Reader Questions – Is THIS a Conflict of Interest?

By Kelly G. Richardson, Esq. CCAL

 

Hello Kelly! Is it considered a conflict of interest if a board member is also an HOA employee? Our board is voting on matters which would affect the job duties of the board member/employee. Would this be considered a conflict of interest? The director acts as property manager. Thank you! E.L., Simi Valley

 

Dear E.L.:

A homeowner who is also an employee, let alone the manager, is burdened with major conflicts of interest. Is the manager making their home a higher priority? Does the manager issue violation notices against their friends? Managing HOAs under the Davis-Stirling Act is complicated, particularly under the growing body of technical requirements. Don’t hire a neighbor; hire a professional manager. They cost more, and there are reasons for that – professional managers have training, experience, and resources behind them which more than offset the cost.

Best regards, Kelly

 

Mr. Richardson, how ethical is it for an active member of our HOA board to be dating one of the vendors presently working on our property? Other homeowners are aware of this situation and I have been elected to ask you if it is ethical.  We feel as though one or the other should step down from their position. Kind of a conflict of interest.  Maybe you have a better perspective on the situation and can share with me. C.C., San Diego

 

Dear C.C.:

A director’s personal relationship with a vendor creates a conflict of interests for that director. I am assuming that the director has the good judgment not to discuss that vendor openly (or privately) with any other directors, and to abstain from votes affecting that vendor. Otherwise, it could reflect very poorly on the board’s credibility with the association membership. 

Thanks, Kelly

Kelly, we are beginning to do a major phased landscaping remodel. We have just about completed the first phase – it was awarded to the same company that does our weekly gardening.  Now the man who owns this company purchased a home in our community. Our landscape board feels this is a conflict of interest.  Our board president disagrees and wants to award him the next phase of landscape redo. Your thoughts, please? Thanks, P.S., Newport Beach

 

Dear P.S.:

I generally discourage hiring homeowners. It is harder to fire or criticize a neighbor who is also a vendor, and if there is a major problem it is harder still to discussing suing that neighbor. Sometimes an owner or the owner’s close relative will bid on HOA work and even offer a substantial discount, but it is not worth it. There will always be someone claiming nepotism. Further, if that vendor needs to be taken to task, is the HOA willing to do so if it is a neighbor or a neighbor’s close relative? Sincerely, Kelly

READERS: Civil Code Section 5350 was added to the Davis-Stirling Act in 2014 and recites very short list of official conflicts of interest. It declares a conflict if voting on one’s own discipline, reimbursement assessment, assessment delinquency, architectural modification request, or grant of exclusive use common area rights. However, there are many other circumstances which are a conflict, such as the situations recited by readers E.L., C.C., and P.S. Protect your board’s legitimacy and avoid conflict or appearances of conflict.