Q&A: Real Estate Agent...and Board Member?

Q. Can a newly-appointed vice president to the board, who is also a broker, sell units in his/her condominium building? I would think that this would be a conflict of interest since the board member has access to all personal information about individuals, and personal board information such as litigation against the board and other information which they cannot disclose and they can be held liable. One cannot serve two masters. Please clarify.

—Questioning a Possible Ethics Breach

A. “There would be a conflict of interest if he/she were to participate in a board vote on the transaction (such as whether or not to waive a right of first refusal) for which he/she was to be compensated as a broker,” says Chicago attorney Michael C. Kim of law firm Schoenberg Finkel Beederman Bell Glazer. “As for a ‘conflict’ arising from his/her access to personal information about an individual party to a sale/lease transaction in which he/she is involved as a broker, it probably would not be a true conflict of interest but rather a possible breach of fiduciary duty (to use information accessible to him/her only as a director for personal benefit); or a possible breach of the unit owner’s privacy rights. Similarly, an officer or director should not be disclosing or using confidential board information (such as the board’s strategy or planned action in pending or anticipated litigation) for personal benefit. 

“As a practical matter, it may be difficult to discover any such misuse of information (for example, if the broker steers potential buyers away from the condominium even if he/she does not expressly disclose the confidential negative information). If the vice president is aware of confidential negative information, he/she may be in a ‘no-win’ situation. For example, if the negative information is properly withheld, the buyer may accuse him/her of committing fraud; conversely, if it is disclosed, his seller client may claim that he was ‘killing the deal.’ Perhaps, the board could adopt a policy that directors may not access individual unit owner information or files without a specific, legitimate ‘need to know’ basis.  

“Ultimately, while it may be preferable for the vice president to avoid such potential problems, accusations, or suspicion by simply avoiding involvement with unit sales or leases in the condominium, if he/she nonetheless proceeds to handle such transactions, there is probably little that can be done absent evidence of actual wrongdoing.”

Related Articles

Q&A: Double Dipping?

Q&A: Double Dipping?

Conflicts of Interest

Recognize Them Now to Avoid Problems Later

Bulk Sales in Chicago

A Case Study