Community Association Managers’ Duty to the Association

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 the community association managers contracted by the board, owe a fiduciary duty to the association as well.

To begin, Black’s Law Dictionary defines a fiduciary as one “holding the character of a trustee, or a character analogous to that of a trustee … a person having duties involving good faith, trust, special confidence, and candor towards another.” Black’s Law Dictionary 625 (6th ed. 1990).

Certainly, the community association manager contract should address this concern, but with the resent change in the community association manager statute, along with the continue eradication of the Economic Loss Rule, this issue may not be as clear as one would think.

According to Section 718.111(a), Florida Statutes, the legislature intended  that the statute not provide for or remove the fiduciary duty between an association unit owners and any manager employed by the association.  The fiduciary duty between a management company and an association may be implied in law. “A fiduciary duty may be implied in law, regardless of whether contractual relations or formal writings exist or a statute imposes such a duty, when one party relies on another to act on the party’s behalf and to look out for its best interests.” John F. Mariani, Christopher W. Kammerer, Nancy Guffey-Landers, Understanding Fiduciary Duty, Fla. B.J., March 2010, at 20, 22. If managers are employed by associations as agents of the association hired to carry out the best interests of the association, then the fiduciary responsibility may be implied in law.

Finally, as one Florida case made it clear, a management company hired by a timeshare association owes a fiduciary relationship to the timeshare 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)). Although the case involves the separate law governing timeshares, an argument could be made that management companies hired by condominium associations should also have a fiduciary responsibility to the association under the separate law governing condominiums.

This year, the legislature codified community association manager standards.  This is a very important statute for community association managers to read, know and understand.  They are the statutory agent for the association now – by law – and the principles of agency are now clearly established.  The entire new section is below with emphasis added:

468.4334 Professional practice standards; liability.—

(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.

The codification of this standard seems to further expand the role and responsibility of the Florida community association manager.  Finally, as one Florida case made it clear, a management company hired by a timeshare association owes a fiduciary relationship to the timeshare association. 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)). Although the case involves the separate law governing timeshares, an argument could be made that management companies hired by condominium associations should also have a fiduciary responsibility to the association under the separate law governing condominiums.

As with all expanding legal theories, the claim of a community association manager acting as a fiduciary to the association is one that is highly dependent upon the particular facts of the situation.  A clearer understanding of the law surrounding community association managers and their new responsibilities will assist associations in evaluating whether they are in fact contracting with an appropriate community association manager.