Conflict of interest selling real estate while serving on ARB

Started by FrankF5 • 29 replies • 3059 views

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FrankF5 (Florida)
Posts: 4

Posted:

Hi,

On our last monthly Board meeting our ARB chairperson informed us she will be reactivating her real estate license and wants to begin offering her services as an buyer / seller agent within the HOA. Right now she is approving all ARB requests. I believe this could lead to some homeowners questioning the relationship between the Board and her. Possible conflict of interest?

Our HOA is located in Central FL. consisting of 72 single family homes. Nothing in our CCR's prohibit it.

Anyone else have an opinion on this?

Regards,

Frank

TimB4 (Tennessee)
Posts: 21,059

Posted:

Frank,

Do you see it as a conflict of interest?

If you do, why?

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By FrankF5 on 04/27/2016 12:47 AM
she will be reactivating her real estate license and wants to begin offering her services as an buyer / seller agent within the HOA.

"Within the HOA." Were those her words or just your description? I ask because it sounds as though she wants an exclusive deal whereby she is the only agent who may list a property for sale within the HOA.

Even if that is not her intent, I would be concerned that her position as a real estate agent could lead to the perception that you must buy or sell through her to get ARB approval. I do not know why else she, as chairman of the ARB, would make an announcement about reactivating her real estate license at an official HOA board meeting.

CarolF (Florida)
Posts: 435

Posted:

Our POA (master association) in FL with 1600 voting units has the following noted about serving on the ARC.

"Active realtors and builders may not serve on the ARC, yet may serve on other committees"

I think there might be a conflict of interest if a realtor has a potential sale - and the client wants to have some changes approved by the ARC and makes the sale contingent on that.

KerryL1 (California)
Posts: 14,550

Posted:

I'd have the same concerns as Carol. Sellers often do want to make changes for purposes of marketability and to have an active realtor control the ARB process could be intimidating. Sellers might feel that they must list with her. I think if I were on the board I'd encourage it to ask the realtor to not work in their HOA. If she won't cooperate, I'd look for a new ARB chair, or give the entire committee control.

Kind of fresh on my mind. At last night's board meeting our newish director, who tries every which way to promote her status as a realtor, wore her realtor badge during the open meeting. It's about 2" X 2" square. I thought it very inappropriate!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I do not see an issue with this as long as they are not an "exclusive" HOA realtor. Realty sales is a free enterprise business. Why not allow them to sale houses? Seems to me not allowing them to do their business in a HOA is asking for trouble. The only true issue is not using their home as their business. Can't hang the old "Realtor" shingle up in the yard.

They are not the only one with a vote on any committee or board. So still able to have their suggestions voted down. It's only a conflict of interest if ya let it be.

Former HOA President

KerryL1 (California)
Posts: 14,550

Posted:

Melissa, the OP wrote: "Right now she is approving all ARB requests," which sounds like she has all the power. Of course no one can tell NOT to list or sell homes in this HOA. But they can ask her to refrain IF she still want to be on the ARB. boards have complete authority abut whom serves on committees

The other option, as I already mentioned, is that the entire ARB have power, not just her.

No matter what, it is not a conflict of interest so far as I can tell, but her power makes it very inappropriate! I don't know, Melissa what your remark: "It's only a conflict of interest if ya let it be" means????

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Simply means if you perceive it to be a conflict of interest then it is. Otherwise, it doesn't exist. My opinion making this a conflict of interest issue is just adding drama to the situation. Another reason to make tongues wag... Welcome to the world of the HOA...

Former HOA President

KerryL1 (California)
Posts: 14,550

Posted:

I perceive no conflict of interest, Melissa. And even if I did, it wouldn't make it true.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Perceptions of undue influence can undermine trust in the HOA.

Depending on how much power she wields, I might ask her to step down from chair position.

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

There's the phrase I was looking for, Nps, "undue influence." In such a position, she could undermine the creditability of the whole board.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Gee,

I have an attorney on the Board. Does this make it a conflict of interest because they might have undue influence an decisions where statutes need to be interpreted?

I have the owner of a landscape company on the Architectural Committee. Would they have an undue influence if you were requesting landscape changes and didn't hire them?

I have a house painter on the Architectural Committee and has served on the Board in the past. Is this a conflict of interest because they may have undue influence on specific paint use?

I work in the media and administrate our website and edit our newsletter. Is this a conflict of interest because I may have undue influence on how information is posted or published?

Actual conflict of interest and perceived conflict of interest (or perhaps simply a disgruntled owner who didn't like a decision and now has a grudge) are different things.

The Architectural Committee should be a committee (i.e. 3 or more) not one individual. If it's just one individual, then that is an issue. What the individuals profession happens to be is not.

