As president I recently made an exception and I am allowing a resident to utilize our clubhouse for a fundraising event in regard to an ill family member. The family needed a quick answer so there was not time for a board meeting. Another board member commented since I did not get board approval if there is a liability issue I would not be covered by our insurance and neither would the association. Have I done something wrong and if so, short of canceling their fundraiser what can I do to make this right?

ANSWERS:

You may have made a mistake in not getting Board approval, but the impact can be limited if you take immediate action. Legally, the resident has the right to rely on your “apparent authority” as president to utilize the clubhouse for the event. If you (or the Board) alert the resident to the authorization problem before the resident has taken action that cannot be undone (such as spending money or signing contracts), though, then the HOA’s obligation to honor the agreement could be limited.

In the meantime, schedule a meeting of the Board to discuss the next steps. The Board may decide simply to ratify your action as a one-time exception under the circumstances. If the Board refuses to agree, though, then it should immediately notify the resident of that decision and the parties will need to deal with expenditure issues.

The HOA’s insurance carrier would almost certainly defend a claim arising from an incident at the event. The scope of its liability (and the Association’s) would be based on what the Association and the resident did. For example, if the Board clearly and affirmatively notified the resident that such permission had been improperly given and barred the resident from hosting the event in the clubhouse, then the resident might be considered a trespasser and the liability of the Association significantly more limited. If the resident sued for the cost of a non-refundable deposit with the caterer, though, that would usually be covered by your insurer under the circumstances.

Kenneth Jacobs
Smith, Buss & Jacobs LLP
733 Yonkers Avenue
Yonkers, NY 10704
914-476-0600 X4102

60 East 42nd Street
46th floor
New York, NY 10165
212-688-2400 X4102

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Generally, a president of a non-profit corporation has the power to make any and all decisions on behalf of the organization, unless the by-laws or a corporate resolution provide otherwise. It is clearly the better practice to allow the board to decide business issues; however, sometimes circumstances do not permit such to be done. In those instances, the president’s decision is binding.

Patrick F. O’Dea, Esq.
Nelson Mullins Riley & Scarborough, LLP
3751 Robert Grissom Parkway, Suite 300
Myrtle Beach, SC 29577-6412
Phone: (843) 946-5631
patrick.odea@nelsonmullins.com
www.nelsonmullins.com

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Unless granted authority to make decisions normally reserved to the Board, then any officer making such a decision has acted outside of his/her authority and could be personally liable for any damages (as could the Association). Here, it sound like the problem is not whether the fundraiser was allowable, but just that it was not approved by the Board. The easy fix is for the Board to retroactively approve the event.

Sara A. Austin
Austin Law Firm LLC
226 E. Market St.
York, PA 17403
717.846.2246 phone
717.846.2248 fax
saustin@austinlawllc.com