Thoughts on the developer on the board

We have an open position open on our board due to a resignation that the board will appoint a member to fill. The developer has expressed an interest in the open position and has been invited to our next board meeting so that we can discuss the vacancy with them. As a property owner they are eligible to serve and we have a decent relationship with the developer (no construction issues, lawsuits, etc). I can see pros and cons to having this individual on the board which I will outline below. Am I missing anything and I am curious as to your thoughts on having the developer on the board.

Pros:

1) This individual has a strong knowledge of the history of the development. Our development is about 15 years old and transitioned to owner control several years ago. We occasionally run into issues where knowing the history would help with decision making or long range planning.

2) The individual is a successful real estate agent in the community and would bring a new point of view to the board about how our plans may be perceived by buyers and the real estate community.

3) They should have a strong understanding of our documents given that they were the developer and the importance of why the board needs to operate within authority granted by these documents.

Cons

1) Our development was set up with a land lease which requires each owner to make a monthly payment to the developer (the potential new board member) in addition to their association dues. Our association and the developer are often pursuing collection actions against the same individuals. My concern is that this individual may use information from our board meetings to make sure their company takes legal action before us to ensure they get a judgment first and receive priority in getting paid. We have a collections policy that we follow pretty closely although if an owner approaches us about payments or a potential situation we will try to work with them to avoid additional legal fees for the individual, etc.

2) Similar to above there could be confidential information discussed at board meetings that could benefit their real estate business although this is less of a concern to board operations.

I don’t think these are major issues but I want to make sure I am not missing anything and also make sure that we aren’t going to create any major issues for members of the association to find yet another reason to be upset out.

Con #1 pretty well states why he should not be on the board. He will have a buit-in conflict of interest in that he would representing two different entities dealing with the very same people. None of the pros overcome this con.

Thank him for his offer but gracefully decline it. This person may be a resource to call on in the future and you really do not want to alienate or offend him.

I concur that this presents a conflict of interest.

I missed the post from CwlW so to answer those questions and to update on the situation.

Our land lease is a monthly payment to the individual who developed our condo complex. They leased the ground back to the development for 99 years when the condo was completed. The developer pays the property tax on the land itself (each owner pays the property tax for their unit) but is not responsible for any upkeep or maintenance. All landscaping, etc falls to the association. Our fees do go up every few years but the increase is spelled out in the land lease documents which are part of our documents.

In our case the developer retained ownership of a few units to use as rentals. As a unit owner they are a member of the association and pay dues on those units.

To update on the original post...

This individual was voted onto the board. I did bring up the conflict of interest which others didn't see as being a problem. The rest of the board didn't see that it was a concern so we shall see how it goes. I do think this new board member will add some interesting insights but I'm not sure how the membership will see it.

Chris and others.

Why a land lease? Does that not say come the end (I will not be here....LOL) but say they can do pretty much as they wish, like sell it out from under?

Help me understand.

Thanks

The land lease seems to be a popular tool for developers around here to make sure they have a stream of income into retirement. The two largest complexes in our area both have this type of arrangement. I didn't think that much about it when I purchased my condo but being on the board it does cause some problems since some owners have a hard time understanding that the land lease doesn't provide any funds for maintenance, reserves, etc. An interesting question is what would happen at the end of the 99 year lease, I'm not sure what happens at that point. Fortunately we have 85 years before that happens (I realize that sounds like owners who say we don't need reserve funds because I won't be here when the roof needs to be replaced).

In terms of excluding the new director from collections information etc I was the only one on the board who even thought it could be a potential concern so nothing along those lines will happen. I'm hopeful that this won't cause any issues.

I was curious as to what happens at the end of 99 years so I looked it up. According to our documents all of the buildings become property of the development company at the end of the lease.