Avoiding conflicts of interest in a committee

An Owner’s Corporation Committee represents all owners in the property, so it is vital that all potential conflicts of interest be declared and avoided where possible. This ensures that all decisions made are in the best interests of the whole Owner’s Corporation, not the individual making the decision.

What is a conflict of interest?

Simply put, a conflict of interest can come about when a committee member has the potential to benefit from a decision that may not be in the greatest interest of the Owner’s Corporation.

This can be a situation that seems completely innocent, such as a committee member who is an electrician using their own business to do some casual maintenance, but without following proper procedures, the Owner’s Corporation’s interests haven’t been protected to a sufficient extent.

How can they be avoided?

It is very important to a smooth operation of the Owner’s Corporation that the Committee operates in a clear and transparent manner. This means that any decisions made are made with the approval of the whole committee, and the knowledge of the Owner’s Corporation as a whole.

Declaring potential conflicts of interest, even when the potential is only slight, ensures that the committee remains above reproach regarding any action taken.

What to do when one arises?

There are many approaches, and it will often depend on the situation at hand. If it’s something relatively minor, it may be enough that the decision is delegated to a sub-committee, free of any members with a conflict of interest. However, for major decisions, such as hiring of contractors or ongoing suppliers, any committee member with the potential to profit (financially or otherwise) from the decision should exclude themselves, and may be best serve to resign their position.

What are the penalties for failing to declare a conflict of interest?

There can be substantial penalties, including legal proceedings for a breach of the conflict of interest.

I’m unsure if I have a conflict of interest, who can I contact?

Mayfield is always available to offer advice on all areas of running an Owner’s Corporation. If you feel that there is even a slight potential for a conflict of interest, we can evaluate the situation, and advise you on the best way to proceed that will ensure a transparent, responsible and accountable decision process.