Court Applies Business Judgment Rule to Settle HOA Dispute over Boat Slip

This case pertained by an action filed by a condominium owner (“Owner”) against her homeowner’s association (“Association”) over a decision by Association’s board of directors to reduce the width of a boat slip that belonged to Owner by 1 ½ feet in order to remove an encroachment onto a neighboring owner’s property. Owner was assigned the exclusive use of the boat slip as a part of the conveyance of title to the condominium that she purchased. Owner’s action against Association sought to recover damages for conversion of portion of the boat slip that had been taken away by the Association’s action in reducing the size of her slip.

In defending against Owner’s action, Association’s alleged that it was shielded from liability because the decision to reconfigure the dock was authorized by Association’s bylaws and was made pursuant to the board’s discretion under the business judgment rule. The trial court granted summary judgment in favor of Association and Owner appealed the decision.

The appellate court stated that, “In reviewing a condominium board’s actions, courts should apply the business judgment rule.” The appellate court further stated that under the business judgment rule, the court’s inquiry is limited to a consideration of the following two components of the rule: