Conflict of Interest/Unethical

During a March closed board meeting a letter was disclosed from a member who was way behind in association dues. The member said she was trying to sell or rent the home for over a year. The recommendation from the associaation manager was to consult the associations attorney on possible courses of action. During the discussion I said asked another board member (a realtor) to look into the property as I would be interested in purchasing it, he laughed and Isaid I was serious. 4weeks later I missed the April board meeting where the board agreed to start forclosure proceedings and therefor I was not aware of this decision. During the May meeting it was announced that the forclosure proceeding were started with no other discussion. 6 weeks after the March meeting I did not hear anything from the realtor board member so I wrote a letter to the owner asking if she were still interested in selling the home. She wrote me back and said yes. During several meetings with the owner I disclosed I was a member of the board and that I was not representing the board in any way in this transaction. After we agreed on a price she disclosed that she might still be under contract with a Real Estate company for the listing. After confirming this I then had a licenesed agent prepare an purchase agreement just days before the June meeting. In the June meeting on a Tuesday before discussion about the forclosure proceedings I announced to the board my intentions to purchase the property. I was asked immediately to leave the room. After 15 minutes I was asked backed into the meeting and informed the board was going to consult the association attorney about my actions and a possible conflect of interest. No one asked for any details of the purchase at that time. 3 days later on Friday the board president meet with me at my home and informed me that the association attorney said this was a conflict of interest on my part because I voted for the forclosure. I informed the president that I did not attend the April meeting and did not participate in the vote to forclose on the property. He called the association manager and confirmed this. He then said he still felt I was in the wrong and would get back to me. They called a special meeting a week later and refused to give me a copy of the adjenda saying it was not about me but an assessment item. In the meeting the board produced their time line on the situtation. In their time line of events they acknowledged hearing my comment of interest on the property but did not think I was serious. They acknowledged the owner called the office in mid May and asked if they would sell or rent the property for her.
The board assigned a special committee made up of members who do not like me because during my first 2 years on the board I discovered several instances where the board knowingly violated the CC&Rs and bi-laws for the benefit of a board member and the association itself. They are looking at charges of using confidential information, that I did not disclose to the board my intensions and that I am refusing to disclose terms of the purchase agreement to "ascertain whether or not there was a breach of Fiduciary duty on my part to the association and/or its members".
My offer on the property is 20K higher than any offer presented to the owner from her agent. The house is uninsurred and has been vandalized. It is a fair market offer after the cost for repairs to make the home even habitable. Am I wrong, are my actions wrong or is the board just on a witch hunt as suggested by another board memnber?

Based on your posting, a bit of each.

Based on your post, you only became interested in the property because you found out about it through the board meeting (that is you did not have a real estate agent shopping available houses or you would have likely made an offer prior to it becoming a board issue). This caused the "perception" of possible impropriety.

Based on your post, the Board is assigned a committee to check into this perception. These alleged charges are:

using confidential information - This is certainly a valid perception. See previous paragraph.

that I did not disclose to the board my intentions - per your post, you did inform the board that you were interested. It's not your fault that they did not believe you.

I am refusing to disclose terms of the purchase agreement - typically sales are public record. You have already posted some of this info in a public forum (this cite). Why not disclose the terms of the sale, perhaps with written statements from the realtor of the other offers they received and a written statement from the member showing that you disclosed the fact that you were a member of the Board to them (hopefully you did that in writing so there is additional proof).

was [there] a breach of Fiduciary duty on my part to the association and/or its members - per DavisStirling.com's website Fiduciary Duties is "A duty to act for someone else's benefit, while subordinating one's personal interest to that of the other person."

An argument could be made that the Association was ready to foreclose on the property which would have cost money and may not have resulted in the recovery of any monies owed as this would depend on the order of liens. By making an offer to purchase, you saved the membership the expense of foreclosure costs and the lien will need to be satisfied to complete the purchase (which means the Association collects the monies due).

Now per the same website, Conflicts of Interest is defined as "Conflicts of interest occur when a director, or the director's family, stands to benefit financially from a matter before the board in a manner that is different from all other members."

As I said, although other members certainly had the right to make an offer on the property, you made your offer only after it was found out the board was considering foreclosure. The technicality may be that you were not present when that issue was brought to a vote. Unfortunately, this is a judgement call.

Hope this helps,

Tim

Terry:

If the home was on the open real estate market then it was not "insider information" even though you first learned that it was available at the closed meeting in March.

By happenstance you were not at the April meeting where the board decided to foreclose, therefore there is no conflict of interest on your part regarding that decision.

From the timeline you give it appears that you first approached the seller between the April and May meetings.

At the time of the May meeting it appears that you were still negotiating with the seller and had not yet completed the purchase. It would be a judgment call whether you should have said anything at that time to the rest of the board. I see no true conflict of interest if you did not try to influence the association's foreclosure action.

I do not approve of either your actions or the rest of the board's action at the June meeting. If you are a board member you cannot be excluded from a board meeting. It was wrong of them to ask you to leave and it was wrong for you to leave at their request. Likewise, it was wrong of them to hold a special meeting and refuse to provide a copy of the agenda.

You do not answer to the other board members. You answer to the general membership. If the others wish to engage in a witch hunt because you followed through on the purchase of a home that was on the open market then let them waste their time and energy on it. So far the only fault I see on your part is to allow yourself to be bullied into leaving a board meeting.

You did not state what happened with the foreclosure action but I assume that ended with the association being paid in full at closing.