Evaluating the Impact of Undisclosed Conflicts
Potential Consequences of Failing to Disclose a Conflict
Legal Penalties: Undisclosed conflicts may lead to regulatory actions, fines, or loss of license under the Real Estate Act.
Financial Losses: A contract awarded due to an undisclosed conflict could result in financial mismanagement or legal disputes.
Erosion of Trust: Owners may lose confidence in the board and management, leading to governance issues.
Example of Non-Disclosure and Consequences
Scenario: A condominium manager hires a landscaping company owned by their sibling without informing the board.
Impact:
The owners discover the conflict and allege favoritism.
The corporation must terminate the contract, leading to financial losses and operational delays.
The manager faces potential disciplinary action for failure to disclose the conflict.
Corrective Action:
If a conflict is discovered after the fact, the manager should immediately disclose it, recuse themselves from related decisions, and allow the board to take corrective action.
Identifying and Analyzing Conflict of Interest Resolution Options
What Makes a Resolution Method Effective?
A conflict resolution strategy should:
Ensure compliance with Alberta condominium legislation.
Maintain transparency and ethical integrity.
Minimize financial and legal risks for the condominium corporation.
Preserve trust between the board, management, and owners.
Common Conflict of Interest Scenarios & Resolution Methods
Scenario | Conflict of Interest Risk |
A condominium manager’s spouse owns a company bidding on a maintenance contract. | Financial conflict—manager has a personal interest in the outcome. |
A manager accepts gifts or incentives from a vendor. | Ethical conflict—potential bias in vendor selection. |
A board member pressures the manager to select a preferred contractor despite a competing bid being more cost-effective. | Potential financial harm—favoritism over merit-based selection. |
Scenario | Resolution Option |
A condominium manager’s spouse owns a company bidding on a maintenance contract. | Formal Disclosure & Recusal: The manager must disclose the conflict in writing and remove themselves from the selection process. |
A manager accepts gifts or incentives from a vendor. | Formal Disclosure & Policy Enforcement: The board should have a no-gift policy to prevent such conflicts. The manager must disclose any received gifts and, if necessary, return them. |
A board member pressures the manager to select a preferred contractor despite a competing bid being more cost-effective. | Contract Renegotiation: The board should ensure fair, competitive bidding, and the manager must report undue influence. |
Legislative Reference: The Real Estate Act Rules require condominium managers to disclose conflicts of interest in writing before taking any action that could be seen as biased.
Evaluating the Risks and Benefits of Different Conflict Resolution Methods
Key Conflict Resolution Methods
1. Voluntary Recusal
The manager steps back from decisions involving a personal or financial interest.
Best when: The conflict is unavoidable, such as a manager’s family member owning a bidding vendor.
Risk: If not properly documented, recusal may not be enough to prevent reputational damage.
2. Formal Disclosure
The brokerage provides a written disclosure to the board, outlining the conflict.
Best when: The brokerage's conflict is indirect (e.g., prior business relationships).
Risk: If not followed up with corrective actions, disclosure alone may not prevent biased decisions.
3. Contract Renegotiation
If a conflict is discovered after a contract is signed, the board may choose to amend or terminate the agreement.
Best when: A vendor selection was influenced by undisclosed relationships.
Risk: Can result in legal disputes and financial penalties if termination terms are not met.
Comparing Conflict Resolution Strategies
Resolution Method | When to Use |
Voluntary Recusal | When the manager has direct financial or personal ties to a vendor. |
Formal Disclosure | When a potential conflict exists but the brokerage is not directly involved in the decision. |
Contract Renegotiation | When a conflict is discovered after a contract is signed. |
Resolution Method | Risk Level |
Voluntary Recusal | Low |
Formal Disclosure | Medium |
Contract Renegotiation | High |
Resolution Method | Effectiveness |
Voluntary Recusal | High—prevents biased decision-making. |
Formal Disclosure | Moderate—transparency must be followed with corrective action. |
Contract Renegotiation | Varies—may result in financial loss if not properly executed. |
Legislative Reference: The Condominium Property Regulation states that condominium corporations must act in the best interest of unit owners when managing contracts and vendor relationships.
Creating a Conflict of Interest Resolution Plan
Steps to Resolve Conflicts of Interest in Condominium Management
Step 1: Identify the Conflict
Assess whether a financial, personal, or ethical conflict exists.
Review the Real Estate Act Rules for disclosure obligations.
Step 2: Select a Resolution Method
If the manager’s involvement could create bias → Recusal.
If disclosure will ensure transparency → Formal written notice.
If a contract was impacted by a conflict → Renegotiation or cancellation.
Step 3: Document and Communicate the Resolution
Maintain written records of conflict disclosures and resolutions in board meeting minutes.
Ensure the resolution process follows Alberta condominium legislation.
Step 4: Implement Conflict Prevention Strategies
Establish a vendor selection policy that includes competitive bidding.
Require annual conflict of interest declarations from board members and managers.
Legislative Reference: The Real Estate Act Rules mandate that managers must document and retain all disclosures for regulatory compliance.
Conflict of Interest Resolution Plan
Scenario:
A condominium manager has a prior business relationship with a contractor bidding for a major repair project. The board is unaware of this relationship, and the contractor submits the lowest bid.
Your Task:
Determine if a conflict of interest exists.
Identify the most appropriate resolution method.
Write a conflict resolution plan to ensure transparency.
Correct Answer:
A conflict exists because the manager’s past business relationship may create bias.
The best resolution method is Formal Disclosure.
The manager should submit a written disclosure to the board and allow an independent decision-making process.
Example Conflict Resolution Plan Statement:
"To the Condominium Board,
I would like to disclose that I have a past business relationship with ABC Contractors, who have submitted a bid for the upcoming repair project. While I no longer have financial ties to ABC Contractors, I recognize that this could be perceived as a conflict of interest. I will recuse myself from all discussions and decisions regarding this contract to maintain transparency. Please let me know if further information is required.
Sincerely,
[Manager Name]"
