The Board should consult with its legal counsel as soon as possible and solicit a formal legal opinion about this circumstance to ensure that there is no breach of fiduciary duty by the Board in allowing this arrangement to persist.
Breaches of fiduciary duty generally boil down to abuses of power. There are essentially three categories:
2. exercising of personal vendettas
3. selective enforcement of policy
If there is an problem involving a Board member also serving as building superintendent, it would the first of the three types described above: Self-dealing.
When a Board member obtains a personal advantage from their position on the Board, it could potentially be self-dealing and a breach of fiduciary duty. Board members have a legal obligation to subordinate their personal interests to those of the association or the unit owners. Failure to do that is self-dealing.
When a Board is hiring a vendor such as a lawyer, accountant, managing agent or a company that offers services such as security, telecommunications, repair or maintenance services or in this case the building superintendent, and a Board member has an interest in one of these companies or positions, special precautions must be taken in order to avoid a breach of fiduciary duty. An interested director is one who enters into a transaction with his or her association in which he or she has a personal financial interest in that transaction. There is no doubt here that the Board member who is serving as the super is an interested director.
An interested director should always disclose his or her interest in a transaction to his or her fellow board members. Failure to do so may allow the association to void the transaction if the interest is discovered later. It doesn’t sound like that is an issue here, as it would appear to be no secret to anyone that the Board member is serving as the super.
Assuming an interested Board member discloses his or her interest in a transaction to his or her fellow Board members, the interested director should recuse himself or herself from any vote to authorize such transaction.
The voting Board members should then vote, keeping in mind their fiduciary duty, which requires that they act for the benefit of the unit owners and not the personal interest of their fellow Board member.
In this instance I would recommend that the Board should have a written contract in place with the super, for a term of no longer than one year, and that it not be automatically renewable. Approximately 8 to 9 months into the contract term, the Board should solicit other bids for the super job by advertising for the position and/or contacting other companies or individuals who offer this service for similar buildings and inviting them to submit a bid. The Board should review those bids carefully and choose the one that is best and most advantageous for the association. The Board member who is serving as the super should have the opportunity to bid to retain the job, but he should be strictly excluded from any discussion of the super job, he should not be allowed to see the other bids, and he should be prohibited from voting on the decision.
Sean A. O’Connor
Finkel Law Firm LLC
4000 Faber Place Drive, Suite 450
North Charleston, South Carolina 29405
Direct Dial 843.576.6304