Conflicts of interest can easily arise in community associations and can have unwanted legal consequences. Learn how to avoid them with this guide, which covers recognizing conflicts of interest, fiduciary duty, directors’ conduct, manager conflicts, ethics policies, board conflicts and a host of other topics. Also contains sample policies, resolutions, codes of ethics and illustrative court cases.
Contents
Introduction—Background and Key Points
Chapter 1—Recognizing Conflicts of Interest
Director Duties
Chapter 2—Board Conflicts
Self-Dealing/Contracts With the Association
Maintenance, Preparation of the Annual Budget, and Providing Community Services
Other Types of Financial Gain
Covenants Compliance and Enforcement
Developer-Appointed Directors
Chapter 3—Dealing with Conflicts
Conduct of the Directors
Chapter 4—Manager Conflicts
Who Is the Client?
Self-Dealing and Other Personal Benefits
Gifts
Conflicts With Other Clients
Representation of Individual Owners and the Association
Duty to Management Company
Ethics Policies
Appendix 1. Sample State Law—California Corporations Code
Appendix 2. Sample Cases—Conflicts of Interest
Appendix 3. Sample Resolution—Disclosure of Interest Resolution for Board Members
Appendix 4. Sample Policy—Conflicts of Interest Policy for Managers
Appendix 5. Code of Ethics—CAI Professional Manager Code of Ethics
Appendix 6. Sample Conversation—Conflict of Interest Disclosure
Background and Key Points
As American society becomes more litigious, the individuals who serve on community association boards face increased risks of personal liability for improperly performing their duties. While attorneys and accountants have professional codes that govern their conduct, few state or private regulations exist to help directors and managers of community associations perform their duties properly.
This guide will help the board and the manager to perform their duties and avoid conflicts of interest. It highlights areas of community association activity in which actual or potential conflicts of interest may arise, discusses ethical considerations in conflict situations, and includes suggestions for addressing these conflicts.
Key Points
A conflict of interest is a situation in which an individual's duty to one leads to the disregard of a duty to another.
An association's manager owes a fiduciary duty to the association--that includes a duty of care, loyalty, and honesty.
Managers owe a duty of confidentiality to the associations that they represent. The duty of confidentiality continues after the client relationship has ended.
Managers should not generally accept gifts or other favors from vendors who provide supplies to their clients.
Members of the association's board owe the association the same duty of loyalty, care, and confidentiality as the manager. Board members may be held personally liable for the violation of these duties.
Boards must enforce the association's covenants and rules and regulations consistently.
Board members should never make exceptions for other board members or for friends.
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