Get 2 months of free community web site hosting from Community123.com!
Tuesday, August 20, 2019
Get 2 months of free community web site hosting from Community123.com!
Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.
Subject: Hiring from within??
Prev Next
Please login to post a reply (click Member Login on the menu).
Author Messages
DavidL37
(Georgia)

Posts:11


07/15/2019 9:26 PM  
Hello,
I serve on the HOA Board for my community and one of my other board members is planning to start their own landscaping and pressure washing business. My question is, would it be legal and ethical to hire his business for taking care of our community? Would he have to resign his board position in order to do so?

Thank you,
Dave
MelissaP1
(Alabama)

Posts:8396


07/16/2019 4:03 AM  
This sounds so familiar to me... It depends. Are they going to be licenses and insured? Are they going to bid against atleast 2 others for the job?

For me because a HOA is made up of your neighbors, I don't have an issue hiring a neighbor that is qualified. As long as it is disclosed and no one else is having an issue with it. Think they should excuse themselves from any votes regarding their business.


It really depends on your HOA's culture and if you have people who would be upset by this.

Former HOA President
CathyA3
(Ohio)

Posts:338


07/16/2019 5:23 AM  
Posted By DavidL37 on 07/15/2019 9:26 PM
Hello,
I serve on the HOA Board for my community and one of my other board members is planning to start their own landscaping and pressure washing business. My question is, would it be legal and ethical to hire his business for taking care of our community? Would he have to resign his board position in order to do so?

Thank you,
Dave




If you want to hire your neighbor, your first step is to always get competitive bids plus references. Otherwise, the optics are bad. I don't think that the board member should resign at this point, but he should declare this conflict of interest and recuse himself from any discussion or voting on the landscape contract. If he is hired, then you should probably revisit this.

* Your neighbor may well do an excellent job for you. However, it doesn't sound like he'd have much of a track record. Part of the bidding process involves verifying references, and if he doesn't have any, that should take him out of the running he has that track record under his belt.

* As Melissa noted, your neighbor must be licensed and carry the proper insurance. Verify this as well.

* Consider what would happen if he did not perform acceptably. Are you comfortable with the steps you'd need to take? This will cost money, and it's the kind of thing that makes the "low bid" turn into the "high bid" quickly. Also remember that it's possible you'd end up taking legal action against the guy. Will it poison the atmosphere of the community?

In general we avoided hiring the "friends and family" folks just because of they introduce issues that don't exist with outsiders. It's easier for the board to fulfill its fiduciary duty to the association if the relationship between HOA and owner is strictly business with no conflicts of interest.
DavidL37
(Georgia)

Posts:11


07/16/2019 5:45 AM  
Thanks for the replies you guys! Excellent points so far and it’s giving me a lot to think about for consideration!
MarkM19
(Texas)

Posts:371


07/16/2019 6:46 AM  
David,
Please read the definition of the term "Fiduciary Duty" it should clear up your concerns.

The landscape contract is usually the 2nd biggest expense in most HOAs. It has many adds for sprinkler repairs, replanting shrubs and tree care. It would be impossible for this person to not be involved in all of those proposals. It is also going to be hard for him not to know who he is bidding against and what they are proposing. This will cast a shadow that will effect your board.

If he wants to start a new business let him know that there are lots of other opportunities in every other HOA for good Lawncare companies.
SamE2
(New Jersey)

Posts:133


07/16/2019 7:51 AM  
I would hire him if I thought it was in the best interest of the HOA. If you are concerned about his experience go month to month with a contract price. No one treats their home like an owner. This guy has to see and listen to the other owners. I'd expect him to take a lot more pride in the place then a vendor that has no connection to the place. With that said I wonder if the guy knows what he is getting into taking on work where he lives. I don't think it is illegal and he wouldn't have to resign from the Board just recuse himself from landscaping issues.
JohnC46
(South Carolina)

Posts:8550


07/16/2019 9:49 AM  
My opinion is he could be hired to perform those tasks if:

1. Other bids were solicited and his is considered the best.
2. He recuse from bid discussions and voting.

There is something said about personal pride as in he would want to make his association look good.
DavidL37
(Georgia)

Posts:11


07/16/2019 7:55 PM  
Everyone, thanks again for the insightful input that you’ve given me! Although it’s really varied, there are some extremely good selling points here that I will take back to the rest of the board at our next meeting!
SueW6
(Michigan)

Posts:526


07/17/2019 4:39 AM  
Any vendor under consideration needs to be asked for references. It sounds like he is just starting up, so he may lack a work history. That certainly would factor in any decision the board might make.

Of course, he should recuse himself from any vote if he has a bid on the pile.
AugustinD


Posts:1886


07/17/2019 7:57 AM  
Posted By DavidL37 on 07/15/2019 9:26 PM
I serve on the HOA Board for my community and one of my other board members is planning to start their own landscaping and pressure washing business. My question is, would it be legal and ethical to hire his business for taking care of our community? Would he have to resign his board position in order to do so?


