Is it a conflict of interest to award a contract for a residental project paid for by a HOA to the HOA’s board president?

Our HOA board decided that our subdivision needed a new front entrance, so they took 2 bid one for 5k and one for 45k. The board minus the board president voted and picked the bid for 45k. The company that got the winning bid is owned by the board president. The contract also include a maintenance contract for $2400 per year. Is there a conflict of interest going on here? The only other people involved where the 3 people on the landscaping community. This was all kept in secret from the rest of the home owners, until someone found out and got the rest of the community involved.

Asked on November 4, 2011 under Real Estate Law, Texas

Answers:

B.H.F., Member, Texas State Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

It sounds like you and the community need to vote on a new HOA board.  The situation certainly smacks of conflict of interest, even though the board president tried to slightly distance himself.  If his membership on the board was an influencing factor, then it is a conflict of interest.  The project you describe is not so unique that other companies would have been unavailable to bid on the project.  With two bids so different in price, reason would have dictated seeking at least one more bid from a qualified contractor.  The fact that the whole bidding process was kept secret also raises concerns.  HOA's are fiduciaries of the funds they hold in trust for the community.  They are required to keep records for any HOA to inspect on how and where they spend that money.  You can request copies of all bid notices and records regarding this transaction.  Your HOA by-laws will control how you can remove and elect a new HOA Board and Board President.  You may also want to consult with an attorney that has had experience in suing HOA's and discuss a temporary injunction to prevent the HOA from spending on 45k on a beautification project during this economy.


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