The business judgment rule is a legal concept dating back hundreds of years. Basically, this rule means that a court will not question a business decision of a manager or other decision maker, absent a showing that the decision was made in bad faith, or was arbitrary or capricious. The business judgment rule has always operated as a defense when community association is sued by a homeowner for any given decision. On February 23, 2022, the Florida Court of Appeals, 3 rd DCA issued a decision in New Horizons Condo. Master Ass’n v. Harding, No. 3D20-1471, 2022 Fla. App. LEXIS 1224 (3d DCA Feb. 23, 2022), which took the business judgment rule one step further.
In New Horizons, the 3 rd DCA stated not only was the business judgment rule a defense, it was a presumption. Companies do not have to plead business judgment rule as an affirmative defense or else waive that defense. In most cases, if you do not raise a defense at the beginning of your case, you cannot take advantage of that defense later on. Not so with the defense of business judgment rule. The 3 rd DCA held that the business judgment rule was a presumption for the suing homeowner to overcome, and
that the Association does not need to plead it as a defense. This holding will make it much easier for associations to prevail and have their decisions go unquestioned, and much more difficult for homeowners who will have to affirmatively plead and prove facts that an association’s decision was arbitrary,
capricious, or in bad faith.
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