Can president hire his own company for maintenance?

I'm not involved in the legal professions, but so far as I know his actions were not illegal. My sense is that you don't want to pursue this as, say, a lawsuit.

But most might agree that his comportment was unethical as there was a conflict of interest. This means that his interest in his own monetary gain might have conflicted with what was in the best interests of your HOA.

If there had been an actual board, he should have revealed his conflict of interest and recused himself from voting. If he didn't recuse himself, the Board could have demanded that he recuse himself and even could have asked him to leave the room while discussion of the services took place and while the vote took place.

So if he's still on the board and the situation arises again, do not permit him to vote if his own firm is involved. Also make certain someone on the board or your property mgr. brings bids from firms other than his.

The bigger question is why is he the only Director on the Board?

Is nobody stepping forward to volunteer? Have you offered to serve?

Typically, although a conflict of interest, the Board may hire whom they think are the best contractor for the work. Although, I am not an attorney nor do I work in the legal profession, my understanding is that conflict of interest is typically not considered illegal providing that the conflict is disclosed to the Board. If that individual was the only person serving on the Board, they were aware of the conflict.

The best way to prevent conflict of interest is for the membership to become involved in the running of their Association. If the members are apathetic, then those who are willing to serve will be the one's making the decisions for everyone else.

Ron:
Your real problem is that you don't have a guorum on your board and all the actions the one person took could be considered illegal and could be challenged in court. You need to fix this.
Jeanne

Not knowing the laws for HOA's in OHIO, but in California the action the President took would be considered illegal. If he hired his company for an emergency project, fine. Signing a contract for continued services, absolutely no. His only action would have been to appoint enough directors to gain quorum, which was adding two individuals.

Yes, this is what happened. After that president left, I ran for president and assembled a legit board. Before that, though, one person was running the show and doing what he wanted. He could have charged the HOA any price he wanted. As far as how he ended up being the only one on the board, no one ran for any office (it's a very complacent community). When I ran, I had to basically pull teeth to fill the board seats.

Also, our by-laws require that at least three people be on the board at all times. This is indeed in the past, though, and I am only inquiring on it to satisfy curiosity.

Ron has handled this problem, but other HOAs may confront this. There at least two good reasons why directors or their relatives, etc. should not get HOA contracts.

1. It smacks of favoritism, cronyism and self-dealing, which can easily cause problems in an HOA. Owners get suspicious about where, exactly, their dues are going and if the price being paid is a competitive one. Or is the director just lining his/her own pockets?

2. It might be much more difficult, as Janet points out, to dismiss the director's firm because of potential hurt feelings, anger, etc.

Are there additional reasons?

In CA, Larry, directors also are required to state what their "interest" is. In our Corporations Code, they are called "interested directors" in that they have a particular interest in the outcome of the board's decision.

As of 1/14, CA Civil Code may have been revised so that directors may not vote on or discuss certain agenda items in which they have a personal or monetary interest. But I need to check on that!! Specifically, it's CA Civil Code 5350, and lists some matters when the director must abstain: their own discipline; architectural matters re: their property; whether to accept a payment plan; decisions to foreclose on the director's property; grants for exclusive use of a common area. I need to learn if this code includes contracts as in the current discussion.

I'm glad you replied, Richard. I don't think this new statute has been publicized very much. I think I understand it correctly (??) Corps. Code 7233 has stated all along that directors must disclose their interest, but may not vote on certain matters (if I read it right!!) 7234 (below) says that such directors may be counted towards quorum. Here's the text of the law, effective in Calif. on 1/1/14.

Civil Code §5350. Prohibited Actions by Directors & Committee Members.

(a) Notwithstanding any other law, and regardless of whether an association is incorporated or unincorporated, the provisions of Sections 7233 and 7234 of the Corporations Code shall apply to any contract or other transaction authorized, approved, or ratified by the board or a committee of the board. [Old: Civ. Code §1365.6]

(b) A director or member of a committee SHALL NOT vote on any of the following matters:

(1) Discipline of the director or committee member.

(2) An assessment against the director or committee member for damage to the common area or facilities.

(3) A request, by the director or committee member, for a payment plan for overdue assessments.

(4) A decision whether to foreclose on a lien on the separate interest of the director or committee member.

(5) Review of a proposed physical change to the separate interest of the director or committee member.

(6) A grant of exclusive use common area to the director or committee member.

(c) Nothing in this section limits any other provision of law or the governing documents that govern a decision in which a director may have an interest.

Read more: Civil Code §5350 http://www.davis-stirling.com/MainIndex/Statutes/CivilCode5350/tabid/3806/Default.aspx#ixzz2vb3htuV2
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