Why did the person announce that they were getting their license at the meeting? I don't know. Perhaps they were simply excited about returning to that line of work and was sharing with friends.

I will say, in addition to the above professions of individuals who have served our Association, we have also had a Realtor serve on the Board. This was good as they had an ear to what others were saying about the community and why sales were good or bad. This insight helped make things better.

KerryL1 (California)
Posts: 14,550

Posted:

The OP, Frank, is worried about a conflict of interest. No one who's replied perceives it. I don't see that your examples, Tim, illustrate the extreme power this woman seems to wield as she seems to decide alone according to the OP.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By FrankF5 on 04/27/2016 12:47 AM
Right now she is approving all ARB requests.

Quote:

Posted By NpS on 04/27/2016 5:47 PM
Depending on how much power she wields, I might ask her to step down from chair position.

I believe that one of the board's jobs is to be vigilant against potential misuse of power. So if it's a RE agent, a lawyer, a landscape company owner, a house painter, an editor, or a candle stick maker, it's second nature for some people to put the interests of the community above their own. For others, it's not second nature - after all, they're uncompensated volunteers dealing with an apathetic crowd, and maybe, just maybe they have feelings of special entitlement.

In my personal experience, I've asked a RE agent board member to step down and I've asked a lawyer non-board member to stop soliciting. In both cases (which I won't go into here), I thought they had stepped over the line.

Since it's always a fact specific inquiry, here's a few examples for your consideration:

1. After board meeting, board member RE agent hands out business cards to homeowners in attendance. Any concerns?

2. Board often gets advance notice when homes are coming on the market. Board member RE agent sends solicitation letter saying that she's on the board. Any concerns?

3. HOA is looking for new MC. If chosen, one candidate is willing to feed RE leads to a board member RE agent. Should board member RE agent disclose the conversation to the rest of the board? Any concerns?

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KerryL1 on 04/27/2016 6:54 PM

I don't see that your examples, Tim, illustrate the extreme power this woman seems to wield as she seems to decide alone according to the OP.

Kerry,

What is unknown is if the OP's ARB is made up of this one individual who approves/disapproves requests or if it truly is a committee and, as often happens, because that individual is the chair, they are only perceived as the individual approving/disapproving (even though it is a committee decision).

KevinK7 (Florida)
Posts: 1,343

Posted:

While if nothing written than I don't see a documented conflict but I do see a real one. In both my neighborhoods I had experienced some real estate agents having some pretty cozy relationships with the board and it was not to the benefit of the homeowners yet it all started as a mutually beneficial relationship... just for the board and the agent.

Here are examples of what could happen if things go unchecked:

One agent offered their offices to the board to hold BOD and membership meetings. This was so the board could refuse entry to homeowners.

One agent offered beautification "grants" but used them to improve the county right-of-ways adjacent to board member properties.

That same agent also got advertising in the newsletters and allowed to write articles to support various initiatives that, like mandatory conversions (that forced non members to pay) and architectural control that granted the association authority to access property and make changes (which they attempted to use). They also pushed to get certain restrictions changed as well as attempted to get special taxing districts established to benefit his properties (this was all pay off a bigger issue where several boards, real estate agents, and lawyers tried to establish a "preservation society" that sought to change restrictions and purchase upgrades to communities so that they would be more valuable like the neighboring communities. "

One agent became the property manager for the club and then used that position to up enforcement to improve property values for their clients by going after their neighbors.

In many instances these real estate agents would present themselves as a quasi expert in HOA matters because they dealt with real estate.

LarryB13 (Arizona)
Posts: 4,099

Posted:

I am still troubled by the announcement in front of the board of directors that the chairwoman of the ARB was going to renew her real estate license because she wanted "to begin offering her services as an buyer/seller agent within the HOA."

Why would anyone make such an announcement unless they intended to personally profit from their relationship with the HOA?

BobD4 (up north)
Posts: 1,002

Posted:

Good comments above about conflicts of interest. Less obvious can be a reverse downside for realtors or any other service provider/professional who sit formally on a Board or committee. Realtors tend to be joiners/network builders, but does saying NO to anyone help a realtor's business networking ?

One realtor with good business ethics was elected to a highrise urban condo Board in my jurisdiction several years ago.

He found that other directors persistently sought 'insider information' whose disclosure raised troubling issues for him as a member of the region's realtor Ethics Committee. With electronic data collection issues still in flux at that time, he reviewed the principle & legality of such demands confidentially with the appropriate consumer protection & realty bodies.

There is strong evidence that this triggered a backlash amongst some other condo Directors who expected him to be a pipeline, and he ultimately had some VERY bad experiences. ( He also had the savvy to recognize some disturbing management activities) .

Realtors & other professionals respectfully should think long & hard about the full range of issues beyond scarce time.

