Is There a Conflict of Interest?
If you are on the board of directors or the president of the association, there’s a risk of real or perceived unfairness. Your governing documents will likely state whether or not members can be compensated for serving on the board. They may even define whether a board member can provide other paid services as a vendor. But even if these things are not spelled out, the gray area can be a tricky. Even accepting vendor bids from companies owned by family members who aren’t part of your association can raise eyebrows since you still might have something to gain from the transaction.
If you do decide to bid on a contract, the vendor selection should be done by other board members. Ways to minimize the chances of a conflict of interest might include formally recusing yourself from the bid award process and having the board take a “sealed bid” approach to reviewing proposals. This ensures consistent criteria for all bidders involved. But even these steps can’t always safeguard against the perception of inappropriate self-dealing.
The board may turn down your bid—even if it’s competitive. Everyone on the board has a fiduciary responsibility to watch out for the interests of the association rather than their own. If community members decide there is a conflict of interest, they might challenge the transactions. If successful, they could seek reimbursement and damages from the association or even from you personally. That could prove to be more of a headache than it’s worth.
What If You Aren’t on the Board?
If you are just a member of the community, the risk of a perceived conflict is lower. You would still need to go through the formal proposal process with the rest of the competing vendors and win the bid fair and square. When you don’t expect or ask for any special consideration, there’s not as much chance that people will complain.
If you do become a vendor for your own HOA, here are a few tips for managing it the right way.
- Make sure your HOA issues a 1099 each year if payments meet the reporting requirement threshold for independent contractors. And even if you only earn a few hundred dollars from services provided to the HOA, you must still report this income to the IRS.
- Maintain the necessary liability or errors & omissions insurance. Failure to do so puts both you and the property owners’ association at risk if something goes wrong. In fact, your proposal to render services shouldn’t be considered unless you meet the same requirements as third-party contractors.
- Be ready to go above and beyond in terms of customer service. Remember, it’s your own neighbors who are paying for your services through their HOA or condo association fees. And they know where you live. If the service you provide is one that impacts their quality of life, don’t be surprised if they complain to you directly if things aren’t to their liking.
Remember there are many other ways to be of service to your HOA beyond becoming a vendor. Take the time to attend meetings, serve on the board, and vote on important matters that improve the quality of life for your community.
