Who owes fiduciary duties — and who does not

The most portable holding in the opinion is also the simplest. “Fiduciary duties are owed to, not by, the corporation.” Under § 81-303(a), officers and members of the executive board owe duties of care and loyalty. The association itself owes none.

That is a pleading rule with teeth. A complaint naming only the association cannot support a fiduciary-duty claim. An owner who wants to press one has to name the individual board members and give them the chance to defend themselves.

Where board members are named, ordinary Delaware corporate standards apply rather than anything association-specific. Breach of the duty of care requires gross negligence. Breach of loyalty requires a personal financial or otherwise disabling interest — and the court held that holding an unpaid volunteer seat is not one. The owner's theory that the board ran the election to entrench itself therefore failed for want of any financial interest to entrench.

Enforcement choices are business judgment

The board's decisions to involve counsel, to decline an in-person inspection of the windows, to decline mediation, and to impose fines at all were each held to fall within the board's judgment. The court anchored that in § 81-302(a)(4) — the association's power to institute and defend litigation — and in the Zapata line of Delaware corporate cases.

For boards, the reassurance is real but narrow: it protects the choice to enforce, not the manner of enforcement, and it does not reach a board that skips notice and hearing.

No universal-proxy requirement

On the election challenge, the court found nothing in the Unit Properties Act, in DUCIOA, or in Haslet Park's own documents that requires an association to circulate proxies or ballots in any particular format, or to put a challenger's name on the association's proxy form. Delaware's general corporate proxy provision, 8 Del. C. § 112, is permissive rather than mandatory. Using an inspector of election chosen by the board was likewise not improper.

Associations facing a contested slate should read that as permission, not as a safe harbour: the ruling turned on the absence of a requirement in the governing documents, so a declaration or code of regulations that does specify proxy mechanics still binds.

A board cannot vote itself a fee-shifting rule

The board's post-suit “Resolution” charging its legal fees to the owner did not survive. Rulemaking authority over “the operation and use of the property and the use of the common elements” does not reach fee-shifting. Doing that requires amending the Code of Regulations — at Haslet Park, a two-thirds vote of unit owners at a duly constituted meeting.

Separately, the court declined to shift fees under 25 Del. C. § 81-417(a), which is discretionary. Even though the association largely prevailed, the owner's positions were not frivolous and a substantial fine had already landed. An association that wins is not thereby entitled to its fees. See our Delaware fining authority page for how § 81-417 interacts with the fine power.

DUCIOA reaches back into pre-2009 communities

Haslet Park was formed under the Unit Properties Act, not DUCIOA, and the court still applied DUCIOA to it. At footnote 6 of the opinion, the Vice Chancellor held that §§ 81-302(a)(4), 81-302(a)(11), 81-303 and 81-417 “apply to the Association even though it is a ‘preexisting community’ formed under the UPA,” citing 25 Del. C. § 81-119.⁵

This is the clearest recent judicial statement of a question Delaware boards ask constantly. DUCIOA governs communities created on or after September 30, 2009; older communities remain primarily under the Unit Properties Act. But § 81-119 reaches selected DUCIOA sections back into those older communities for events occurring after the effective date — and the fine power and the fee-shifting provision are both on that list. Our Delaware governing statute page sets out the full reach-back.

What it changes for Delaware boards

Three operational points follow directly.

Notice and a hearing are the whole test, and the hearing date is the clock. A board without a written fine schedule is not disarmed — but fines that accrued before the owner was heard are exposed, and fines after it are not. Documenting the date of the hearing is the single most valuable record in a fine file.

Fee recovery lives in the governing documents, not in a board vote. If an association wants a contractual fee-shift, it needs the owner vote to amend. A resolution passed in the shadow of litigation will not do it, and § 81-417 discretion is not a substitute.

Fiduciary exposure is personal. Board members, not the entity, are the defendants in a duty claim — which cuts both ways, and is a reason to check that directors-and-officers coverage actually names them.

What to watch next

The docket is live. Fines continue accruing at $30 per day pending cure, and a compliance stipulation is outstanding. No Delaware law-firm client alert or trade analysis of this decision had appeared as of this writing — we looked. For a ruling this consequential to fine practice, that is likely to change.