If for example a jurisdiction imposes a statutory Directoral decision standard of 'mere honesty' ( 3 Stooges OK), some jurisdictions may expect a higher standard of directoral behaviour within that professional's specialty (instead of uniformity with non-professionals on the same Board).

Realtors should be careful. . .

NpS (Pennsylvania)
Posts: 4,216

Posted:

I posted 3 actual examples of experiences I had. Didn't get any responses. Wonder what you think.

Quote:

Posted By NpS on 04/27/2016 7:06 PM

1. After board meeting, board member RE agent hands out business cards to homeowners in attendance. Any concerns?

2. Board often gets advance notice when homes are coming on the market. Board member RE agent sends solicitation letter saying that she's on the board. Any concerns?

3. HOA is looking for new MC. If chosen, one candidate is willing to feed RE leads to a board member RE agent. Should board member RE agent disclose the conversation to the rest of the board? Any concerns?

Sikubali jukumu. Read all posts at your own risk.

BobD4 (up north)
Posts: 1,002

Posted:

Quote:

Posted By NpS on 04/30/2016 8:19 PM
I posted 3 actual examples of experiences I had. Didn't get any responses. Wonder what you think.

NpS: I have concerns with #1 & 2 for obvious interest conflict reasons as to the realtor Director. Especially for the compromised rights of homeowner/beneficiaries of trust owed to the owners.

#3 could be seen as a disturbing secret inducement offered by the candidate PMC.

( If not disclosed by the realtor Director to rest of the Board/ if instead acted upon to receive such promised secret benefit, then the realtor could be compromising both duties to the condo/HOA corporation and to the realtor community.

Whatever the response, a secret inducement or secret commissison offer is a huge warning against the PMC's bid. I suspect even offering it may be illegal in some jurisdictions. . . .)

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By NpS on 04/27/2016 7:06 PM

Since it's always a fact specific inquiry, here's a few examples for your consideration:

1. After board meeting, board member RE agent hands out business cards to homeowners in attendance. Any concerns?

All but one person are there for a board meeting. One guy is there to hand out business cards. Which is more important to him: performing the duties of a board member or promoting his real estate business?

Aside from problems with trying to serve two masters, there is an implied threat that life will be hell for the owners who choose to do business with another agent. Either way, a board member handing out business cards at a board meeting is never appropriate.

Quote:

2. Board often gets advance notice when homes are coming on the market. Board member RE agent sends solicitation letter saying that she's on the board. Any concerns?

I do not know where this advance notice comes from. Asking for the listing sounds like insider trading and, even if legal in this case, is inappropriate. Adding that she is on the board adds an implied threat of interference in the sale if she is not given the listing. Needless to say, it is not appropriate conduct.

Quote:

3. HOA is looking for new MC. If chosen, one candidate is willing to feed RE leads to a board member RE agent. Should board member RE agent disclose the conversation to the rest of the board? Any concerns?

The MC candidate is offering a bribe for at least one vote. The person whom he offered the bribe to is keeping it a secret. If I had that information I would call the police and let them both explain. Blacklist the MC candidate and recall the board member.

RichardP13 (California)
Posts: 3,868

Posted:

I was going to respond to NpS, but wanted to see a couple post prior.

First, I hold a Real Estate license in the State of California. It can be used to act as a agent for a buyer or seller in a RE transaction, it can be used to rent property, or it can be used to do mortgages.

I will answer the questions:

1. What concerns, it is AFTER a Board meeting.

2. Boards get advance notice when homes are coming on the market? What, before the home is listed and a RE agent has been hired? I see them once they hit the MLS or any RE web service I might be subscribed to. Are you saying the Board is getting inside information. If I didn't have a license, I would see the transaction once escrow is opened up.

3. WHERE does it say the Board member has kept this a secret?

I have never seen or heard what NpS is suggesting. Also, a RE agent has a fiduciary responsibility higher than that of a Board member. If the person has a potential conflict of interest then the person should know you recuse yourself from the situation.

If the RE agent is on an ARC and an application comes before them that might have a potential conflict, then they should by all mean say something. Otherwise it's a non-issue.

We could pretty much find some fault with any profession if you try hard enough.

BobD4 (up north)
Posts: 1,002

Posted:

Quote:

Posted By RichardP13 on 04/30/2016 10:48 PM
... 1. What concerns, it is AFTER a Board meeting. ( ? ) . . We could pretty much find some fault with any profession if you try hard enough.

Good comments including the above.

Afterwards,receiving the realtor Director's business card in the meeting venue AFTER observing/interacting with the Board, do the attending owners come away with a burden of coercive pressure, expectation of beneficial insider influence, or whatever else ?

To the extent that a condo/HOA Board has a somewhat adjudicative function I wonder how many private business cards get handed out by an adjudicator/decision maker getting up from the table ? What sort of onsite general message gets sent & received when the immediate post-meeting card is "Here is my business" as opposed to "Here is my Director ID " ?

