Homeowners' associations (HOAs) play a pivotal role in managing and maintaining the quality of life within residential communities. At the heart of these organizations are the board members, entrusted with making decisions that affect all residents.
However, when personal interests interfere with official duties, conflicts of interest can arise, undermining trust and leading to potential disputes. Understanding these HOA conflicts and knowing how they are addressed under California law can help homeowners better evaluate their options and protect their interests.

Understanding Conflicts Of Interest In HOA Boards

A conflict of interest in an HOA context generally arises when a board member’s personal interests—financial, familial, or otherwise—interfere, or appear to interfere, with their obligation to act in the best interests of the association. These situations can raise concerns about whether decisions are being made for the benefit of the community as a whole.

Examples may include:
- Awarding contracts to companies owned by a board member or a close family member
- Participating in decisions that could result in personal financial benefit
- Using non-public association information for personal advantage

Conduct of this nature can undermine confidence in board decision-making and, depending on the circumstances, may implicate duties imposed under California law.

Importance of Addressing Conflicts in HOA Governance

Addressing conflicts of interest is central to maintaining functional and transparent HOA governance. If left unaddressed, conflicts can contribute to:
- Erosion of trust among homeowners
- Increased risk of internal disputes or litigation
- Financial or operational decisions that may not reflect the association’s best interests

Identifying and managing conflicts helps promote accountability and consistency in board actions.

Identifying Conflicts of Interest

Common Scenarios in HOA Boards

Potential conflicts of interest may arise in situations such as:
- A board member voting on matters in which they have a direct personal stake
- The association retaining vendors with personal or financial ties to board members
- Transactions that disproportionately benefit a particular individual rather than the association

These scenarios can raise questions about whether fiduciary duties are being met.

Signs of Potential Conflicts of Interest

Homeowners may notice indicators that warrant closer attention, including:
- Limited transparency surrounding board decisions
- Repeated benefits flowing to the same individuals or entities
- Resistance to reasonable requests for financial records or meeting information
- Decisions that consistently favor certain parties without clear explanation

Observing these patterns does not necessarily establish wrongdoing but may justify further inquiry.

Legal Framework in California

Overview of the Davis-Stirling Act

The Davis-Stirling Common Interest Development Act governs most aspects of HOA operation in California. Under Civil Code § 5350(b), a director may not vote on matters in which they have a material financial interest, subject to limited statutory exceptions. This provision is intended to reduce self-dealing and promote decision-making in the association’s best interests.

California Corporations Code Considerations

Many HOAs are organized as nonprofit mutual benefit corporations and are also subject to California Corporations Code sections 310 and 7233. These statutes address transactions involving interested directors and provide that such transactions may be voidable unless:
- The material facts of the transaction and the director’s interest are fully disclosed
- Approval is obtained in good faith by disinterested directors or, where applicable, the membership
- The transaction is fair and reasonable to the association at the time it is approved

Compliance with these requirements can be a critical factor when evaluating board conduct.

Internal Resolution Strategies

Role of Governing Documents in Conflict Resolution

An HOA’s governing documents—including bylaws and CC&Rs—often contain provisions relevant to conflicts of interest, such as:
- Disclosure obligations for board members
- Recusal procedures when conflicts arise
- Standards of conduct or disciplinary mechanisms

Reviewing these documents is often an initial step when concerns about board conduct arise.

Transparency, Disclosure, and Recusal

Common practices used to manage conflicts include:
- Disclosure of potential conflicts before board discussion
- Recusal from deliberation or voting when a conflict exists
- Documentation of disclosures and recusals in meeting records

These measures can help demonstrate good-faith governance and reduce the likelihood of later disputes.

External Legal Options

Consulting HOA Attorneys

When internal processes do not resolve concerns, some homeowners choose to consult with an HOA attorney to better understand how California law may apply to their situation. An attorney can help:
- Review governing documents and meeting records
- Explain relevant provisions of the Davis-Stirling Act and Corporations Code
- Discuss potential procedural or legal avenues that may be available

The appropriateness of any particular course of action depends on the specific facts involved.

Legal Actions Under California Law

In certain circumstances, disputes involving board conflicts of interest may lead to formal legal proceedings. Claims sometimes raised in this context include:
- Allegations of self-dealing
- Breach of fiduciary duty
- Statutory violations under applicable California law

Possible outcomes vary by case and may include injunctive relief, court oversight, or other remedies permitted by law.

Homeowner Rights And Responsibilities

Homeowner Access and Participation Rights

California law provides homeowners with statutory rights that may include:
- Access to specified association records
- Attendance at properly noticed board meetings
- Participation in member votes and elections

Exercising these rights can play a role in promoting accountability within the association.

Codes of Ethics and Conduct

Some associations adopt written ethics or conduct policies for board members. Homeowners may:
- Request copies of adopted ethics policies
- Monitor board conduct for consistency with those standards
- Raise concerns through internal dispute resolution or other permitted processes

Engagement at this level can contribute to more transparent governance.

Prevention Measures

Conflict of Interest Policies

Many associations adopt formal conflict-of-interest policies that:
- Define what constitutes a conflict
- Require disclosure of potential conflicts
- Establish recusal and documentation procedures

Periodic review of these policies can help maintain compliance with evolving legal standards.

Community Awareness and Education

Associations may promote awareness by:
- Sharing educational materials with homeowners
- Encouraging attendance at meetings
- Providing general information about homeowner rights under California law

An informed membership is often better positioned to participate constructively in governance.

Addressing HOA Board Conflicts in California

Questions about board conflicts of interest can be complex and fact-specific. Homeowners who are concerned about potential misconduct may wish to review their governing documents and applicable California statutes before deciding how to proceed.

LS Carlson Law represents homeowners in HOA disputes throughout California and focuses on issues involving board conduct, governance, and statutory compliance. Homeowners can reach out to learn more about how these matters are typically evaluated and what options may be available under California law.