Residing in Texas more often now means living within a Homeowners Association. Governed by a board of directors elected by association members, the actions of individual board members can occasionally spark disputes. This prompts the question: Can a Texas HOA member sue a board member personally?
Personal liability scenarios
In essence, an HOA board member in Texas may face personal liability when breaching fiduciary duties to the HOA or its members. Fiduciary duties entail legal obligations to act in the best interests of the HOA and its members, conduct HOA business with care, loyalty to the HOA and HOA good faith. Texas mandates HOA board members to uphold fiduciary duties to the association and its members. A breach of a fiduciary duty could render an HOA board member personally liable for damages resulting from their actions.
Circumstances leading to personal liability
HOA board members in Texas can be sued personally if they engage in negligent, willful misconduct, bad faith, fraud, criminal activity or actions beyond their board authority. Personal liability scenarios may involve embezzlement, fraudulent contracts, failure to maintain common areas or discriminatory actions.
Individual versus communal liability
It is crucial to note that not every claim against an HOA or its board extends to individual board members. Collective actions or decisions of the board may be the basis for certain claims, with the HOA as the entity under scrutiny. For instance, if an HOA enacts a rule infringing on a member’s rights, the member may sue the HOA as an entity rather than pursuing individual board members.
Texas personal liability mitigation
While personal liability is a possibility for HOA board members in Texas, proactive measures can mitigate such risks. Adhering to Texas laws and HOA governing documents is paramount. This includes compliance with the Texas Uniform Condominium Act for condominiums and cooperatives, as well as adherence to CC&Rs, bylaws, articles of incorporation and rules and regulations.
Board members should also consistently act in good faith, exercising reasonable care in their duties. This involves sound judgment, discretion and avoidance of arbitrary, capricious, malicious or fraudulent actions.
Insurance Coverage
Ensuring the HOA has sufficient insurance coverage is a fundamental step. Common policies include general liability insurance, property insurance and Directors and Officers insurance. D&O insurance is especially crucial, offering protection against claims related to breach of fiduciary duty, negligence, mismanagement, discrimination, harassment or rights violations. Despite these measures, insurance policies may have limitations or exclusions.
Serving on an HOA board in Texas brings both rewards and responsibilities, accompanied by potential risks. Personal liability for board actions is a real prospect.