But it's not an easy issue. Is it different weeks later offsite if the same card casually gets handed out to same owners ?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Thanks for your responses Bob, Larry, and Richard. Here's a bit more detail:

Quote:

Posted By NpS on 04/27/2016 7:06 PM
1. After board meeting, board member RE agent hands out business cards to homeowners in attendance. Any concerns?

I didn't react to this until one of the other board members said that she strongly objected. To her, the fact that it happened after the meeting was irrelevant - because she thought it affects the ongoing relationship between board members and owners.

It's particularly significant for us because the board is also the ARB. So everyone knew that the person handing out business cards has significant influence over future change requests.

Quote:

Posted By NpS on 04/27/2016 7:06 PM
2. Board often gets advance notice when homes are coming on the market. Board member RE agent sends solicitation letter saying that she's on the board. Any concerns?

Not unusual for us to know when a house is about to be listed. We're less than 100 units. Prospective owners ask questions that indicate they're about to list their houses. When someone dies, we have a good idea if and when it's likely to go on the market.

Again this was a situation that another board member reacted to. Didn't actually see the letter myself. So not sure if any special capabilities or privileges were implied.

Quote:

Posted By NpS on 04/27/2016 7:06 PM
3. HOA is looking for new MC. If chosen, one candidate is willing to feed RE leads to a board member RE agent. Should board member RE agent disclose the conversation to the rest of the board? Any concerns?

This is the one that got me. At the time, there were actually 2 RE agents on our 5 member board. Their preferred MC candidate only had one other community. It was just himself and his wife running the operation. He didn't have a good reputation. We couldn't be sure what the private deal was between our 2 RE board members and the MC, but the choice didn't make any sense.

We end-ran them by forcing a special meeting where we invited all 3 MC candidates to address our owners. Even though the owners had no vote in the MC selection process, we were confident that the owners would object to this particular MC being selected because his skills and capabilities were so inferior to the 2 other choices. Once he was rejected by the owners, it would have been nearly impossible for the board to choose him.

At the time, the RE market was very soft. The RE leads side-deal was the only reason we could come up with to explain the preference for this particular MC.

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

Overall, here, I agree with Larry. And, remember, the OP states that the ARB chair, the realtor, makes all the decisions: "Right now she is approving all ARB requests."

Unlike some other examples posted here, she has real power over some Owners! Owners may bend to her will to get their plans approved. So I think this realtor, and the Board who lets her continue to exert this power unhindered, are acting highly inappropriately. Could give everyone a bad name.

But....it seems Frank, the OP, has left us...

The realtor on our Board, who wore her 2"x2" name badge with her firm's name on it during our open board meeting the other night acted, I believe, inappropriately too. But, as it turns out, thus far her agenda items and remarks during our open meeting wouldn't impress anyone!

At a private party in one of our community lounges two night ago, this same realtor wore her badge--can't complain about that except seemed in poor taste.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KerryL1 on 05/01/2016 1:26 PM
Overall, here, I agree with Larry. And, remember, the OP states that the ARB chair, the realtor, makes all the decisions: "Right now she is approving all ARB requests."

Quote:

Posted By TimB4 on 04/27/2016 9:07 PM

Posted By KerryL1 on 04/27/2016 6:54 PM

I don't see that your examples, Tim, illustrate the extreme power this woman seems to wield as she seems to decide alone according to the OP.

Quote:

Posted By KerryL1 on 05/01/2016 1:26 PM

But....it seems Frank, the OP, has left us...

As previously pointed out, until Frank clarifies this issue, we simply do not know if this individual is serving as a committee as one or, by being the chair, being perceived as the approving authority (vs. being a committee decision)

KerryL1 (California)
Posts: 14,550

Posted:

I did & do grasp your points, Tim. I'm going with the OP's words though. Hope he'll let us know if he misspoke or...misswrote.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By KerryL1 on 05/01/2016 1:26 PM
The realtor on our Board, who wore her 2"x2" name badge with her firm's name on it during our open board meeting the other night acted, I believe, inappropriately too. But, as it turns out, thus far her agenda items and remarks during our open meeting wouldn't impress anyone!

At a private party in one of our community lounges two night ago, this same realtor wore her badge--can't complain about that except seemed in poor taste.

I agree Kerry that there is a distinction between wearing the badge at a scheduled board event and wearing the badge on premises like any other homeowner could.

Sikubali jukumu. Read all posts at your own risk.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Maybe they came from work and forgot to remove the badge.

KerryL1 (California)
Posts: 14,550

Posted:

The affair was very dressy, but she pasted it on her cocktail party attire anyway. Looked not only tasteless, but odd.

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