Board Members Fiduciary duty and Conflict of Interest

Hi,
We have a board of 3 members in a 15 unit HOA. Two of the board members have a conflict of Interest with an issue that is being put to vote. So if the board members recuse themselves from voting and we need a supermajority(75%) to pass the amendment which would mean 12 votes, can the supermajority be reduced to 10 in this case as the Board members with conflict have opted out from voting. How can the HOA achieve its supermajority in this situation? Any help/suggestions would be appreciated. Thanks

Ask yourself if other owners should be excluded from owners voting if they had a financial interest in the project?

Does me owning GE stock preclude me voting on the association buying new GE appliances for the clubhouse?

I understand conflict of interest on the BOD voting on things but you are asking about BOD members that are also owners. To me that is the difference.

No, John. But to your point, voting to force the HOA to purchase GE appliances from your family's appliance store would be the conflict of interest.

At any rate, knowing the conflict-of-interest is half the battle.

My opinion is if the two board members recuse themselves, they have participated in the vote, lowering the super majority threshold needed.

Do your documents ALLOW you to lower the number of votes needed under any circumstance? If not, then you need to pass an amendment allowing such.

They're 2 out of 15 when it comes to passing an amendment. I see no reason why they shouldn't be able to vote on behalf of their units in an election for the general population.

If it were the case of a bid for work that the BoD alone was voting on, it would be improper for them to vote though.

Not an attorney but in all of the documents I've seen over the years, the language to amend usually says something like 75% of all lot owners. Not 75% of all lot owners eligible to vote.

I'm stumped at what kind of conflict of interest could possibly exist when voting on an amendment.

Board voting on contracts? Sure
Amendment to the docs? Almost impossible

I'd love an example.

Not buying that example, Kevin.

Yup, you have the existing owners of rentals. But you also have the other owners who are looking at that thinking, "ya know, John & Sue seem to have it pretty good....I might want to rent MY house someday, so I see the benefits of voting against/in-favor"

That's NOT a conflict of interest. That's the voices of the owners being heard. It would be preposterous to exclude the owners of rental property from casting votes, and lowering the standards for passing an amendment such that you don't need their participation. That's precisely what should NOT happen. They paid for their property the same as anyone else, and deserve an equal vote.

A conflict of interest would be inserting an amendment that says "rubbish removal shall be contracted to Bob's trash removal service from now until eternity" when Bob is a board member.

I believe that everyone would agree with this statement.
I know I do.


I disagree.
The fact that the amendment was drafted, isn't in conflict with existing laws and brought to the membership for a vote fulfills their fudiciary duty.

Typically, when discussing rental restrictions, you will always be creating a conflict of interest for one member or another. What many members fail to recgonize is that a Board member typically has three jobs within the Association:

1) Director - As a Director, they have one vote for every decision brought before the Board
2) Officer - As an Officer (Pres, VP, etc.) the same individual has certain duties to perform to ensure the day to day operations of the Association occurs.
3) Member - As a member, they have one vote per lot/unit for every decision brought before the general membership. They also have the duty to be part of the checks and balances of the Boards actions.


Well first of all, the example you provided with Davis-Stirling is addressing issues before the Board. In fact, that section specifically stated "No member should vote on a question in which he has a direct personal or pecuniary interest not common to other members of the organization."

Rental restrictions would be a common interest to all members (as you never know when someone will or won't want to rent their property).


To believe that those who are renting should recuse themselves simply because they are landlords is as bad a believe as believing that the members who don't rent should recuse themselves because they have a personal interest that can be seen as a conflict of interest.

Personally, I think you have a desire to have this amendment pass and that you are trying this tactic to try and ensure it's passing. I applaud your efforts and creativity. However, I disagree with your premiss.


The answer would be NO.

Per your citation, the document is very clear. It requires 75% of the members to approve an amendment. With 15 units and the need for 75% approval results in needing 12 lots/units to support the amendment (as you previously posted).

Since there are only 3 rentals, it appears that you have a good chance of having the amendment being adopted. I suggest that you start knocking on doors and see if you can convince everyone to vote the way you want to the vote to go.

I know that this isn't what you wanted to hear, but I hope it helps,

Tim

I like add to the concept of "HOA". The board represents the majority of members on the daily business of the HOA on their behalf. However, the HOA can represent itself in taking a majority vote be it in an ammendment, board removal, or special assessments. A HOA board is NOT the HOA. It is the members of the HOA which is ALL of your neighbors and you,

A board member is also an owner and an individual member. That does not mean 2 votes. It just means their vote is to represent the majority of HOA members including themselves. If their vote is a minority and it gets voted in anyways, then you have an issue. Otherwise it is the system...