Conflict of Interest

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How Should Body Corporates Deal with Conflict of Interests?

It is imperative that Body Corporate Committee Members do not place themselves in a position of conflict between their duties to the Committee and their personal interests. If conflicts of interest do exist, it is important they are disclosed and recorded. 

What is a Conflict of Interest?

In simple terms, a conflict of interest arises when a person is in a position where they are involved in a transaction in more than one way – that is, they have multiple interests, which may be in conflict with one another.  Or, put another way, ‘Jill can’t serve two bosses. 

An example of a conflict of interest that could occur in a Body Corporate setting is when an owner, who is also the building manager, is elected onto the Body Corporate committee. That person is simultaneously a contractor to the Body Corporate, an owner paying for those services, and a member of the committee whose job it is to oversee the performance of contractors like the building manager.  When decisions need to be made, the best outcome might be quite different for each of those three ‘interests’(or ‘hats’), leading to a ‘conflict of interest’ for the person wearing all three of hats. 

Best Practice for Dealing with Conflict of Interests

Best practice would be for this relationship to be disclosed both at the general meeting before the committee elections take place, and at the first committee meeting. In a General Meeting scenario, the building manager should leave the room when either their contract, performance or remuneration are being discussed, and the minutes should record their departure and return.  In an AGM situation the individual may return to vote by virtue of their ownership interest.  In a committee situation, best practice would suggest that a committee member in this situation should both leave the room (or ‘recuse themselves’, to use a technical term) and refrain from voting on matters that affect their role as Building Manager. 

This also applies to other positions where there is the potential for a person to have an interest in more than one part of a transaction.  It can apply to Body Corporate Managers, tenders associated with maintenance to the building, as well as the provision of building management services.

There should be complete transparency and all owners need to be aware of any potential conflicts of interest prior to those owners being employed or contracted into positions of influence and advantage within the Body Corporate.

Capturing Conflicts of Interest

Conflicts of interest can be captured in various ways:

1. As a standard item on the General Meeting Agenda at the start of the meeting, in order for all participants to declare any conflicts of interest that may arise during the meeting;
   
   
2. As a request for each member of the committee nominated for election to declare any conflicts of interest they may have prior to the election process. These can be collected by the Body Corporate Account Manager and read out during the meeting, or can be presented by nominated members present at the meeting;
   
   
3. As a standard item on the Committee Meeting Agenda (either on an on-going basis or at the first meeting of the newly appointed Committee) to allow any conflicts of interests to be noted.

While it may seem common sense to keep these records, the reality is that very few conflicts of interest are registered and should a dispute arise, it is prudent to have a register of such in place.

If you would like to find out more about Conflict of Interest management or have a general Body Corporate inquiry, contact our Body Corp Community Living experts on 09 968 3311 or email bc@crockers.co.nz.