A former HOA of mine contracted with the landscaping business owned by one of the board members. Many members objected to the arrangement. The board member eventually lost a re-election bid because of this. It was nasty. In my opinion, the board member should have anticipated the nastiness as a reasonable response.

Many HOAs' Declarations have a statement in them saying that board members, 'shall not receive compensation for their service.' The appearance to me is that this board member was using his board service to help his company financially, and so to help himself financially.

The Board can put up all the 'chinese walls' it wants. To me, the appearance just stinks. The situation also begs for all manner of political maneuvers subsequently. E.g. suppose there is competitive bidding, and the director's landscaping company is not selected. Will the director then vote in opposition to motions put forward by directors who voted against his company?

To me, it's a bad sign that your board is even considering this.
AugustinD


Posts:1886


07/17/2019 8:26 AM  
... plus you do realize that this board member has a competitive advantage over other landscaping businesses: He knows exactly what the budget will allow and what the soft spots are for specific directors. I think'competitive bidding' that passes legal muster is impossible when the guy has these advantages.
JohnC46
(South Carolina)

Posts:8550


07/17/2019 8:36 AM  
Posted By JohnC46 on 07/16/2019 9:49 AM
My opinion is he could be hired to perform those tasks if:

1. Other bids were solicited and his is considered the best.
2. He recuse from bid discussions and voting.

There is something said about personal pride as in he would want to make his association look good.



ADDITION

One of the major requirements for me to vote for a vendor is past, proven performance. Not sure I want to be a guinea pig for a new company thus he would probably not get my vote.
DavidL37
(Georgia)

Posts:11


07/17/2019 9:02 AM  
I can definitely understand your skepticism if the situation that I presented and it’s not that I’m considering it, I just wanted to know from a legal and ethical standpoint if it were a feasible solution. Every HOA situation is different and in my case, we have a lot of homeowners not paying and the bills continue to stack up. I was also looking at it from an angle for cutting costs. After reading this whole discussion string, I’m leaning more toward not entertaining this “idea” at all. However, if the board member wishes to resign and pursue his landscaping business and submit a bid like other companies then that’s a risk he can take as well. This discussion has been extremely helpful for me and I really appreciate your input as well.
AugustinD


Posts:1886


07/17/2019 10:26 AM  
Posted By DavidL37 on 07/17/2019 9:02 AM
I just wanted to know from a legal and ethical standpoint if it were a feasible solution. Every HOA situation is different and in my case, we have a lot of homeowners not paying and the bills continue to stack up. I was also looking at it from an angle for cutting costs. After reading this whole discussion string, I’m leaning more toward not entertaining this “idea” at all. However, if the board member wishes to resign and pursue his landscaping business and submit a bid like other companies then that’s a risk he can take as well.


In my first post I purposely avoided getting into what is legal and what is ethical. I checked Georgia HOA statutes for conflicts of interest and found nothing. (By comparison, Florida HOA statutes happen to have some discussion of conflicts of interest.) What you proposed is probably legal. I think "ethical" is subjective. I wanted to sharing my own feelings on that aspect.

I know it is tough serving on a board, especially one in bad financial shape. If your board wants to hire this director's company, then it would not be the first time (what I call) "a cozy arrangement" was worked out. Sometimes all is fine. Also I have been in the vicious circle you seem to indicate is happening at your HOA: People are not paying their assessments, on account of the grounds looking bad. The bills stack up. The HOA cannot afford top-quality landscaping. The landscaping worsens. More and more people stop paying.

Maybe you should start a new thread on hiring a collections attorney (not agency)? That helped for awhile with a former HOA of mine. Nonetheless, the landscaping quality has gone down exponentially. The board actually turned off the water for the front yard irrigation systems on some 1200 homes. Which was probably illegal. It's largely why I sold and moved.

As you seem to suggest, to me it would be best for this gentleman to resign and then submit a bid for a landscaping contract.

Good luck.
ND
(PA)

Posts:330


07/17/2019 11:05 AM  
I don't think the "optics" of the overall situation change much whether he is a Board Member who recuses himself from discussion and award of a contract to his own landscaping company or a recently-resigned Board Member who owns the new company that happens selected for the HOA's landscaping contract.

Either way is likely perfectly legal and can be done ethically; however, other homeowners' perceptions is all that will matters to them in the end. There will be enough folks in the neighborhood who cry foul and perceive the situation to be illegal, unethical, sketchy, favoritism, etc. to make this a situation that I would likely try to avoid.

Perhaps a first step in saving money on landscaping would be to minimize your contracted services to only those things absolutely necessary to keep the place from looking dumpy, put it out to bid to several interested contractors, and see what comes back. I'd suggest looking into a variety of contractors . . . those with well established business and large staff as well as those less established with a smaller crew.
KerryL1
(California)

Posts:6534


07/17/2019 11:12 AM  
Augustin wrote: "... this board member has a competitive advantage over other landscaping businesses: He knows exactly what the budget will allow and what the soft spots are for specific directors. I think 'competitive bidding' that passes legal muster is impossible when the guy has these advantages."

