Keeping it Above Board Avoiding Common Conflicts of Interest

 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.  

 Avoiding Problems

 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.  

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2 Comments

  • Please find or develop a model job description for Board Members which addresses the issues raised in this article eg. conflicts of interest. Another aspect to the job description is a policy role versus micromanagement. Liability on individual board members for micromanagement mistakes. Thanks
  • Curious for the degree of conflict of interest in a voting member of HOA who is a property manager doing business within the condo association - responsible for sales & rentals on properties. How does this person vote for budgets and management decisions knowing that there is a personal financial gain/loss interest in HOA decisions? Is there someone who can speak to this among Forum readers and knows of any specifics in Florida?