In this blog we will explore the meaning and applied significance of the word FIDUCIARY.
The word origin stems from the Latin word “fidere”, which means “to trust.”
Fiduciary applies to any situation in which one party or person justifiably places confidence and trust in someone else.
A legal definition of Fiduciary can be found at: https://legal-dictionary.thefreedictionary.com/fiduciary+duty
Typically, Condominium Bylaws and Government issued Statutes dictate for officers to be Fiduciary.
For Example:
Some, if not all Condominium Bylaws state:
Article III Board of Directors Section 1. Number and Qualifications … Board of Directors who shall owe fiduciary duty to the Association (of Apartment Owners – per the definition in the Declarations).
And:
Hawaii Condo Law §514B-106 Board; powers and duties, for example states:
(a) Except as provided in the declaration, the bylaws, subsection (b), or other provisions of this chapter, the board may act in all instances on behalf of the association. In the performance of their duties, officers and members of the board shall owe the association a fiduciary duty and exercise the degree of care and loyalty required of an officer or director of a corporation organized under chapter 414D.
This Fiduciary Duty is OWED. The word “owed” is being used, meaning the Board is under a moral obligation (Dictionary of Oxford Languages) to the Association of Apartment Owners; and do so on behalf means in the “interest of, as a representative of.”
Important to note:
- All of the fiduciary’s actions are performed for the ADVANTAGE of the beneficiary.
- … MUST AVOID “selfdealing” or “conflicts of interests” in which the potential benefit to the fiduciary conflicts with what is best for the person who trusts…
The Webster Dictionary, as well as countless others, leaves no room to speculate about what being and acting Fiduciary really means.
The Fiduciary duty is very specific. It is a duty for the advantage of people who place their trust in the Fiduciary.
It is not a duty to the concrete walls, the building, the paint company, a lawn mower service, nor is it a duty to oneself, and one’s beliefs and one’s out of state commercial real estate experiences, nor is it a duty to a managing agent, a Board advising attorney, nor is it a duty to the other board members, or a duty to save face and not to feel embraced.
In conclusion, being placed under a fiduciary obligation requires the Fiduciary to act for the benefit of the beneficiary. When it comes to Condominiums, the beneficiary is typically and clearly defined as the aggregate owner group making up the association.
Please also read our Blog: “What Is an Apartment Owner Association”
