Question:Our association would like to pay one of our board members to perform some limited odd jobs on the property. Can we do this?Answer:Community associations occasionally consider engaging a member of the association's board of directors to provide services to the association. Depending upon the particular circumstances, such an arrangement can be appropriate. However, association boards should be aware of certain legal considerations before entering into transactions with directors. This discussion is limited to the engagement of directors to perform types of work normally handled by outside independent contractors and does not address compensation for fulfilling the duties of an association director or officer, license requirements for providing community association management services or legal requirements associated with hiring employees, rather than independent contractors.First, both the Illinois Condominium Property Act ("Condominium Act") and the Illinois Common Interest Community Association Act ("CICAA") require disclosure of certain board member transactions. Subsection 18(a)(16) of the Condominium Act provides that a condominium board may not enter into a contract with a current board member or with a corporation or partnership in which a board member or a member of the board's immediate family has a 25 percent or more interest unless notice of intent to enter the contract is given to the unit owners within 20 days after the board decision to enter the contract is made. If a petition for an election to approve or disapprove the contract is signed by at least 20 percent of the unit owners and delivered to the association within 20 days after the notice, the election shall be held within 30 days after delivery of the petition. Under this provision, the term "immediate family" means the board member's spouse, parents and children. For associations subject to CICAA, Subsection 1-30(b) of that statute contains identical requirements, with the exception that Subsection 1-30(b) defines a board member's immediate family to mean the board member's spouse, parents, children and siblings.Second, board members must appropriately handle conflicts of interest when voting. Condominium associations and non-condominium community associations organized as not-for-profit corporations generally are subject to the Illinois General Not For Profit Corporation Act of 1986 ("Not For Profit Act"). Section 108.60 of the Not For Profit Act addresses director conflicts of interest. Under Subsection 108.60(c) of the Not For Profit Act, the presence of a director who is directly or indirectly a party to a transaction with the corporation or is otherwise not a disinterested party may be counted in determining whether a quorum is present at a board meeting but may not be counted when the board takes action on the transaction. Subsection 108.60(d) of the Not For Profit Act provides that, under most circumstances, a director is considered "indirectly" a party to a transaction if the entity conducting business with the corporation is an entity in which the director has a material financial interest or is an officer, director or general partner. In short, under Section 108.60, the director at issue should recuse himself or herself when the board votes on whether to hire the director.Third, before engaging the board member, an association should consult with its insurance representatives to confirm that the director's activities will be adequately covered by workers' compensation insurance.Finally, it is incumbent upon boards to remain cognizant of their fiduciary obligations and exercise reasonable business judgment in evaluating whether the director possesses the proper qualifications for the job at hand. In most cases, the benefits associated with hiring an outside contractor with specialized skills, knowledge, experience, credentials, equipment and other resources will outweigh the convenience of having a director provide the service.
