Regarding an HOA board membership, what constitutes a conflict of interest?

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Regarding an HOA board membership, what constitutes a conflict of interest?

One of our HOA board members is a custom home builder in the neighborhood he oversees. He is known to visit houses that are under construction by his competitors and soaks up information about how they are built. Is this not a conflict of interest? What can be done?

Asked on January 28, 2017 under Real Estate Law, Texas

Answers:

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

Answered 4 years ago | Contributor

A conflict of interest is when someone is likely to receive an economic benefit because of the status for which he was elected beyond the terms of his appointment.  Meaning... if the board member is using the position to enhance his business dealings (beyond what little pay, if any, he may be receiving as any other board member would), then he has a conflict of interest.
The remedy will be based on two things.  First, the terms of the HOA's incorporation will determine when and how a board member can be removed.  Look to the bylaws to determine the exact process.  Sometimes, it's simply easier to vote the board member off than to file a lawsuit...or dissolve the whole HOA so you don't have to put up with the HOA drama.   The second option should be pursued by the other home builders.  They can sue the board member for encroaching or interefering with their business dealings or theft of trade secrets (depending on the exact facts).  They would have to be the ones to sue for option two because they are the ones who are subject to being harmed by the board members conduct.  Other homeowners may think the board member's conduct is appalling, but moral judgment is not usually a harm, making them poor candidates for plaintiffs. 


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