Can a board hire a member's relative or friend?

Q. I just learned the board president of our condominium association has steered hundreds of thousands of dollars of maintenance contracts for the association to her sister-in-law's company. The relationship was only recently made known, and it was never disclosed to the board before the board approved the contracts. Was this a conflict of interest for this board member?

A. Section 18(a)(16) of the Illinois Condominium Property Act governs contracts with board members and immediate family members of board members. A board member's immediate family means the board member's spouse, parents and children.

The act does describe a procedure that involves notifying owners of a contract the board intends to enter into with a board member's immediate family, and it permits owners an opportunity to vote to reject the proposed contract. However, the sister-in-law of a board member is not an immediate family member as defined under the act. Therefore, the procedure set forth in the act did not have to be followed. The board was free to enter into the contract.

That said, owners and other board members probably have a right to be upset if a board member is steering business to family members or friends, even if not to an immediate family member - even if the board member does not receive a direct benefit. I think it's a relationship that most board members and owners would want to know about. Learning it after the fact gives the appearance of impropriety, even if none actually existed.

Some associations have policies in place that require a board member to disclose any family relationship with a prospective vendor. So, while the board member in question did not have a conflict of interest in this instance, prudence dictates that any family relationship with a prospective contractor be disclosed to the board by the board member.

Q. There are real estate brokers on the board of our condominium. Is it ethical for these board members to use information gleaned from closed meetings of the board for their own advantage? The last situation involved information about a sheriff's sale in a pending foreclosure against an owner that was discussed in a closed session of the board. Your thoughts, please.

A. Board members receive information and documents, and engage in discussions, in executive session of board meetings or at other gatherings of the board that are not open to unit owners of the association.

Such information, documents and discussions are confidential and in general should not be disclosed to third parties.

In general, disclosure would be a breach of fiduciary duty, and could expose the board member to damages and to claims of self-dealing if used for personal gain. That said, without knowing the details as to how the information is being used by these board members, if the information discussed in the executive session is public, such as foreclosure pleadings, the use of that sort of information by a board member might not give rise to the same concerns.

Q. The declaration for our condominium limits the number of proxies that can be given to any one person. The declaration says no voting member may cast a proxy vote for more than three owners. This tends to disenfranchise many owners who give their proxy to the same person, but who can then not vote them. Is this limitation valid?

A. The restriction is lawful. In general, unless the association's articles of incorporation or bylaws provide otherwise, owners can vote by proxy.

Because these documents can prohibit voting by proxy, an association could similarly restrict the number of proxies that a voting member may cast on behalf of other owners. There are ways a proxy can be drafted to minimize the impact of this restriction, and the association's counsel should be consulted about appropriate language.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.