Homeowner-Contractor Conflict of Interest?

Why would it be a conflict of interest? If it is disclosed they are a HOA member/owner, then what does anyone care? Matter of fact, many people might appreciate the fact they are a fellow owner. A fellow owner has an interest in doing a good job do they not? They are "invested" with everyone else.

This reminds me of the story of only 2 barbers on an island. 1 Barber's hair looks great. The other Barber hair's a mess. Which barber do you choose to cut your hair? The barber with the messy hair. Why? Cause they are the barber cutting the other barber's hair...

But he is not on the BOD. You want to deprive him of making a living?

Absolutely not. However, many people would not sell a used car to a neighbor in case the car turns out to be a lemon. Same principle to a contractor who is a member of the HOA.

NpB,

Can't tell - is this occurring in your HOA at this time?

Additional background on why this has come up now? Lead up the circumstance?

Or, is this hypothetical?

Some other thoughts:

People's rights and obligations as homeowners are legally clear. People's rights and responsibilities as paid contractors are also legally clear.

Hiring a homeowner as a paid contractor blurs the distinctions in possibly unhelpful ways. For example, if a contractor fails to perform according to the terms of his contract, or does poor quality work, the board has options to correct this. However, the board may be reluctant to go after "good ol' Joe who lives down the street" because they have a personal relationship outside of the professional one.

Refusing to hire homeowners shouldn't prevent them for earning a living, as one other commenter mentioned. If he does good quality work, he should have plenty of clients, and savvy business owners understand the folly of depending on a single client to stay afloat. If he doesn't do good quality work, why would you want to hire him anyway?

So I've talked myself around to "don't hire homeowners". It may or may not be a conflict of interest, but even leaving aside the optics, there are enough pitfalls to make it not a smart move.

Post-o. Such conduct is a certain invitation // to // the contractor/HOA Owner/Condo Owner to file suit for tortious interference.

If the Owner/contractor learns that bids have been solicited but her/his company was excluded, and the Owner/contractor can see no lawful basis for her/his company's exclusion, I think the owner has a viable winning lawsuit.

Small aside, somewhat related: Around 2012, I was on the Board of a 2000+ home HOA with landscaping needs worth a few hundred thousand dollars to the lucky company who won the bid. The HOA sent out RFPs to really as many companies as the Board could think of that were large enough to handle the work. A week or so later a landscaper contacted the Board demanding to be included in the bidding process, and ya know, sounding kind of legal. Fortunately the HOA had retained all the emails it sent out soliciting bids and was able to respond: 'Here is a copy of the email the HOA sent to your company on . Did you not receive it? The landscaper put its tail between its legs; found the email from the Board; and put in its bid.I do not find a lawful basis for a claim that these so-called pitfalls preclude inviting a bid from a condo/HOA Owner. In Arizona, even if it is a director's business, the board can still have the director's business bid on and win a contract, as long as disclosure, meeting certain statutory requirements, is done.

From the Arizona Condo Act, Section 33-1243:

C. If any contract, decision or other action for compensation taken by or on behalf of the board of directors would benefit any member of the board of directors or any person who is a parent, grandparent, spouse, child or sibling of a member of the board of directors or a parent or spouse of any of those persons, that member of the board of directors shall declare a conflict of interest for that issue. The member shall declare the conflict in an open meeting of the board before the board discusses or takes action on that issue and that member may then vote on that issue. Any contract entered into in violation of this subsection is void and unenforceable.

If a business is insured and license what does it matter where the owner of that company lives? Just as long as they are not running it out of their home?

Basically, any business that has a license and is insured can be considered for business opportunity if they choose to bid. Any professional business knows it's just a BID it's NOT a contract. You don't award a contract based on they are a HOA member. You award a contract for them being licensed/insured, offering good price (not cheapest), and is an expertise.

So I don't see any conflict of interest in hiring a bon a fide company whether or not they live in the HOA. Just disclose it and done.

Does anyone concern themselves with questions like this one where it sounds hypothetical?

NpB - ya didn't answer my question - is this hypothetical? You probably owe it to everyone here to tell us, yes?

I should have added: boards should always try to evaluate bids "blind", without any info that identifies particular companies. That way they will be evaluating bids on their merits. On the other hand, a past history with a company who has performed well should also be taken into account, since they are more likely to quote attractive rates and be easy to work.

I actually think this is an interesting discussion because the issues are not clear cut. And it's something that boards in larger communities may run into.

We do have a homeowner in my community who works for one of our contractors, although he's an employee, not the owner of the company. He actually found our community after doing a job for us and decided he wanted to live here. Most important, though, is that he doesn't benefit personally from working for that contractor, except indirectly. It would be different if he owned the company.

Good discussion!

So, what have we learned NpB? Here's one person's opinion.

No, there's nothing that specifically prohibits a homeowner from bidding on association work. I believe I've said before, it's impossible for everything in HOA land to be legislated. Communities need flexibility to make and amend rules that make sense in their communities. As long as those rules don't violate local state or federal law, you're probably ok.

If you don't see something mentioned in the law of your documents (that's where you should start anyway), try applying common sense. This is where Cathy's comments come into play and they're a great start to what you should consider if a homeowner should make such a bid.

Same with a realtor serving on the board. In fact, whatever you do to make a living, you need to ensure there aren't any possible or actual conflicts of interest when it co.we to association issues.

Declining to vote or participate in a discussion due to conflict of interest concerns doesn't make you a crook, but it can help ensure no one has an ulterior motive in pushing for something.

Unfair advantage to other contractors, which has nothing to do with the HOA.

We have a homeowner who does work for other homeowners and the HOA. Works out great. He bids lower everytime, lacking any inside information. He has lived here forever and done work here forever, knows the place like the back of his hand. I consider that an advantage. I consider his low bids to be an advantage. I consider him living on property to be an advantage. He is not some guy who could potentially screw us over and not care about our business enough to make it right. We knew where he lives ;-)