“On Advice of Counsel” Should Begin the Inquiry—Not End It*

Why Nevada HOA Boards Cannot Outsource Their Duty to Govern

Homeowners are routinely told that controversial HOA board decisions were made “on advice of counsel.” For volunteer directors and owners, that phrase carries enormous weight. It sounds like protection. It sounds like prudence. It sounds like doing exactly what a responsible board member should do.

And sometimes it is.

But the phrase can also conceal a serious governance problem—one that affects owners, directors, regulators, managers, and attorneys alike. The problem is not that boards consult lawyers. They should.

The problem arises when consultation with counsel is treated as though it ends the board’s responsibility to exercise its own judgment. Nevada law does not say that.

NRS 116.3103 requires executive-board members and officers to act on an informed basis, in good faith, and in the honest belief that their actions are in the best interest of the association.

Those obligations belong to the directors. They do not migrate to association counsel simply because legal advice was requested. That distinction matters.

Two Very Different Ideas That Are Too Often Treated as One

Reliance on legal counsel can play at least two very different roles in HOA governance.

First, consulting counsel may be relevant to whether a director acted prudently. Volunteer directors are not expected to be lawyers. When confronted with a difficult legal issue, obtaining competent legal advice may be entirely appropriate and may demonstrate that a director did not simply guess, ignore the issue, or act recklessly.

That is sensible.

But there is a second idea that too often becomes intertwined with the first: "We relied on counsel” is treated in practice as though it ends the fiduciary inquiry."

It should not. The relevant questions are different.

One asks: "Did the board seek appropriate professional advice?"

The other asks: "After receiving that advice, did the board itself exercise informed, good-faith fiduciary judgment?"

Those are not the same question. Consultation may be evidence that directors acted carefully. It does not necessarily establish that directors fulfilled their fiduciary obligations.

Nevada Law Places the Duty on the Board

Nevada’s statutory language makes this especially important. NRS 116.3103 does not merely require directors to obtain information. It requires them to act on an informed basis and in the honest belief that their actions are in the association’s best interest.

The statute focuses on the director’s conduct. That means obtaining advice is only part of the process. The ultimate decision remains the board’s. A director cannot satisfy a statutory duty to exercise judgment merely by identifying someone else who exercised judgment first. Legal advice may inform the board’s decision. It cannot become the board’s decision by default.

How Volunteer Boards Are Pushed Toward Deference

Most HOA directors are volunteers. Many begin service with little formal training in corporate governance, statutory interpretation, contracts, financial oversight, litigation, insurance, or regulatory compliance. They may suddenly find themselves responsible for multimillion-dollar budgets, reserve programs, enforcement systems, elections, contracts, litigation, and property rights. In that environment, association counsel can quickly become the most authoritative voice in the room. That is understandable.

But what begins as professional advice can gradually become something very different. Directors may come to believe that questioning counsel is imprudent. They may be told that the attorney has already decided what the law requires. They may assume that following counsel eliminates personal or institutional risk. Some may conclude that their role is simply to implement the attorney’s interpretation. At that point, governance begins to change. The board is no longer using counsel to assist its judgment. It is substituting counsel’s judgment for its own.

Volunteer status helps explain why this dynamic develops. It does not eliminate the resulting governance problem. Directors may understandably rely heavily on professionals, but the statutory responsibility remains theirs.

The failure is therefore both structural and individual: a system that encourages deference, coupled with directors who may never be clearly told that they must ultimately exercise their own judgment.

Attorneys Are Advisors, Not Governors

Association attorneys are retained professionals. Like managers, engineers, auditors, reserve specialists, accountants, and other outside experts, they are engaged by the association to provide specialized expertise. Legal expertise may be indispensable. But expertise is not governing authority.

Association counsel represents the association as the client and owes the professional obligations imposed by the attorney-client relationship and Nevada’s Rules of Professional Conduct. Those obligations are substantial. But they do not make the lawyer a member of the executive board.

Attorneys are not elected by the owners. They do not occupy the statutory position assigned to the executive board. They do not cast the board’s vote. They do not adopt association policy. And they do not inherit the directors’ fiduciary obligations merely because the directors requested legal advice.

Legal advice is advice—not governing authority.

It may be highly persuasive. It may identify legal risks that directors would otherwise miss. It may sometimes provide the best available answer to a genuinely uncertain question. But the decision whether and how to act remains with the board.

