Q. Is it illegal for members on the HOA board to also hold a position on the board of directors of the property management company that the HOA hires and oversees?

                                    —Conflict of Interest?

A. “While the situation described in this question arises with some frequency,” says senior attorney Douglas Christy, who works in the Tampa and Sarasota offices of Becker & Poliakoff,  “the answer to the question is that this situation may be a problem, but this situation is not necessarily a violation of any laws or ‘illegal’ per se. The situation where a person is a director for a corporation and is also a director for another entity doing business with the corporation or is financially interested in the other entity could give rise to a potential conflict of interest when the corporation and the other entity are involved in a contract or transaction. For homeowners’ associations organized as a Florida corporation not for profit, this situation would need to be handled in accordance with Section 617.0832, Fla. Stat. to ensure that there is no problem arising out of the potential conflict of interest for the homeowners’ association and so that the contract or transaction at issue would not be subject to a claim that it is void or voidable. Section 617.0832(1), Fla. Stat. provides that::

No contract or transaction between a corporation and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested shall be either void or voidable because of such relationship or interest, because such director or directors are present at the meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction, or because his or her or their votes are counted for such purpose, if:

(a) The fact of such relationship or interest is disclosed or known to the board of directors or committee which authorizes, approves, or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors;

(b) The fact of such relationship or interest is disclosed or known to the members entitled to vote on such contract or transaction, if any, and they authorize, approve, or ratify it by vote or written consent; or

The contract or transaction is fair and reasonable as to the corporation at the time it is authorized by the board, a committee, or the members.

“Therefore and based on Section 617.0832, Fla. Stat., any claim that any conflict of interest arising from the person’s position as a director for both the homeowners’ association and the management company renders the contract or transaction void or voidable can be prevented if the contract or transaction between the homeowners’ association and the management company is fair and reasonable at the time it is authorized per Section 617.0832(1)(c), Fla. Stat. Additionally, any claim that any conflict of interest arising from the person’s position as a director for both the homeowners’ association and the management company renders the contract or transaction void or voidable can be prevented if the conflict of interest is disclosed by this person and the contract or transaction is approved in compliance with Section 617.0832(1)(a), Fla. Stat. or Section 617.0832(1)(b), Fla. Stat., as may be applicable. 

“If the contract or transaction does not meet the requirements of Section 617.0832(1), Fla. Stat., there is likely a problem and the contract or transaction could be subject to challenge as being void or voidable.”