Participating in your association as a director of the board is an important role that comes with many responsibilities. Directors owe a fiduciary duty to the association and must act in the best interest of the association. It is a voluntary position that comes with no compensation.
Generally, the director is not entitled to compensation for his or her services.1 There are, however, some exceptions to this general rule. A director can be paid either when: (1) the board agrees to pay the director for a specific service before he or she performs the service, or (2) the director performs an extraordinary service, one that is not within the scope of his or her usual duties, and where it is intended he or she be paid for the rendered work.2
For those of you who have served on a board or are serving on a board, this might sound wonderful as your responsibilities are great indeed. Adding compensation to service can, however, complicate matters potentially creating not only conflicts of interest, but also a legal mess. Briskin v. Oceanside Marina Towers Association is a prime example of how just the discussion of director compensation can lead to unwanted legal battles.
Jules Briskin was the board director of the Oceanside Marina Towers Association.3 The Association leased the land on which the development was built.4 The city owned the land and the Association only owned the improvements. While he was director, Briskin began negotiating for the purchase of the land from the city.5 The negotiations began in 2003 and continued through 2008 when the city agreed to sell the land to the Association.6
During this time, Briskin asked for compensation for his work in the land sale negotiations.7 He claimed other board members individually told him he should be compensated for his work, and a committee was formed to address the matter.8 The committee recommended the board compensate Briskin, but the board never took action on the issue.9 After the city agreed to sell the land, Briskin resigned from the board, and the board formally decided not to compensate Briskin for his work.10
Briskin responded by filing a law suit against the Association for compensation.11 Briskin claimed there was an implied contract and that the Association intended to pay him.12 The Association argued there was no intent that he be compensated.13
The Association cited its governing documents, which provided, “Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the board.”14 The court said this provision, which requires the board to agree to pay a director for his work by board resolution was not dispositive of the issue.15 The question of what the parties intended had to be resolved in trial, and the result in trial is still unknown.
This is a scary outcome. The board did not follow the governing documents and is now not protected by the governing documents. If it is shown that (1) the negotiation of the land sale was an extraordinary service performed by Briskin and (2) that the parties intended Briskin be paid regardless of what the governing documents require, the Association will have to compensate Briskin.
This could have been avoided if the Board followed proper procedures and if board members had abstained from individually discussing the matter, outside of board meetings, with Briskin.
This case should serve as a reminder to all associations: The procedures within the governing documents should always be followed. If you serve on the board of directors, remember it is something you do for your community and neighborhood, without the expectation of compensation.