By Steve Walz, CMCA®, AMS®, Westward360-Denver
In the world of Colorado common interest communities, being a board member is often a thankless job. You’re balancing tight budgets, aging infrastructure, and the occasional neighborly dispute. However, beneath the day-to-day operations lies a legal and ethical bedrock that every director must stand upon: the Duty of Loyalty.
As a manager, I’ve seen boards thrive when they embrace this duty and crumble when they ignore it. In Colorado, this isn't just "good advice"—it is a requirement codified under the Colorado Common Interest Ownership Act (CCIOA) and the Colorado Revised Nonprofit Corporation Act.
At its core, the duty of loyalty requires a board member to act in the best interests of the association, rather than for their own personal gain or the benefit of a specific group of friends or neighbors.
While the Duty of Care is about being informed and making diligent decisions, the Duty of Loyalty is about motive and allegiance.
There are three pillars to loyalty. This first is Confidentiality which addresses keeping executive session discussions and sensitive owner information private. The second is conflict of interest disclosure, which requires transparency when a personal interest intersects with an association decision. The third is corporate opportunity, which is not taking advantage of information gained as a director for personal profit.
In Colorado, board members are generally held to the "Good Faith" standard. This means that if you act in good faith, with the care an ordinarily prudent person would exercise, and in a manner you reasonably believe to be in the best interests of the association, you are protected by the Business Judgment Rule.
However, the moment a personal agenda replaces the community's welfare, that protection evaporates.
From the manager’s desk, these are the most frequent ways the duty of loyalty is tested:
- The "Special Interest" Trap: A board member runs for office solely to kill a specific project (like a pool renovation) or to target a specific neighbor. Once you are seated, your "constituency" is the entire corporation, not just the people who voted for you.
- The Contractor Conundrum: Your brother-in-law owns a roofing company and the HOA needs a new roof. While not strictly forbidden, this is a massive conflict of interest. You must disclose the relationship, and you should recuse yourself from the discussion and the vote entirely.
- The "Back-Fence" Leak: Sharing confidential information about a neighbor’s delinquency or a pending lawsuit with a friend over coffee. This is a breach of loyalty that can expose the association to significant legal liability.
- Disclose Early, Disclose Often: If you think there might be a conflict, there probably is. Put it on the record.
- Recusal is a Power Move: Stepping out of the room during a vote where you have a personal stake doesn't show weakness; it shows ultimate professional integrity.
- Keep the "Hat" On: Every time you vote, ask yourself: "Am I doing this because it’s best for the property values and community spirit, or because it’s best for my wallet?"
When a board is perceived to be acting out of self-interest, trust—the currency of any HOA—devalues rapidly. When owners suspect that board members are "getting a deal" or "playing favorites," engagement drops, assessments become harder to collect, and litigation becomes more frequent. Conversely, a board that demonstrates a fierce loyalty to the community's long-term health fosters a culture of transparency and stability.
Professional Tips for Board Members
The Duty of Loyalty is your shield. When you prioritize the association above yourself, you aren't just following the law—you're building a better place to call home.
Steve Walz, CMCA®, AMS® is the General Manager for Westward360-Denver. Steve is a 12-year veteran of the industry and values personal relationships, open, clear communication and a slice of humor to navigate management of associations and his team. Steve is also a member of the CAI-RMC Editorial Committee.
