Monday, July 16, 2012

Avoiding the appearance of self interest as an association director

A reader of my blog recently wrote to discuss a situation in her community where the interests of the membership came second to the interests of some board members. The reader wrote that the community had been polled and the vast majority of residents supported an expenditure of $1,500 per year so the county bus would stop outside their community. The board declined to pursue that expenditure but instead opted to spend $3,200 to install a roof over a softball field dug-out in the community; the fact that most of the board members played on that softball team did not go without comment.

The reader wrote that she had no issue with the roof but a bus to make shopping easier for the residents had been her preference along with many of her neighbors. Ultimately, the board is elected by the members to make decisions on their behalf but how often do the directors have personal interests that might be given priority attention? In the scenario provided above, being a softball player alone does not mean that a director could not vote on the respective expenditures and still decide that the roof was in the best interests of the community. However, throw in the fact that the community was polled, voiced its preference and that preference was overlooked and you now have murkier waters.

Believe it or not, directors are human and they have many of the same issues arise in their lives that non-board members experience. Nevertheless, serving on the board demands that directors recognize when their personal issues or preferences might make it difficult or even impossible to vote impartially on a matter. If the board is voting on whether or not to pursue a resident for using someone else's assigned parking space and it just happens to be the President's spot that has been seized, that is fairly pertinent information that the rest of the board deserves to know in advance of the vote. If the board is voting on whether or not to suspend the use rights of delinquent owners and the Treasurer's best friend happens to be delinquent, that relationship should not create a hurdle to doing what is right for the community.

Some issues clearly constitute a conflict of interest which would demand a director's disclosure and abstention from voting. Other issues, however, merely flirt with self interest. Those instances still demand that a director understand how he or she is voting on a particular matter and why. If there is even a whiff of self interest, the membership will sniff it out in many cases so the wise director is the one who takes steps to clarify his or her position in the face of such circumstances.

Lastly, when you poll your community members and they voice an opinion on a proposed course of action, boards who disregard that input do so at their own peril. This is not to suggest that the membership must be polled on every course of action, particularly on routine maintenance which is one of a board's main functions, but if you ask for input on discretionary spending it's probably best to heed the message your members delivered.


  1. The board declined to pursue that expenditure but instead opted to spend $3,200 to install a roof over a softball field dug-out in the community

  2. Can you offer a perspective on this situation: a voting member of HOA Board is a property manager married to a real estate broker. They do active business within the property, but do not have a formal relationship with the condo association or property management. Since several voting actions require consideration of expenditures and these expenditures have a direct impact on their business interests, how should potential conflict of interest be handled?

  3. The Voting Member with the conflict of interest must abstain from voting on all issues pertaining to real estate deals in which the broker is involved. Then it is a simple matter of whether or not the non-conflicted board members feel that broker should handle association matters or other sales in the community.