Questions on fiduciary duty and Bayside

One must question the sincerity of the Carl M. Freeman Companies’ stated core values, as found on their website, of always being respectful, forthright, and ethical in their operations and oversight of the communities they develop. 

I live in Bayside, a community that currently has a Freeman-controlled homeowner association in place, with two homeowner directors and three Freeman-appointed directors. Each director has a singular fiduciary responsibility to the homeowners within the community it represents. Yet the Freeman-appointed directors seem to have lost their understanding of their fiduciary duties as board members, much to the detriment of the homeowners.

In an opinion dated May 19, 2021, of Vice Chancellor Sam Glasscock III of the Delaware Chancery Court regarding Freeman’s continued exercise of control of our board, the vice chancellor noted, “all five members [of the HOA board] are bound to act toward [homeowners] as fiduciaries bound by duties of care and loyalty.…” Delaware courts have repeatedly noted the obligation of loyalty cited by Vice Chancellor Glasscock in his opinion. They have concluded that absolute loyalty to the interests of the homeowners is critical (to the exclusion of any other interests) because of the ability of a developer-controlled homeowner association to exercise “domination and influence” over the homeowners, particularly in the form of imposing rules and extracting assessments - the fiduciary duty. 

The Bayside developer-controlled HOA board has failed its homeowners in numerous ways over the past few years. One illustration deals with townhome roof and paint programs within the community. Recently, the board announced they will terminate the townhome roof replacement program. This, despite the fact that Freeman and its selected Bayside home builders have promoted the existence of such programs as a marketing tool to help sell units. In a June 2021 message by Board President Joshua Mastrangelo, he committed to homeowners to “provide clarity and direction” while “aiming to resolve these issues cooperatively” with regard to this program.

Yet he ignored homeowner pushback in public meetings as well as a request by a group of townhome owners to re-survey all the owners on this matter so that the board could understand the collective preferences for the future of the program. 

How does Mr. Mastrangelo’s unwillingness for a survey jibe with his June statement of resolving issues cooperatively? By unilaterally terminating the roof replacement program and not even asking the opinions of the homeowners most impacted by the termination of the program, the HOA board is shirking its fiduciary responsibility to those townhome owners.

Within our community, we have many committees that consist of homeowner volunteers serving for the betterment of our community, including the finance, grounds and operations, and transition planning committees. In the case of the finance committee, they uncovered the history of poor decisions by past Freeman-dominated boards when establishing annual reserve assessments for both the HOA reserve and previously mentioned townhome programs. 

Such past decisions were made contrary to what is required in the charter and/or against the recommendations made available to the board at the time of those decisions. 

Since November 2020, the community has awaited a decision from the board and developer on resolving the HOA reserves’ discrepancies, despite past discussions with the finance committee, the last being this past August. The board’s continued refusal to support and resolve these HOA reserve funding issues is yet another example of violating Mr. Mastrangelo’s fiduciary responsibility as the HOA board president to resolve matters crucial to the well-being of the community and its homeowners - those he is obligated to serve!

One of the most recent actions by the HOA board is their unanimous adoption and issuance of a “code of conduct” oath that requires all committee members to sign under threat of “removal.” One of the key provisions of the board’s “code of conduct” prohibits committee members from making public comments to the community without board approval.

This is essentially a gag order - their attempt to filter the message by requiring volunteer committee members to obtain board “permission” prior to any disclosure of pertinent information to the community they are serving.

One wonders if the Freeman-appointed board members have a similar constraint on discussing board business with the officials of Freeman, the company that signs their paychecks.

Others who were present at the Oct. 21 board meeting tell me that Mr. Mastrangelo stated, in response to homeowner questions about the board having recently taken actions without homeowner input, that, when you have invested $100 million in a project, you get some rights which carry forward.

And he says this as the president of our HOA to the homeowners whose interests, and not those of the investing party, he is obligated to protect! What other actions can we expect from the board in the future consistent with that perspective?

After the opinion by the vice chancellor was handed-down, Freeman CEO Michelle Freeman sent an email to our entire community stating, “It is time for a reset…Everyone in Bayside benefits from healthy, respectful, constructive dialog.”

If this was her wish, and it certainly is admirable of her to desire this “reset,” how can this be accomplished if her own appointed board president refuses to participate in discussions regarding legitimate community concerns and to suppress important input from our homeowner committees? How can the Freeman-appointed HOA board members not be held accountable for their blatant disregard of their fiduciary responsibilities?

The Carl M. Freeman Companies purported “core values” of being respectful, forthright and ethical are not being practiced by its appointed members of our HOA board. I can only hope that the board members quickly realize that, despite some being Freeman employees, they are each duty-bound to represent our community and have a fiduciary responsibility to represent us. Only when that happens will our community benefit from the constructive and respectful dialog that Michelle Freeman has been advocating. Bayside deserves nothing less!