Q&A: Is This Board Member/Broker Involved in Conflict of Interest?

Q I’m a board member of my condo in Massachusetts. We have one member of the board who is a real estate broker. Our condo owns a very small piece of land that is adjacent to another building near ours. The owner of the nearby building wants to rent this piece of land from our condo, and will pay a commission to this broker and monthly rent to the condo. Some members of the board think that we definitely have a conflict of interest between client, customer and a broker, while others think that it’s unethical for a board member to conduct such business. We have to make a decision and we don't know what’s the right thing to do.

— Brokering a Sale

A Nothing in the Massachusetts condominium statute makes it per se either unethical or immoral for a board member who is a licensed real estate broker to become involved in the rental of common area in exchange for a legitimate broker commission.

In fact, most Massachusetts condominium constituent documents contain a specific provision making it perfectly acceptable for a board member to contractwith and/or deal with the board in such activities – so long as the relationship is disclosed.

The document provision is typically entitled “Trustees May Deal with Condominium,” or something to that effect. So, the questioner should carefully review his or her constituent documents for specific guidance on this issue.

Whether or not a particular condominium’s constituent documents address this issue squarely, good practice suggests that the board member who plans to act asbroker for the association recuse himself/ herself as part of any board voting process on the issue.

Of course, the proposed relationship should be disclosed fully to the board, to the unit owners, in any meeting minutes, etc. And, as an aside and at the risk of sounding self-serving, the board probably should consult with a knowledgeable lawyer to discuss whether the grant of an easement is preferable to a true common area rental agreement.

— Joe Saurino, Esq.

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