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Q&A: Conflict of Interest

Q I am the vice president of our condo board. Just recently we found out through a  real estate ad that the president of the board is selling his unit. Does this  pose a conflict of interest? In effect, should the president remain the  president while he is selling his unit? He's postponed several meetings where  we are supposed to address a maintenance increase. My guess is that he is  obligated to tell his prospective buyers about the maintenance increase, but  one would wonder why these meetings have been continuously postponed. Any  advice?  

 —President Selling Out  

A “It is not improper for a condominium association board member and president to  serve in those capacities while attempting to sell his or her unit. Subsection  18(a)(1) of the Illinois Condominium Property Act establishes unit ownership as  the sole criterion for serving on a condominium board,” explains attorney Scott A. Rosenlund, Esq., from the law firm of Fullett  Rosenlund Anderson PC in Lake Zurich. “However, while acting as an association representative, the president must  continue to fulfill his fiduciary obligation to act in the best interests of  the association, regardless of his or her own personal situation.  

 “If it appears the president is acting to postpone meetings for the purpose of  furthering his own personal agenda, the remainder of the board should take  action to override this tactic. Subsection 18(a)(19) of the Condominium  Property Act provides that special board meetings may be called by the  president or 25 percent of the members of the board. If important board  business is being delayed, the other board members should call a special board  meeting and move forward with addressing the issues which have been deferred  (with or without the president’s support), so long as a quorum of board members is present at the special board  meeting.  

 “Subsection 108.60(c) of the Illinois General Not For Profit Corporation Act of  1986 requires that a board member recuse himself or herself from board  decisions which directly affect the board member. If board decisions which  directly affect the president arise, the president should refrain from  participating in the discussion or vote relative to those particular issues.  The president may be counted in determining whether a board quorum is present  and may participate in board decisions relating to other business.  

 “If the president actively interferes with board business moving forward, a  possible option could include removal of the president as an officer and/or as  a board member. In an extreme case, the association could consider initiation  of injunction litigation against the president. Once the president successfully  closes on the sale of his unit, he no longer may serve as an association board  member or officer.”  

 

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Comments

  • We have a Condo Association for a Marina. It comprises of 117 slips. The developer never sold off all of them. He has retained over 50% of them. Once the association was established he remained on the board as Treasurer. A "pump-out" station is being proposed by the board. There is a Federal grant to fund the initial cost of it. Afterwards the association will be on the hook for the maintenance. The marina considered in our bylaws a Private Marina. The grant will force the marina to be open to the public. There is a myriad of issues with this. One being the majority owned board member does not use the slips other than for renting or selling for financial gain. We are a non-profit association. This would only provide a benefit to him for the purpose of rent or sell. Would this be considered conflict of interest? Other issues: Over 15 years have proven no financial where with all to maintain our docks,floats and electric pedestals. Most of the slip owners would have no use for this. They dont have boats with bathrooms. Additional issues is the ingress/egress. The board has not presented the members the projections of future costs for pump-outs. WFor a 3 member board and one board member having the majority vote and the other 2 other directors that may have some financial gains if approved leaves the rest of the association without a voice. Any comments or suggestions would be welcomed.