When the developer of a common interest development serves on the board of a homeowner association, or otherwise controls the board, the developer owes a fiduciary duty to the association and its members. This means the developer must:

• Place the interest of the 'association and its members above his own interests;
• Be absolutely loyal to the association;
• Establish a separate HOA operating account and reserve account on or before the date the first escrow closes;
• Pay assessments into the HOA operating account, before the delinquency date, for all unsold units or lots;
• Use association funds (assessments) only for association purposes which does not include paying costs to cure defects or other non-association related expenses;
• Provide the association (corporation) with copies of those documents set forth in Regulation 2792.23 of title Real Estate Commissioner of California;
• Avoid or disclose in writing, any actual or potential conflicts of interest;
• Recuse himself or herself from voting on any matter where he or she has a conflict of interest or potential conflict of interest with the association;
• Comply with the law at all times in performing his or her duties as a board member;
• Be truthful at all times in communicating with other board members; and
• Repair any construction defects properly and timely utilizing its own funds.

The failure of the developer, acting as a board member, to place the interests of the association and its members above his own interests can lead to a legal claim by the association or its members for monetary damages, including punitive damages.

Developers sometimes breach in their fiduciary duty to the association and its members by signing contracts on behalf of the association with management companies and other service providers with which the developer has a special. relationship. New board members taking over from a developer controlled board should investigate all existing contractual relationships to make certain they are arms length agreements.