What is a Conflict of Interest?
The Real Estate Act Rules define a conflict of interest as a situation where a manager’s personal interests or relationships may compromise their ability to act in the best interests of the condominium corporation.
A licensee must not engage in conduct that creates or could create a conflict of interest without promptly disclosing it to their client and taking steps to address the conflict.
WHAT YOU'LL LEARN
What is a Conflict of Interest?
Identifying Situations That May Create Conflicts of Interest
Strategies for Addressing Conflicts of Interest
Handling Situations Where Personal Interests Conflict with Fiduciary Duties
Fiduciary Duties and Conflicts of Interest
As fiduciaries, condominium managers are required to act honestly, in good faith, and in the best interests of the condominium corporation.
Key Fiduciary Duties
Duty of Loyalty: The manager must prioritize the interests of the condominium corporation over their own.
Duty of Disclosure: Any actual or potential conflict of interest must be disclosed immediately.
Duty of Care: Managers must exercise reasonable care and skill in their actions.
A licensee must act honestly and in good faith in the best interests of the client.
Identifying Situations That May Create Conflicts of Interest
Examples of Common Conflicts of Interest
Recommending Contractors with Personal Ties
Example: A condominium manager recommends a contractor with whom they have a personal or financial relationship, without disclosing this to the board.
Risk: This could result in biased decision-making and harm to the corporation.
Accepting Gifts or Incentives
Example: A contractor offers the manager a gift in exchange for securing a contract with the condominium corporation.
Risk: Accepting such gifts may compromise the manager’s ability to act impartially.
Dual Representation
Example: A manager represents two condominium corporations involved in a legal dispute.
Risk: The manager may struggle to fairly represent the best interests of both clients.
Financial Investments in Suppliers
Example: A manager has a financial stake in a company supplying goods or services to the condominium corporation.
Risk: This could create the perception of self-dealing.
Red Flags for Potential Conflicts
Personal or family relationships with contractors or vendors.
Receiving offers of gifts, commissions, or financial incentives.
Engaging in activities or relationships that could compromise impartiality.
Failing to disclose financial interests related to the condominium corporation’s operations.
Strategies for Addressing Conflicts of Interest
Legislative Requirements
Under Alberta legislation, managers must take the following steps to address conflicts of interest:
Immediate Disclosure:
A licensee must immediately disclose to their client any conflict of interest or potential conflict of interest.
Client Approval:
Managers must seek written approval from the board of directors before proceeding in any situation involving a conflict.
A licensee must not provide services to a client in a conflict of interest situation unless the client has provided informed, written consent.
Transparency and Documentation:
Maintain clear records of disclosures, board decisions, and steps taken to mitigate the conflict.
Avoid the Conflict When Possible:
If a conflict cannot be resolved ethically, the manager must refrain from engaging in the activity or relationship.
Best Practices for Avoiding Conflicts
Establish Policies:
Work with the board to create clear policies on conflict-of-interest disclosures and gift acceptance.
Educate Stakeholders:
Provide training to boards and staff on identifying and handling conflicts of interest.
Adopt a Vendor Selection Process:
Use transparent bidding processes to select contractors, ensuring fairness and impartiality.
Interactive Activity
Scenario:
A condominium manager has received a bid for landscaping services from a company owned by their sibling. The manager believes the company is well-qualified and offers competitive pricing.
Task:
Identify the potential conflict of interest in this situation.
Outline the steps the manager must take to handle the situation ethically, based on the Real Estate Act Rules.
Handling Situations Where Personal Interests
Conflict with Fiduciary Duties
Real-World Example
Situation:
A manager oversees a major repair project and recommends a contractor with whom they have a financial interest. The board later discovers this relationship and accuses the manager of failing to act in the best interests of the corporation.
Correct Course of Action:
The manager should have disclosed the financial interest to the board immediately.
The board should have been provided with alternative contractor options to ensure transparency.
All recommendations should have been documented to demonstrate impartiality.
Resolving Ethical Dilemmas
When faced with a conflict of interest, managers should:
Prioritize the condominium corporation’s best interests.
Consult the Real Estate Act Rules for guidance.
Seek advice from legal professionals if necessary.
Interactive Case Study
Scenario:
During a routine meeting, the board discovers that the condominium manager has been accepting frequent gifts from a maintenance contractor. The board is unsure how to proceed and requests the manager’s input.
Task:
Analyze the situation and identify the legislative breaches.
Recommend steps the manager and board should take to address the issue ethically.
