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  • #8665

    In our strata, 2 members of the 7 member EC have a direct conflict of interest in the provision of trade services to the building. Although they do not vote when the contracts / agreements are approved at committee meetings, they have ‘won’ all work in this particular field since joining the committee.

    And the amounts involved aren’t petty – the most recent contract signed was $28,000.

    The EC believe that is is all above board as they didn’t vote on the issue. However it smells.

    Understand that there is no provision in NSW strata legislation covering this (we are an old building).

    Any advice appreciated.

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  • #17690
    Sir Humphrey
    Strataguru

      @tracer said:
      In our strata, 2 members of the 7 member EC have a direct conflict of interest in the provision of trade services to the building. Although they do not vote when the contracts / agreements are approved at committee meetings, they have ‘won’ all work in this particular field since joining the committee.

      And the amounts involved aren’t petty – the most recent contract signed was $28,000.

      The EC believe that is is all above board as they didn’t vote on the issue. However it smells.

      Understand that there is no provision in NSW strata legislation covering this (we are an old building).

      Any advice appreciated.

      Perhaps they are generously quoting to provide the services to the place where they live at little or no profit to themselves and consequently are cheaper than others. Perhaps they are acting with self-interest because they know they will do a quality job but others might not. They seem to be doing the right thing by abstaining from voting on the EC. 

      The best evidence that things are not so rosy would be if the same services could be provided distinctly cheaper by someone else. Did the EC get other quotes? If you really thought there were grounds to be worried you could perhaps get an indicative quote from someone else.

      #17693

      Peter C – Thanks for your views, which I shared until recently. Their quotes for specific contracts are regularly 10% cheaper than others obtained – however the rate charged for ongoing maintenance work and small jobs is significantly higher than previously.

      I was interested to see that the Owners Corporation Network’s position on financial conflicts of interest is definite – people should neither nominate nor sit on a committee if they have a direct financial interest in any decisions. Abstaining from voting is immaterial as they would be privy to other quotes etc. The particular people involved have always had the last crack at quotations.

       

      How do other Owners Corporations handle conflicts of interest issues?

      #17700
      Sir Humphrey
      Strataguru


        @tracer
        said:
        Peter C – Thanks for your views, which I shared until recently. …Abstaining from voting is immaterial as they would be privy to other quotes etc. The particular people involved have always had the last crack at quotations…How do other Owners Corporations handle conflicts of interest issues?

        I have experience of somewhat similar instances:

        We wanted some particular equipment installed. One owner with relevant industry involvement offered to do one of two things. 1) She could help the EC by scrutinising the quotes from others to ensure we got quality materials and a good price. Alternatively, (2) She could supply most of the materials to an installer she recommended who would then quote for the job, presumably at a good price having got the material cheaply. Our EC preferred option 2. Why should the EC cut off the possibility of getting a better deal this way? The EC did not disclose or discuss the quotes with that owner or anyone else till all were in. The quote using material supplied by the owner was distinctly better than the others and the EC decided to recommend that one to a general meeting.

        As it happened we did not ultimately go ahead at that time for unrelated reasons and a few years later when the proposal came up again the owner was no longer in a position to go with option 2. Instead she helpfully commented on quotes from other suppliers. 

        On various other occasions our EC has considered various approvals applied for by EC members. On those occasions the EC member has absented themselves from the meeting while that matter was discussed and that fact was minuted. Any email discussion on that topic among the EC members excluded that person explicitly. 

        #17703

        Peter C – you are on a constructive and positive EC. Unfortunately our EC is very arrogant and sees any questioner as a “troublemaker and person of doubtful character”.

        Utilising the expertise and skills of EC members effectively is very positive for all owners – however whether this should extend to payments for services (other than reimbursements) is another matter.

        As the philosophers say: ‘power corrupts; especially when monetized” – or something like thatConfused

        #17721
        Whale
        Flatchatter

          Tracer – We have one E/C Member who’s in the building trade and always provides a first class service to our Plan, but in addition to him providing quotes and abstaining from votes on the proposal concerned, I’ve had to ensure that all quotes, including his, come directly to me as Secretary.

          Why? Well, when he was privy to the amount of the competing quotes as they came in, he would always quote lower and, prior to my arrival, would always win the work, and in the end we had difficulties getting other tradespeople to quote – because the E/C Member either got the job or the job didn’t proceed.

          No problems now though, because I receive the quotes, our E/C Member abstains from voting, he still wins around 60% of the work, still does a good job, and as I e-mail those tradespeople who miss out to briefly thank them for quoting and to tell them who won the job, and always pay before the due date, we never have problems getting quotes.

