Washington HOA and condo board conflict-of-interest checklist

A conflict of interest does not begin and end with a director owning a vendor company. It can arise when a board member, officer, household member, employer, client, investment, or other relationship creates an actual or potential benefit or detriment that could impair objective judgment. The board's job is to identify the interest early, obtain legal guidance, protect the decision process, and create a record showing that the association's interests came first.

Start with the law that governs the community and the entity. For a common interest community governed by RCW 64.90.410, officers and directors must exercise the care and loyalty required of corporate officers and directors and are subject to conflict-of-interest rules, regardless of the form in which the association is organized. RCW 64.90.365 does not list Section 64.90.410 among the sections generally extended to pre-July 2018 communities. Older communities should therefore have Washington counsel identify the applicable common-interest statute, corporate chapter, declaration, articles, bylaws, policies, and any election into WUCIOA.

Many Washington associations are nonprofit corporations governed by Chapter 24.03A RCW. Where that chapter applies, RCW 24.03A.495 requires directors to act in good faith, with the care an ordinarily prudent person in a like position would exercise, and in a manner reasonably believed to be in the corporation's best interests. It also requires disclosure of material information known to the director when needed for board or committee oversight, subject to specified confidentiality limits.

RCW 24.03A.615 addresses transactions involving a member, director, or officer, or another entity in which a director or officer has a role or financial interest. The statute describes paths involving disclosure or knowledge of the material facts and good-faith authorization by disinterested directors, approval by eligible members, or fairness to the corporation. It also says the section applies except as provided by the articles or bylaws. That is a legal framework, not a reason to treat every disclosed transaction as automatically acceptable.

Use a standing disclosure process rather than waiting for a controversy. At the beginning of each board term, ask every director and officer to identify businesses, employment, professional relationships, ownership interests, close family or household relationships, and other connections that reasonably could intersect with association decisions. Update the disclosure when circumstances change and at the start of each procurement, employment, collection, enforcement, insurance, construction, or professional-services matter.

Before discussing a specific agenda item, ask whether any director has an interest that a reasonable person could view as affecting judgment. The affected person should state the material facts to the board and counsel without minimizing the relationship. The chair or secretary should record that a disclosure occurred, while sensitive detail can be handled in a counsel-directed confidential record when appropriate. A vague statement that someone 'knows the vendor' is not enough if the material facts include compensation, ownership, family ties, or another significant relationship.

Disclosure is only the first control. Ask counsel who may receive materials, join discussion, be counted for quorum, vote, or sign the resulting contract under the governing law and documents. The answer is not always a generic rule that the interested director must leave the room for every purpose, and the association should not invent a procedure after seeing how the votes line up. Adopt a written, counsel-reviewed policy before a difficult case arrives.

Give disinterested directors the information needed for a real decision. Use a written scope, comparable proposals where practical, price and service comparisons, licensing and insurance verification, reference checks, conflict disclosure, evaluation notes, and contract review. A transaction should not become favorable merely because the interested director abstains. The remaining directors still need to determine that the choice serves the association and to understand alternatives, total cost, risks, performance standards, and termination rights.

Keep the manager in an administrative role unless the management agreement and board direction say otherwise. A manager can collect disclosures, organize proposals, verify documents, maintain the procurement calendar, and preserve the record. The manager should not decide whether a legal conflict exists, waive a required procedure, conceal a relationship, or pressure directors toward a preferred vendor. Counsel should advise on close calls and on transactions involving the manager or an affiliated vendor.

Minutes should show enough process to support the action without becoming a transcript or publishing unnecessary personal information. Depending on counsel's direction, record the agenda item, the existence and general nature of the disclosed interest, who was present for each stage, any abstention or recusal, the motion, vote, and approved follow-up. Keep proposals, comparisons, legal advice, insurance evidence, and detailed disclosures in the appropriate controlled files rather than attaching everything to public-facing minutes.

Special care is warranted when a conflict intersects with owner enforcement. A director involved in a neighbor dispute, architectural application, collection matter, hearing, or complaint may have personal facts or interests beyond the association's institutional role. Pause the assignment, preserve communications, limit access, and ask counsel who should investigate, hear, deliberate, and vote. Consistent enforcement and procedural fairness matter as much as the final outcome.

Revisit the conflict after approval. Confirm that the interested person did not expand scope informally, approve their own invoices, direct change orders, evaluate their own performance, control payment, or suppress complaints. Assign contract administration, invoice approval, and performance review to disinterested people with documented authority. Require a new disclosure if ownership, compensation, scope, subcontractors, or other material facts change.

This checklist is general board education, not legal advice. Washington's common-interest and nonprofit-corporation rules do not apply identically to every association, and the governing documents may add stricter duties. Counsel should decide applicability, disclosure sufficiency, participation, quorum, voting, privilege, minutes, contract approval, remedies, and whether a prior transaction needs corrective action.