Oh, Be Careful What You Say!

Often associations run into problems when board members or managers say too much. It’s easy to make a remark in passing or fire off a quick email about the construction of a garage, installation of a new door or the interpretation of a rule without thinking about the effect of those remarks. In a friendly conversation between neighbors when a homeowner asks the association’s vice-president, “Would the association approve a new door that I’m thinking about installing,” it’s natural to say “yes” without giving the matter much thought, particularly since the installation of a new door is fairly routine. Unfortunately, in the HOA world, those offhand remarks or quick emails can cause big problems for an association if what’s installed ultimately doesn’t comply with the association’s restrictions.

Most Bylaws or Articles of Incorporation give directors or officers express authority to act on behalf of the association in certain situations. This means that these persons will have actual authority to bind the association by their words or actions.

Board members or officers also have what’s known as inherent authority. This authority flows naturally from their position in the association. For example, a person could reasonably assume that an association president or vice-president has the authority to make decisions for the association simply based on their position. So, in our example of the neighborly conversation over the fence, the association vice-president may have unknowingly approved a violation of the association’s restrictions.

Managers also have to be careful because they will often have apparent authority to bind the association. Apparent authority exists when a third party is led to believe that an agent, based on the representations of the principal, has the authority to act on behalf of the principal. In other words, apparent authority comes from the actions of the principal, not the agent. Many times a manager will be held out by the association as the “go-to” person when it comes to association issues. The manager is the one to contact about emergencies, the one that sends the violation letters, the one who receives architectural applications, etc. These actions, among others, are typically enough for a court to find that a manager has apparent authority to act on the association’s behalf.

The “moral” of the story here is twofold. First, it’s important to be factual and not to make promises when interacting with members about association issues, especially when the topic relates to architectural approvals or the interpretation of documents. Second, it’s important to define the authority of directors, officers and the association’s manager. Bylaw amendments and Board resolutions can be effective tools to define the scope of each person’s authority.

For questions on actual, inherent or apparent authority, please contact Jason N. Miller or any other attorney with the firm.