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.
“We have seen conflicts of interest arise in cases where a board member owns, is employed by, or in some other way represents, a goods or service company that wishes to do business with the building,” says Michael Berenson, president of AKAM Associates, Inc., providing on-site management to New York co-ops and condos. “We have also seen conflicts of interest arise where a board member is a real estate salesperson or broker and wishes to transact business with the building.”
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.
“It’s a very dicey issue because there are no hard and fast rules and that’s a problem,” says Andrew P. Brucker, Esq., a partner with Schechter & Brucker, P.C, a law firm in Manhattan. “Even the appearance of impropriety—even if no conflict of interest has occurred—is something that boards need to look out for.” And 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.
Living in close proximity to others, along with a sense of loss of control, gives rise to a whole host of different types of disputes. Adding a conflict of interest problem into the mix can make the situation even more volatile.