Avoiding Conflicts of Interest Servant of Two Masters

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.

Read More...

Related Articles

Q&A: When Spouses Are on the Board Together

Q&A: When Spouses Are on the Board Together

Q&A: Conflict of Interest?

Q&A: Conflict of Interest?

Q&A: Neighbor’s Troublesome Window

Q&A: Neighbor’s Troublesome Window

Q&A: Can a Vendor Be a Board Member?

Q&A: Can a Vendor Be a Board Member?

Q&A: Changing the Rules to Benefit a Board Member

Q&A: Changing the Rules to Benefit a Board Member

Q&A: Bribing for Votes

Q&A: Bribing for Votes

 

8 Comments

  • What if a Board of Trustee makes what would be considered a "major material change" to the By-Laws (without a homeowner majority vote) by adding Siding Replacement to the Reserve Fund? Further, they already fund 3 buildings to be re-sided as a "maintenance" line item within the past two years? Does this not have the stench of impropriety? Siding replacement is supposed to be a "Limited Expense" item whereby the unit owner(s) who get the sole benefit, are supposed to pay the cost. What can homeowners do about it?
  • Can Board Members receive pecuniary benefits (free annual dues) for services rendered as a Board Member in a not-for-profit home owners association?
  • can a home owner be board's president in a home owner association and director in his master association? (The condo has a master association for ppal streets and club and 20 associations)
  • Our current painting contractor for the HOA, who owns a unit in the association, recently ran and won a seat on the Board of Directors. He did not disclose his ownership of the the business in the election data nor has it been brought up in meetings. The vast majority of owners are not aware of this potential conflict of interest situation. Is this a problem? If so, how should it be addressed?
  • We, in our subdivision have a "father" (Secretary for several yrs) on the Board and his recently appointed "daughter" as President, who has a different last name and owns a home here so according to her, she "has every right to serve on the Board". The issue here is she and her father are as one. She even calls him by his given name at meetings for those homeowners who are not aware of their relationship (or so they think). We see many of the behaviors mentioned in the "Conflicts of Interest" piece.
  • Is there a conflict of interest when a HOA Board Member is also a Planning Commissioner and participates in a public hearing of a property that is adjacent to the HOA property?
  • I am an active realtor in my community who would like to serve on our board. Would this be seen as a conflict of interest?
  • The condemning redevelopers are at the same time a board members. They are using open meetings to intimidate members and talk them into buying condominiums for 3-6 times less price than the best and highest value should be. I went on the board meeting, asked for minutes the day after, and never got a feedback. What do we do?