          #17742

          Whale – this is fine if you have the processes in place to keep things above board.

          The trouble with our place is there are no processes (other than the parties not voting);  remaining EC members vote as one on these contracts; some owners feel they are being taken for a ride; and the work undertaken is not done in a timely or professional manner.

          I intend placing a motion on our AGM agenda to deal with conflict of interest issues but not sure how to phrase it.

          #17748
          kiwipaul
          Flatchatter

            @tracer said:
            I intend placing a motion on our AGM agenda to deal with conflict of interest issues but not sure how to phrase it.

            I regret to say the NSW Strata act dosn’t address the confilict of interest issue and so you have to rely on the honesty of the individuals concerned as you cannot legally stop them voting for their own motions concerning anything.

            You might be able to introduce a bylaw that addresses this issue but to get it approved you would need a 75% vote in favour of the new bylaw passed at the AGM and then registered with NSW gov.

            #17751

            @kiwipaul said:


            @tracer
            said:
            I intend placing a motion on our AGM agenda to deal with conflict of interest issues but not sure how to phrase it.

            I regret to say the NSW Strata act dosn’t address the confilict of interest issue and so you have to rely on the honesty of the individuals concerned as you cannot legally stop them voting for their own motions concerning anything.

            You might be able to introduce a bylaw that addresses this issue but to get it approved you would need a 75% vote in favour of the new bylaw passed at the AGM and then registered with NSW gov.

            Thanks for this, kiwipaul. Realise the NSW Strata Act is mute on this issue however intend to submit a motion on the AGM agenda so owners mayCry have the opportunity to air their views. Probably won’t get up however may prompt the EC to put some controls in place (wishful thinking). Our EC pretty well does what it likes (strata laws or not).

            #17763
            scotlandx
            Strataguru

              Conflict of interest is a universal governance issue, it doesn’t just apply to strata, it is up to individual schemes to determine how they deal with it.  If you are concerned about how these matters are handled, one approach is to have the EC adopt a conflict of interest policy that sets out how it deals with it.  There are plenty of examples on the internet on which you can base a policy.

              Personally, I do have an issue with an EC member having a direct interest in the provision of services to the scheme.  While it can work, and may in some instances cost less, it can create problems.  For example, if a lot owner provides building services and there are defects that may lead to litigation.  I agree with Whale and PeterC that in many instances an EC member may be doing the right thing, as it benefits them as an owner, but it can be tricky.

              Two of us on the EC are in professions that could be used by the OC, but we would never offer to supply any services, because we would be worried about liability.

              Certainly an EC member who is quoting should not have access to other quotes, because they are may use that confidential information for their own personal benefit.  Similarly they should not vote and should absent themselves when the vote is taken.

              #17773

              @scotlandx said:
              Conflict of interest is a universal governance issue, it doesn’t just apply to strata, it is up to individual schemes to determine how they deal with it.  If you are concerned about how these matters are handled, one approach is to have the EC adopt a conflict of interest policy that sets out how it deals with it.  There are plenty of examples on the internet on which you can base a policy.

              Personally, I do have an issue with an EC member having a direct interest in the provision of services to the scheme.  While it can work, and may in some instances cost less, it can create problems.  For example, if a lot owner provides building services and there are defects that may lead to litigation.  I agree with Whale and PeterC that in many instances an EC member may be doing the right thing, as it benefits them as an owner, but it can be tricky.

              Two of us on the EC are in professions that could be used by the OC, but we would never offer to supply any services, because we would be worried about liability.

              Certainly an EC member who is quoting should not have access to other quotes, because they are may use that confidential information for their own personal benefit.  Similarly they should not vote and should absent themselves when the vote is taken.

              Thanks for this, scotlandx – have placed a resolution on agenda for our upcoming agm. Although having an EC member undertake paid work can be beneficial, it is a quagmire unless sufficient controls are in place – this is not the case in our building (36 units) and the EC is unresponsive. Many owners are not even aware that the relevant parties are benefiting financially and have won 100% of the work in this field over the past 2 years. Time for an airing!

              #17789
              Sir Humphrey
              Strataguru

                BTW. It is a requirement of the Act in the ACT that the EC complies with the Code of Conduct included the Act. The Code includes that an EC member must declare any conflict of interest on any matter before the EC. It does not say what happens then but the Act requires that minutes be kept. These would be the evidence that the conflict of interest was declared and how it was then handled. 

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