HOA Officers and Directors Must Have Proper Authority to Enter into Contracts

Homeowners associations are operated by the collective action of a board of directors that is elected by the homeowners. For individual officers, directors, or property managers to take action on behalf of a homeowners association, they must first be vested with the authority to take the action that is contemplated.  That authority typically comes from a resolution adopted by the association’s board of directors at a proper meeting. When it comes to negotiating and entering into contracts, state laws and the governing documents for a homeowners association vest the association’s “board of directors” with the power to contract for the association. Thus, absent action taken in an emergency situation, the individual officers and/or directors of a homeowners association do not have the right to individually negotiate with vendors, instruct vendors, or enter into contracts with vendors without proper authorization from the association’s board of directors.

If an individual officer or director of a homeowners association approves and enters into a contract in a non-emergency situation without proper authorization from the association’s board of directors, the association may still be bound by the unauthorized agreement and thus be required to perform in accordance with the agreement, or be subject to liability for nonperformance.  In such a case, the individual officer or director who acted without authority in entering into the contract may be subjected removal from the board of directors and/or personal liability for his or her wrongful actions and damage caused to the association. Action that is taken by an individual officer or director in contracting for emergency repairs, such as repairs that are necessitated to deal with a broken water pipe that is causing flooding, constitutes an exception to the requirement for advance authorization by the association’s board of directors, and an individual officer or director will not be subject to liability or removal under such circumstances.