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The board can act legally only by consensus . It also helps eliminate or reduce any trust issues or suspicions that homeowners may have about your board. If you or any other board member will be affected, whether directly or indirectly, by a board decision or action, then there is a conflict of interest. The lesson for the board as a whole is to consider adopting either a bylaw provision or a policy statement setting forth a code of ethical conduct for the board members. "headline": "HOA Conflict of Interest: Identifying and Resolving Them", } This is because the board member in question stands to financially gain from the business contract. There can be lots of complicated reasons to change or preserve your rules for who is eligible to serve on the board & as it's always been explained to me (sometimes by lawyers) is a board conflict of interest must include financial benefit to either the board member or a member of their family. A board member who asks for a loan from association funds or distributes a loan to member from association funds has breached fiduciary duties, and can face legal penalties. Board members run the association according to its governing documents and make decisions in the communitys best interest. A hearing officer found that although the petitioner had not voted to approve the subdivision, he had participated in the planning boards decision despite his companys contract to perform work at the subdivision and receive compensation. During the meeting, the chair needs to remind the board member . Another way to discipline board members involves the board deciding who the officers are, says Zifrony. ", The bylaws must outline clear procedures for identifying when a conflict may exist, actions the HOA must take to remain impartial, and remedies if legal action is taken as a result of a conflict. 14. For example, in some organizations a board member can be removed by a two-thirds vote of the board at a regularly scheduled board meeting. The decision to recuse is solely within the discretion of individual board members there is no statutory basis for recusal and recusal cannot be compelled by others but a failure to recuse where necessary can have severe ramifications, including invalidation of the board action and removal of the board member.[v].