Staying Away from Impropriety Avoiding 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 to keep their  association board running efficiently, it’s important that board members don’t cross the line and use their position to unduly influence the building’s day-to-day operations.  

 “The most common place where conflicts of interest arise is when you have vendors  of equipment that the building wants to use and that vendor happens to be on  the board,” says Jim Peterson, board president of a Lake Shore Drive condo in Chicago. “If the board wants to use that particular vendor because what he has to offer is  very good and very reasonable and very reliable, it can be a big conflict. It  happens all the time. You’ll have suppliers with high quality stuff and good prices and they live in the  building and sometimes they are on the board.”  

 In these cases, the board member stands to profit financially from mixing his  two interests and may be tempted to put the interests of his business ahead of  the interests of the building. When that happens, the board member runs the  risk of breaching his fiduciary obligation to the building. “What happens in that instance is that the board member should recuse himself  from voting,” says Peterson. “In certain cases, we will use them because it could be in our own self-interest.  You don’t want to shoot yourself in the foot to avoid conflict. You don’t want to avoid conflict—you want to deal with it.”  

 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. Common sources of conflicts of interest are directors and management companies  who directly or indirectly are connected to companies that the association may  currently use or consider hiring.  

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