As a director of a Homeowners' Association (HOA), you make decisions in the interests of all owners. But what if a decision turns out badly and causes damage? In some cases, you as a director can be held personally liable, even if you perform this task voluntarily.
The Management and Supervision of Legal Entities Act (WBTR), which came into force on July 1, 2021, sets out clear rules on how management and supervision should be carried out. Even though owners' associations are formally exempt from certain WBTR provisions, the Act still indirectly influences expectations and liability risk.
1. What is directors' liability?
Director liability means that, as a board member, you can be held personally liable for financial or other damage caused by improper or negligent conduct.
This may include:
- Failure to comply with legal obligations (e.g., establishing a reserve fund)
- Incorrect decision-making (e.g., postponing maintenance, resulting in damage)
- Entering into contracts while the homeowners' association has insufficient funds
2. WBTR in brief
The WBTR aims to:
- Preventing mismanagement, irresponsible financial management, and self-enrichment
- Improving the quality of governance and oversight
- Define tasks, powers, and responsibilities more clearly
The following applies to owners' associations:
The WBTR does not formally apply to 'Book 5' associations (such as owners' associations), but insurers and courts are increasingly looking to these standards when assessing management actions.
Good governance means acting in the interests of the association, making transparent decisions, and avoiding conflicts of interest.
3. Practical examples of liability claims
Incorrect meeting decision: A proposal is adopted with 51% of the votes, while the rules require a two-thirds majority. The decision turns out to be invalid and incurs costs.
Ignoring financial risk: A contractor receives a large down payment for roofing work, goes bankrupt, and the homeowners' association is unable to recover the money.
Postponement of necessary maintenance: A balcony renovation is postponed, the balcony collapses and causes personal injury.
4. How can you limit the risk as a driver?
Know your obligations: Make sure you are aware of the laws and regulations that apply to the homeowners' association.
Record decisions properly: Minutes and regulations are crucial as evidence.
Check the financial situation: Do not enter into any commitments that the HOA cannot fulfill.
Insure your risks: A driverliabilityinsurance protects your private assets in the event of claims.
5. Internal cooperation and awareness
As a director, you are not only responsible for your own mistakes, but sometimes also for those of your fellow board members. Therefore, work as a team:
- Discuss risks openly in the meeting
- Seek timely advice from a homeowners' association expert or lawyer.
- Be aware of potential personal liability when making major decisions.
6. Want to read more about relevant topics?
- Reserve fund → Read all about the legal obligation and how to arrange this properly
- Fire safety → Prevent incidents with our practical tips
- Environment Act & Bbl → Discover the new rules for charging stations and parking garages
Help from our HOA experts
Our specialists advise you on directors' liability, WBTR, and the right insurance solution.
Call our HOA experts at 010 – 288 44 73 or send an email to vve@schoutenzekehreid.nl
