Q&A: Board Members as Real Estate Agents?

Q My question concerns board members who are also real estate agents. How common is this? What must other board members watch out for to ensure that the board member/real estate agent doesn't cross the line and have a conflict of interest? What does the board do if they think a conflict of interest exists and the board member/real estate agent disagrees?”

--Conflict in a Condo

A “The situation like the one you describe is more common than you might think,” says attorney Jonathan H. Katz, who is with the Trenton-based law offices of Sterns & Weinroth. “This is due, in part, to the fact that board members are all volunteers and many (if not most) have full-time jobs other than running their condominium or homeowner’s association’s. However, the fact that a board member is a real estate agent (or even a landscape professional, accountant or lawyer) will not automatically disqualify him or her from serving on an association board. In some cases, these relationships can even be beneficial to the association, when disclosed and dealt with appropriately.

“In a community association setting, a conflict of interest can occur when a board member, contrary to his or her obligation and duty to act for the benefit of the association, exploits his or her position, influence or relationships for personal benefit, typically pecuniary. “This includes circumstances where individuals attempt to use confidential information or their status as a board member for individual purposes, such as requesting that the association contract for services with a friend, relative or (even worse) the actual board member. In order to protect against these situations, board members should be aware of and request that potential vendors disclose any relationships they may have with board members or the association.

“Specifically with respect to real estate agents, conflicts may arise where the agent/board member attempts to use his or her position to solicit association members to utilize his or her services. The appearance of a conflict may also arise when the agent/board member participates in financial decision making (such as budgetary concerns) where it may appear that he or she has a financial interest in keeping the monthly common assessment expenses low to attract potential buyers to the community. Again, full disclosure by the agent/board member is essential to avoid an appearance of any conflict.

“If the board takes the position that a conflict of interest exists, it should advise the conflicted board member and ask that person to recuse him or herself from any discussion of the topic and abstain from voting on the issue. If the board member refuses, the board has several options, including asking the board member to step down or seeking to remove this individual in accordance with the association’s governing documents. However, prior to taking any actions, the board should discuss these issues with legal counsel to attempt to amicably resolve any conflicts between the board and the conflicted board member."

Related Articles

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: Changing the Rules to Benefit a Board Member

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

Business Corporation Law Versus Conflicts of Interest

How Both Impact Boards

Q&A: Transparency at Board Meetings

Q&A: Transparency at Board Meetings

Boards Behaving Badly

Tales From the Dark Side