Understanding Conflict of Interest

September 2023

Your condo directors and condominium manager have a fiduciary duty or legal obligation.  They have the right to act and make important decisions on behalf of the condo owners they represent.  They are required to place their obligation to the corporation ahead of any personal gain.  This means avoiding situations that could present a conflict of interest.  More simply, board members and condominium managers should not personally benefit from actions or decisions made in their official capacity.

A board member who is a real estate agent should not be handling sales in a building.  They, or their family members, should not have decision making authority for a company doing business with the corporation.  Such conflicts should be disclosed to the board which can choose to waive the conflict.  If not waived, the individual must recuse themselves from the matter being discussed or decided.

A conflict may be waived if, in the board’s opinion, the individual’s relevant expertise overrides the conflict.  If the board member offers snow plowing services at a better price than the competition, the board may choose to waive the conflict.

Conflicts of interest are often a matter of perception.  A director may provide renovation services, and recused themselves from discussions and decisions about a renovation project.  The board may have still chosen their company because of price, expertise or reputation.  To avoid perception of conflict of interest, the relationship should be disclosed prior to any vote for approving the company.  Full transparency reduces the risk of improper dealings while maintaining trust.

Residents place their trust in those who manage their home.  Failure to disclose a potential conflict destroys trust that has been earned.  A director breaching their fiduciary duty can be sued.  Disclosing any potential conflict is not to be considered optional.  Hiding a conflict is likely to blow up later on.

Owners have an expectation that the board and management of their community are thinking of the property and its residents first.  Transparency and accountability are essential to maintaining trust.  This requires full disclosure of what could otherwise be perceived as self-dealing.