One of the trickier problems to deal with when you live in a co-op or condo is dealing with board members who sometimes let the power go to their heads. Even though they are entrusted with a great deal of responsibility in the smooth running of the building, it’s vital that board members don’t use their position to create a situation where they are setting themselves up for a conflict of interest dispute.
“Conflicts can arise in all facets of association management,” says Bonnie Bertan, president of Association Advisors, a property management company in Freehold. “Typically the conflict would arise at the board and management level. This is in large part because the management company is typically responsible to bid services and the board makes the hiring decisions directly. There are cases where the conflict could extend to committees such as a procurement committee.”
Nothing undermines a community’s faith in their leadership faster than things like impropriety and self-dealing amongst the board/management team, or even the implication that these things might be going on.
“If a management company has painting contracts or landscaping contracts or janitorial services in which they are a principal owner and hires one of these companies without disclosing that they have ownership or a stake in them, that’s a conflict of interest,” says Jim Evans, CPM, and president of the Institute of Real Estate Management (IREM). “From the board standpoint it’s the same thing. Often we get a brother, sister, uncle or whomever that are in that business and they push to have them added to the list without disclosing their relationship.”
In these cases, the board member stands to profit financially from mixing his or her two interests and may be tempted to put the interests of the business ahead of the interests of the building. When that happens, the board member runs the risk of breaching his or her fiduciary obligation to the building.