that violates a criminal law; derives an improper personal benefit, either directly or indirectly; is grossly negligent; or is reckless, is in bad faith, is with malicious purpose, or is in a manner exhibiting wanton and willful disregard of human rights, safety, or property."

This codification expanded the role and responsibility of managers and management companies. Further, as at least one case has made it clear, a management company hired by a timeshare association was found to have owed a fiduciary relationship to that association. See generally La Costa Beach Club Resort Condominium Ass'n, Inc. v. Carioti, 37 So.3d 303 (Fla. 4th DCA 2010) (finding breach of fiduciary relationship constituted an intentional tort calling for joint and several liability as per Fla. Stat. § 721.13(1)(b)). With this case and the recent legislation discussed above, a strong argument can be made that management companies hired by any association should also have a fiduciary responsibility under the applicable sections of the statute. With expanding legal theories and responsibilities, the claim that a manager is acting as a fiduciary is one that is highly dependent on the facts of that situation. It is important that both managers and associations understand the laws surrounding community association managers and their new responsibilities. If any questions arise about the scope of a manager's responsibilities, consult an attorney experienced with community associations and their managers. 

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