Understanding The Fiduciary Duties Of A Strata Council
The Strata Council is an important—and required—aspect of any Strata Corporation. Comprised of elected volunteers who live in the community, the Strata Council is responsible for overseeing the community’s operations and setting it up for long-term success. A critical role, council members have a duty to act in the community’s best interest when making decisions for fellow residents—a fiduciary duty.
Keep reading to learn more about what fiduciary duty means and the fiduciary duties of council members.
What Is a Fiduciary Duty?
A fiduciary duty is a legal responsibility to act in good faith on behalf of a person or group that relies on you. This relationship typically exists between an individual in a position of power or authority and those affected by that individual’s decisions.
A Strata or condo council member’s fiduciary responsibility is to help the strata community succeed while adhering to the governing documents. Homeowners put their trust and confidence in the council members to protect the community’s quality of living, use funds wisely, and keep
operations running smoothly.
the Strata’s governing documents. The bylaws and Conditions, Covenants, & Restrictions
(CC&Rs) should outline your responsibilities and authority.
What Are the Five Fiduciary Duties of Council Members?
Generally, the five fiduciary duties of the council members include the Duty of Outmost Care, Duty of Integrity, Duty of Full Disclosure, Duty of Loyalty, and Duty of Good Faith. These pillars act as a solid foundation to guide a strata council’s actions.
1. Duty of Utmost Care
Council members are bound to a high standard of responsibility to fulfill their tasks required of their positions. The duty of care means you must do your due diligence to make the most
informed and reasonable decisions within your authority.
2. Duty of Integrity
The council members agree to a code of ethics that requires them to act with honesty, fidelity, and professionalism. This includes following official Strata bylaws and rules and all processes
respecting homeowner confidentiality, and treating residents equally.
3. Duty of Full Disclosure
The duty of disclosure means that council members must lead with transparency and be open and honest about what happens behind the scenes. The council should disclose all material
factors influencing their decisions and impacting homeowners.
4. Duty of Loyalty
The council member duty of loyalty refers to the agreement to leave personal agendas and
preferences aside, to serve the community. There should be no conflicts of interest or intentional personal gains when a council member takes office.
5. Duty of Good Faith
The duty of good faith suggests that council members should always act in the best interests of the association. Every decision should be made to benefit residents within the confines of the law and Strata bylaws and rules.
How Can the Strata Council Live Up to Its Fiduciary Duties?
With strong leadership and dedication to the community, the strata council can naturally live up to its fiduciary duties. Practice your duties by prioritizing:
- Good communication. By actively listening and being open to feedback, you help build
trust and transparency between the strata council and homeowners. - Forward planning. Anticipating association needs and getting ahead of issues can go a
long way in keeping the community functioning at its best. - Sound decision-making. Base decisions on facts, experience, and rational thinking to
make educated choices on behalf of residents. - Task delegation. Assigning responsibilities to strata committees or partnering with a
community management company can help council members avoid overwhelm and fulfill duties more effectively. - Taking initiative. Addressing concerns right away shows your good intentions and loyalty
to community members. - Critical thinking. Council members must provide unbiased evaluations and analysis to solve
problems affecting the association. - Teamwork. Cooperation and compromise can help council members collaborate as they
work towards the community’s goals.
What Are Breaches of Fiduciary Duty?
While most Strata Council members do their best to serve their communities, some may fall short of expectations or take advantage of their positions. A Strata council member breach of fiduciary duty happens when that council member fails to fulfill their legal responsibilities to the community- either inadvertently or intentionally. This can take many forms, such as:
- Council members refusing to work together
- Not adhering to the governing documents
- Ignoring state statutes or fiduciary duty nonprofit council laws.
Some breaches of fiduciary duty are apparent, while others often fly under the radar and go unnoticed. Examples of a breach of fiduciary duty include:
- Using association assets for personal benefit
- Putting your interests before the community’s needs
- Making decisions outside of your authority
- Negligently managing funds or budgets
- Failing to disclose vital information to homeowners
- Encouraging conflict between residents
- Choosing sides based on personal preferences
Consequences of Fiduciary Breach
A council member’s breach of fiduciary duty can leave lasting ripple effects on their
community. On its surface, it can cause a break in trust between homeowners and the rest of the council, leading to suspicion and tension. The breach of duty may also result in legal action against the association.In some cases, the council officer may be personally liable for damages or financial losses caused by the breach of fiduciary duty. If the breach violated provincial laws criminal prosecution could even be possible. Review your community’s governing documents or ask your Strata Manager or Strata Lawyers for more details on the potential consequences of a fiduciary breach.
Do council members have a fiduciary responsibility? Yes. As Strata leaders, a council member has a fiduciary responsibility to act in the best interest of the community. Guided by the five pillars , the fiduciary duty of council members is meant to preserve the council’s integrity. An honorable role, serving on a strata council can also be an exciting and fulfilling endeavor.