Fiduciary Duty Does Not Transfer to Counsel

The phrase on advice of counsel can become dangerous when it is used not to explain a decision, but to avoid examining the decision. Directors remain responsible for considering whether proposed action is:

• consistent with the governing documents,

• supported by applicable law,

• based on reasonably complete information,

• proportional to the problem being addressed,

• financially responsible,

• and genuinely in the association’s best interest.

  
  

That does not mean directors should substitute their own amateur legal interpretation for competent legal advice. It means something much more modest: They still have to think.

They must understand enough about the issue to make a decision. They should know whether the legal answer is clear or uncertain. They should understand major competing interpretations when those interpretations materially affect the association. They should understand significant financial, governance, litigation, and owner impacts. And when circumstances raise obvious questions, they should ask them.

That is what acting on an informed basis requires.

When Reliance Stops Being Informed Judgment

There are circumstances in which continued reliance on legal advice may itself deserve scrutiny. Suppose counsel recommends a course of action that appears inconsistent with the governing documents. Suppose the statutory language appears to point in another direction. Suppose the advice depends on regulatory silence rather than affirmative legal authority. Suppose new facts emerge that undermine the assumptions on which the original advice was based. Suppose the consequences become far more serious than originally anticipated. Or suppose the board is being advised to take an aggressive legal position affecting elections, owner rights, association finances, litigation exposure, or control of the association.

At some point, reasonable reliance may require reasonable inquiry. That may mean asking counsel to explain the statutory basis more fully. It may mean asking whether contrary authority exists. It may mean requesting a written opinion. It may mean obtaining a second legal opinion. It may mean seeking regulatory guidance. And in some circumstances it may simply mean that directors themselves must stop and ask whether the recommended course still makes sense for the association.

Nevada requires directors to act on an informed basis. That necessarily raises a question that deserves far more attention: Can a board truly be acting on an informed basis if it knows there are substantial reasons to question counsel’s interpretation but refuses to investigate them?

At some point, failure to inquire further becomes difficult to reconcile with the obligation to act on an informed basis.

A Recent NRED Letter Shows the Problem

This is not merely a hypothetical concern. A July 31, 2026 letter from the Nevada Real Estate Division illustrates exactly how reliance on counsel can become a substitute for examining whether a board actually exercised the fiduciary judgment required by NRS 116.3103.**

The complaint involved a board’s decision concerning an owner’s eligibility to submit a nomination form for an HOA board election. NRED first correctly identified the governing standard. It noted that NRS 116.3103 requires board members, as fiduciaries, to act on an informed basis, in good faith, and in the honest belief that their actions are in the association’s best interest.

But what followed is revealing.

NRED observed that the board had consulted association counsel regarding the owner’s eligibility and had relied upon counsel’s advice. From that fact, the Division concluded that the board had taken reasonable steps to obtain the professional guidance necessary to make an informed decision and had therefore satisfied its obligation to act on an informed basis. That reasoning illustrates the very problem this article addresses. The relevant fiduciary question should not end with whether the board obtained legal advice.

It should begin there. Did the board understand the statutory basis for counsel’s interpretation? Did directors consider whether the governing law or documents pointed to a different result? Were contrary interpretations presented? Did the board examine the consequences of excluding an owner from an election? Was counsel’s conclusion based on settled law, or was it one interpretation of an uncertain question? Did directors ask questions, request clarification, or independently evaluate whether the proposed action was in the association’s best interest?

The NRED letter does not identify such an inquiry. Instead, the analytical sequence appears to be:

1. The board consulted counsel.

2. The board relied on counsel.

3. Therefore, the board acted on an informed basis.

But that is precisely the proposition that deserves examination. Seeking professional advice may be an important component of informed decision-making. It does not necessarily establish that the directors themselves exercised informed fiduciary judgment.

NRS 116.3103 places that obligation on the board—not its attorney. A regulatory system that treats the act of consulting counsel as sufficient proof that fiduciary judgment occurred risks transforming professional advice into a functional safe harbor.

That is not what the statute says, and it is not how meaningful fiduciary accountability should work.

The Board Cannot Define Its Own Standard of Being “Informed”

There is another problem embedded in NRED’s reasoning noted in its July 31, 2026 letter. The Division stated that the board obtained the information and professional guidance “it deemed necessary” to make an informed decision. But that formulation risks making fiduciary review circular.

If the question is whether directors acted on an informed basis, it cannot be enough that the directors obtained whatever information they themselves decided was sufficient. Otherwise, the statutory requirement becomes largely self-validating:

• The board decided what it needed to know.

• The board obtained what it decided it needed to know.

• Therefore, the board was informed.

