HOA Board Authority Has Limits—Even Under the Business Judgment Rule

Can an HOA board grant one owner exclusive rights to use a portion of the association’s common area?

That issue was at the center of a dispute involving a license agreement that allowed a homeowner to attach private docks to a community dock—effectively limiting access for other members.

While boards are generally protected by the business judgment rule, that protection has limits. When a board acts outside the scope of its authority or in violation of its governing documents, its decisions may not be upheld.

This case is a clear example of how a board’s attempt to enter into what appeared to be a reasonable agreement was ultimately invalidated because it conflicted with the association’s governing documents.

Continue reading to see why the court refused to apply the business judgment rule and what this means for HOA boards making decisions about common area use.