Why shouldn't you hire a board member as a vendor?

It's not unusual for condominium or co-op board members or directors to have careers that would make them a good candidate to be hired as a vendor by the board. For example, some may want to act as a property manager for foreclosed units or for units belonging to New Yorkers who winter in Florida or spend extended periods away from home on business.

However, hiring a board member or director as a vendor, while not illegal, can result in problems if homeowners believe that the deal struck with the board member for his or her services is not in their best interests. They could potentially sue the homeowners' association, asking for reimbursement and damages. Further, if the board member/director does a poor job, it can be more awkward to sue that person than a third-party vendor.

If an outside vendor can be found who is just as qualified as the board member offering to do the job for a comparable price, it's best to choose that vendor. If the board feels that it's member is the best qualified and most reasonably-priced choice, the people making the decision must ensure that they are putting the interests of the homeowners and the HOA above all else and that all income is properly reported to tax authorities. Even then, you run the risk of one or more homeowners taking exception to the business relationship.

If you are considering hiring a board member as a vendor, it's wise to consult with your association's attorneys to help ensure that everything is handled appropriately. This can minimize your chances of incurring civil lawsuits or tax penalties.

Source: Los Angeles Times, "Q&A Hiring a board member as a vendor is not good business for an HOA," Donie Vanitzian, accessed Jan. 13, 2017