HOA Board Votes With Conflict of Interest

Question:

At a BOD meeting last night, the President and another officer voted on a motion for which they have a conflict of interest. When I asked them to recuse from the vote, they refused, voted, and the motion passed (I voted against the motion, and if they had NOT voted, the motion would have failed).
So, my question is what do I do now?

1. CONFLICT OF INTEREST – our bylaw do not address this, but it is common sense. The President and other director have restrictive covenant violations, have been notified, and the motion on the floor was to rescind those violations. Do you agree that they have a conflict of interest?

2. PAST VOTE – we are not expert at Robert’s rules, and so we stumble through the process. What, if anything, can I do about a botched vote? Either to fix a past one, or to prevent it in the future

– Nora

 

Answer:

Hi Nora,

Voting where there is a conflict of interest may be a breach of fiduciary duty to the homeowners association. If the association is a condominium created after January 1, 1994, the Texas Uniform Condominium Act Sections 82.103(a) and 82.103(f)(2) may apply, which state that the board members are liable as a fiduciary of the association and may be held liable if they received an improper benefit.

If the association is not a condominium and the vote is related to entering a contract, the Texas Property Code Section 209.0052(b) allows the HOA to enter into contracts with a board, their relative, or a company where a board member or their relative has a financial interest in at least 51% of the profits under certain conditions. However, one of the conditions stipulates that the board member does not vote on the award of the contract. In your case, the board members in question may be in violation of this provision.

You may raise these with the other board members as they may help nullify the vote. Kindly also review the governing documents to see whether there are provisions that talk about vote reversals or revotes. For further assistance, kindly consult a lawyer.

 

Disclaimer: We are not lawyers. The information provided on this website does not constitute legal advice.

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