Although the position generally offers zero compensation aside from the satisfaction of a job well done, association board members are still in charge of running a business—a business with revenues, expenses, and assets that, depending on the size of the complex and whether it is a co-op or condo, are hardly insubstantial.
Unlike their counterparts at Fortune 500 companies, HOA board members are not usually career executives with resumes uniquely suited for running companies. The boards of residential buildings and associations are stocked with people from all walks of life. Some are attorneys, some dentists; some are real estate brokers, some plumbers. Whoever they are, their status as board member automatically exposes them to one of the perils of the lofty position: the potential for conflicts of interest.
Board members have enough to contemplate as they carry out their community’s administrative duties. Avoiding conflicts of interest—or even the appearance of them—is crucial. Nothing undermines a community’s faith in their leadership faster than impropriety and self-dealing amongst the board and management team. Conflicts of interest can be hard to avoid completely, but how they are handled is of the utmost importance.
But what is a conflict of interest, exactly? How do they come about? Why are board members especially at risk of such relationships? And most importantly, how can they be avoided? Let’s take a look.
What Counts as a Conflict?
Board members have a fiduciary responsibility to the resident owners of their association. This means, in simplest terms, that their loyalty cannot be divided. They cannot serve two masters. They must place the interests of the community above all other interests—including their own.