When you serve on a board, sometimes you get a feeling of empowerment. After all, you bear a great deal of responsibility for how well (or how poorly) your building or HOA fares during your tenure. However, it’s important not to let that power go to your head and create a situation where you are setting yourself up for a conflict of interest dispute. 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.
Conflicts come in many forms, say the pros. “Some examples of conflicts that occur in condo and co-ops include if a board member is a realtor and is using the association financial information to assist in their outside endeavors,” says Regan Marock, executive director of business development for KW Property Management & Consulting in Miami. “Or when a board member has a personal relationship and provides kickbacks to a vendor, or when a board member or management company has an undisclosed financial interest with a vendor.”
“Sometimes the manager is put in the middle,” says Lisa A. Magill, an attorney with Becker & Poliakoff in Fort Lauderdale. “A board member or officer wants something to satisfy his or her personal agenda—and if the manager protests too much, their job may be in jeopardy. The key to any conflicts issue is disclosure. Everyone needs to disclose what relationship they have with a potential vendor and the vendor should likewise disclose any relationships.”
“Common sources of conflicts of interest are directors who directly or indirectly are connected to companies that the association may currently use or consider hiring,” says Donna DiMaggio Berger, a founding partner with the law firm of Katzman Garfinkel & Berger in Fort Lauderdale. “This can be a director who owns a management company (or is a licensed manager whom the board wishes to hire), owns a landscape company or other service provider.”
In these cases, the director with the direct or indirect pecuniary interest in the company being discussed has a conflict of interest, must disclose it to his or her fellow board members and should not vote on matters on which he or she is conflicted.