Board Representation and Conflict of Interest

As many of you know, one owner currently owns 9 of the 16 units in our association. Approximately three years ago, that owner transferred a 1% ownership interest in two separate units to two tenants. As a result, those two tenants became eligible to serve on the Board, allowing that owner and the two tenants to occupy all three Board seats. Whether this arrangement is permitted under our current bylaws or not, it has effectively given one ownership group complete control of the Board for the past three years. During that time, other owners have had little or no opportunity to serve on the Board or participate in the Association's leadership. The situation also raises concerns about independence. Since the two board members are tenants of the owner who holds the majority of the units, it is reasonable to question whether they can make decisions independently when their landlord is also serving on the Board.

One possible solution would be to amend our bylaws to strengthen conflict-of-interest provisions or establish rules that encourage broader representation on the Board. However, because any bylaw amendment would require approval from the membership, and one owner controls a majority of the voting interests, it would be very difficult to adopt such changes without that owner's support. For that reason, I would like to ask whether anyone is aware of any legal remedies or provisions under Iowa condominium law that could address this type of situation. I am interested in having an open and constructive discussion about possible solutions that would promote fair representation and good governance for all owners. My goal is not to criticize any individual but to ensure that our Association is governed in a way that is transparent, balanced, and representative of all owners.

As I understand our bylaws, each unit has one vote. If a unit has multiple owners, they still share that single vote by designating one person to cast it.

The owner in question owns 9 of the 16 units, so they already control a majority of the votes. Can one owner intentionally transfer 1% ownership interests to tenants solely to occupy every board seat, creating a conflict of interest and a board that is not independent? Our bylaws require a two-thirds 2/3 vote of the membership to amend the bylaws or declaration.

I will take a look at the condo act and nonprofit corp act. But chances are you will need a real estate attorney.

The Iowa NonProfit Act speaks to conflicts of interest. However I see nothing in the Act that helps.

I suspect you are stuck with this situation.

For what it is worth, I do not see this as unfair. This one owner does own nearly 100% of each of his nine units. He should have the right to control much.

What can you do? Insist this board follow the law and governing documents.

My concern is that the transfers were made to existing tenants immediately before they became eligible to serve on the Board. Since then, the same owner and those two tenants have occupied all three Board seats for the past three years.

So my question is really whether Iowa nonprofit corporation law, fiduciary duty principles, or conflict-of-interest rules provide any guidance when one owner effectively controls the entire Board through partial ownership transfers to tenants

There are conditions in the law where the tenant-director may have a lack of objectivity or lack of independence, and may be liable.

I think we need to know the issue or issues that may be a problem.

Regarding the last board election, one owner held nine units. He transferred a 1% interest in two units to two tenants, so he controlled all nine votes. The other 7 units were owned by 3 owners willing to serve on the board. I asked them not to give their proxy or vote to the nine-unit owner or the tenants. They voted for me and another candidate, and we each received seven votes. The nine-unit owner and the two tenants voted for each other, giving each of them nine votes and winning all three board seats.

I do not object to one person having significant influence if that person acts in the best interests of all owners. My concern is that the nine-unit owner acts only in his own interest.

The two tenants rarely speak for themselves and simply follow their landlord. There are also ongoing transparency issues: meetings are often changed or canceled without notice, and records and documents are poorly organized and not shared promptly with the other owners.