This topic has come up many times on this forum, I've tended to think it's not a good idea for many reasons as discussed on this thread, but I hadn't thought of the above. This director would know the budget for the line item(s), but as solely an Owner, he'd also have that info, which is available to all owners. To make sure the bidding is competitive, the Board could let all prospective vendors know the budget or budget range they expect vendors to work within.

The second point is more subtle. The director knows various other directors' "soft spots," quirks, preferences, etc., and that does give him an edge. So, ethical? It is, I think, legal to hire a director as the compensation would not be for his work as a director, but as a vendor or employee doing different functions.

IF, David, your board votes to consider this director for those tasks and IF the board selects him, not only must he recuse himself from discussing or voting on any aspect of HOA biz that involves his services, he also should leave the room when the other directors discuss these matter so that they can be frank with one another.
MarkM19
(Texas)

Posts:371


07/17/2019 11:29 AM  
David,
If this guy was the best Landscaper on the Planet and also the cheapest it would still be silly for the board to take the heat for 1 member of the HOA board. Why would it make sense to risk everyone's standing in the community? The downsides are all over the place. I have had 4 landscape firms in my 9 years on HOA boards. None of them are perfect and all can be picked apart by homeowners if you look close enough. I hope you have some nice trees in your community. You should pick 5 that your board wants to be hung from when this fails.

I do not know anything about the guy who appears to be having a mid life crisis and wants to start company. It does have very high startup costs for anyone doing it commercially. What if he is under funded and realizes have way through that he entered a business he can not handle? What if he does it on a shoe string? Guess who will be judged. You and the rest of the board.

The only thing that I can assume is you must be the guy that wants to do this. Please find another business to open.
DavidL37
(Georgia)

Posts:11


07/17/2019 2:17 PM  
Thanks for your input but you’re assumption is way off base! It’s definitely not me as I don’t have a green thumb at all. I’d probably kill a cactus. At any rate, I have all of the answers from this forum that I need to help me make a decision to bring to the rest of the board.
MarkM19
(Texas)

Posts:371


07/17/2019 2:26 PM  
David,
Good luck and please update us on what the board decides. We can all learn from others success and failures.

My only closing advice is try to remain natural and remember you are working for your supporters and the rest of your HOA.
KellyM3
(North Carolina)

Posts:1418


07/17/2019 7:43 PM  
It's not good policy for the vendor to remain on your HOA board if they win the professional contract. If the person was clearly granting below-market pricing, then you can argue the board member is not benefiting from the arrangement. But, in a clean deal, the board member steps down if the winner.
Please login to post a reply (click Member Login on the menu).
Forums > Homeowner Association > HOA Discussions > Hiring from within??



Get 2 months of free community web site hosting from Community123.com!



News Articles Provided by: Community Associations Network
News, articles and blogs about condos/HOA's

Only members have access to all features.
Click here to join HOATalk for Free! Members click here to login and access all features.







General Legal Notice:  The content of forum messages are from the posting member and have not been reviewed nor endorsed by HOATalk.com.  Messages posted by HOATalk or other members are for informational purposes only, are not legal or professional advice and do not constitute an attorney-client relationship.  Readers should not act upon this information without seeking professional counsel.  HOATalk is not a licensed attorney, CPA, tax advisor, financial advisor or any other licensed professional.  HOATalk accepts ads from sponsors but does not verify sponsor qualifications nor endorse/guarantee any sponsor's product or service.
HindmanSanchez Legal Notice:  (For messages posted by HindmanSanchez) This message has been prepared by HindmanSanchez for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Members of HOATalk.com should not act on this information without seeking professional counsel. Please do not send us confidential information unless you speak with one of our attorneys and get authorization to send that information to us. If you wish to initiate possible representation, please contact an attorney in our firm. Our attorneys are licensed to practice law in the state of Colorado only.

Legal Notice For Messages Posted by Sponsoring Attorneys: This message has been prepared by the sponsoring attorney for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute an attorney-client relationship. Readers of HOATalk.com should not act on this information without seeking professional counsel. Please do not send any sponsoring attorney confidential information unless you speak with the sponsoring attorney or an attorney from the sponsoring attorney’s firm and get authorization to send that information to them. If you wish to initiate possible representation, please contact an attorney in the firm of the sponsoring attorney. Sponsoring attorneys that post messages here are licensed to practice law in a specific state or states as indicated in their message signature or sponsor’s profile page. (NOTE: A ‘sponsoring attorney’ is an attorney that is a HOATalk.com official sponsor and is identified as such in the posted message or on our sponsor page.)

Copyright HOA Talk.com, A Service of Community123 LLC ( Homeowners Association Discussions )   Terms Of Use  Privacy Statement