conflict of interest

The law imposes three key fiduciary duties on board members, one of which deals with conflicts of interest.  The law requires board members to discharge their duties in a manner they reasonably believe to be in the best interests of the association (as well as in good faith and “with the care an ordinarily prudent person in a like position would exercise under similar circumstances”).  See Utah Code § 16-6a-822 (“General standards of conduct for directors and officers”).

Thus, a board member must put the association’s interests above the board member's personal interest when acting as a board member.  It is worth noting that something can be in both a board member's interest and in the association’s best interest, so that just because something benefits a board member doesn’t mean the law is violated.

Section 16-6a-825 deals specifically with conflicts of interest.  In essence, it provides that, as long as a transaction is fair to the association, then the transaction is not problematic simply because the transaction involves a board member (that is, it doesn’t matter that a board member has a conflict).  Or, even if the transaction isn’t necessarily fair, if the material facts are known to the board regarding the board member’s relationship in the transaction (the conflict) and a majority of the non-conflicted board members approve the transaction in good faith, then it doesn’t matter that a board member has a conflict.

Exception:  An association may not

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16-6a-822. General standards of conduct for directors and officers
16-6a-825. Conflicting interest transaction
HOA resources and laws annotated
HOA resources and laws annotated