Every association, workplace, or business that involves people with multiple perspectives working together sees disputes at some point. Your Winston Salem Homeowners Association (HOA) is no exception. The HOA is run by members serving on its board and sometimes, a difference of opinion is bound to bring the members to a crossroad.
When conflicts of interest arise as the members undertake administrative and financial decisions, the disagreements can lead to decisions that are not necessarily in the best interests of the community. To avoid this, you need to know what a conflict of interest is and identify it within the HOA.
Recognizing Conflict of Interest
As HOA boards are the primary managers of the residents’ finances, they are held to a fiduciary standard. It is the highest standard of fidelity and good faith recognized by the law, under which the board members must do their due diligence before making any decision. It also means that the board members must exercise caution and try to prevent conflict of interest.
However, conflict of interest can still exist on the board. Here are some common examples:
- Payment for HOA Work
There are several duties that the HOA board members must carry out. However, a board member can sometimes ask to be paid for performing their duties. It is a conflict of interest as board members and volunteers are not entitled to receive additional compensation for their job.
- Bias In Awarding Business Contracts
The HOA board is supposed to award business contracts to vendors and business contractors to perform professional services. Hiring a corporation partially owned by board members or their family is also a conflict of interest. This is applicable to any transaction or business deal with any person who might benefit from a connection with a board member.
- Nepotism
If people associated with the board members benefit from the position, it is a conflict of interest. Asking for a loan from the association and changing HOA rules and regulations according to your convenience are also conflicts of interest.
Dealing With HOA Conflict of Interest in Winston Salem
Here’s how you can successfully deal with conflict of interest or even prevent it from occurring in your Winston Salem HOA.
- Know Your Legal and Fiduciary Duties
Every HOA board member has legal and fiduciary obligations. Focusing on your responsibilities towards the community members, residents, and the association will help you make the right decision and avoid potential conflict.
- Make Impartial Budgetary Decisions
While preparing the HOA budget, verify that personal interests are excluded from the decision-making process. It will help to realign the goal towards the betterment of the community and avoid disputes.
- Keep Community Resources Separate from Personal Resources
The board members in an HOA have access to a lot of confidential information pertaining to homeowners and tenants in the community. Do not use such information for personal gain.
- Define Vendor Finalization Processes
Finalizing a vendor with ties to board members might result in a conflict of interest. To avoid this, it is necessary to set a thorough and defined process to finalize the vendor. It includes requesting formal proposals or directly asking potential vendors. If you are too closely associated with the vendor in question, take a step back and avoid participating in the final decision-making process.
- Create an HOA Conflict-of-Interest Policy
Having a strict policy that can help board members identify any potential conflicts is crucial to prevent them from occurring. Withdraw yourself from your duties if you stand to benefit from any deal that takes place.
Dealing with a conflict of interest in a Winston Salem HOA can be complicated and exhausting. If you need assistance with HOA management or drafting an HOA conflict of interest policy, contact us at Capstone Realty Consultants.