  
  

That cannot be the complete inquiry. The meaningful question is whether, considering the importance of the decision, the information available, contrary indications, legal uncertainty, foreseeable consequences, and other circumstances, the board had a reasonably sufficient factual and legal basis for the action it took.

A fiduciary standard has little value if the person whose conduct is being reviewed gets to define the standard of adequate inquiry after the fact. NRS 116.3103 requires directors to act on an informed basis. That language should impose an objective component to the inquiry—not merely ask whether the directors personally believed they had learned enough.

And where the board’s decision affects significant owner rights, elections, association finances, litigation, or control of the association, the level of inquiry reasonably expected should rise with the stakes. In other words, the statutory question is not: “Did the board obtain the information it wanted?”

It is: “Did the board obtain and consider enough information to reasonably support the decision it made?”

“Counsel Said So” Should Not Be the End of Regulatory Review

This issue also matters for Nevada owners. When a disputed HOA decision reaches the Nevada Real Estate Division or the Commission for Common-Interest Communities and Condominium Hotels, the fact that counsel was consulted should be relevant.

But it should not end the analysis. But examining some NRED decisions that appears to be the case.

NAC 116.405 already focuses on the conduct of directors, including whether they act negligently or incompetently, remain informed regarding common-interest-community law, and cause the association to comply with applicable statutes and governing documents. That framework suggests a more meaningful regulatory inquiry.

Instead of simply asking: "Did the board consult counsel?" Regulators should also ask:

• What issue was presented to counsel?

• What information did the board receive?

• Was the governing law reasonably clear or genuinely uncertain?

• Were competing interpretations identified?

• Did directors understand the material consequences of the proposed action?

• Were obvious inconsistencies or contrary authority considered?

• Did changing circumstances cause the board to revisit the advice?

• Was clarification or independent review sought when the stakes became substantial?

• And most importantly, what judgment did the board itself exercise?

Those questions do not undermine the attorney-client relationship. They examine whether the directors performed the job Nevada law assigns to them.

The Cost of Getting This Wrong

The consequences of excessive deference do not remain inside the boardroom. Owners ultimately pay for them. They pay through association legal fees. They pay through insurance costs. They pay through assessments. They pay when elections are disputed. They pay when enforcement disputes escalate unnecessarily. They pay when litigation continues for years. They pay when questionable decisions become institutional positions simply because reversing course would require acknowledging that earlier advice may have been wrong.

And they pay through something harder to measure: loss of trust in association governance.

The person giving the advice does not cast the vote. The board does. That distinction must mean something.

This Is Not an Anti-Lawyer Argument

None of this means attorneys are unnecessary or that boards should disregard legal advice. Quite the opposite. Boards handling complicated statutory and governance issues often need competent counsel.

Good attorneys help directors understand uncertainty rather than conceal it. They identify competing risks. They explain what the law clearly requires, what remains unsettled, and what choices remain with the board. They help directors make informed decisions. That is exactly how the relationship should work.

The problem begins when legal advice acquires a status the law never gave it: the power to replace governing judgment.

The attorney advises. The board governs. Maintaining that distinction protects everyone—including competent association counsel.

The Principle Nevada Needs to Reaffirm

Nevada already tells HOA directors what their job is. They must act on an informed basis, in good faith, and in the honest belief that their actions are in the best interest of the association.

Consulting counsel can help a board satisfy that obligation. It cannot replace the obligation. The critical question therefore should never be merely: "Did the attorney advise us to do it?”

The more important question is: “After receiving that advice, did the board itself make an informed, good-faith judgment that this course of action was lawful and in the association’s best interest?” That is the inquiry fiduciary accountability requires.

Owners should ask it. Directors should ask it. Regulators should ask it. And responsible association counsel should welcome it. Because “on advice of counsel” should begin the inquiry—not end it.

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*Disclaimer This article reflects the views and analysis of the Nevada HOA Reform Coalition and is provided for educational and policy-discussion purposes. It is not legal advice and does not purport to state an official interpretation of Nevada law. References to NRS 116.3103, NRED correspondence, and regulatory practices are discussed to examine how Nevada’s fiduciary-duty standards are being interpreted and applied. Readers should consult qualified legal counsel regarding their individual circumstances.

**Disclosure: NVHOAReform is citing the July 31, 2026 NRED determination as an example of the Division’s stated reasoning concerning reliance on counsel and the “informed basis” requirement. We take no position here on facts outside the determination itself; our focus is on the regulatory standard reflected in the Division’s written explanation.