Overview

Conflicts of interest arise when an HOA director’s personal or financial interests intersect with the director’s judgment as to what is best for the HOA as a whole. California law addresses these in two several places, including Civil Code 5350(b) (no voting when a director has a material financial interest in the matter) and Corporations Code 310 and 7233 (rules for transactions involving an “interested” director).

This Fact Sheet explains how to recognize when a conflict of interest exists, what the law requires from boards, and what steps homeowners can take to uncover and challenge improper conduct.

For a quick-guide on holding a board member personally liable for wrongdoing (like ignoring conflict of interest), see my Fact Sheet, “Can You Hold HOA Board Members Personally Liable in California?”

For a deeper dive into the topic of a director’s breach of fiduciary duty, see an episode of my podcast, HOA HELL, entitled “California HOAs: What is a Fiduciary Duty?”

Key Points

Conflicts of interest are among the most serious forms of HOA misconduct because they combine financial abuse with a breach of fiduciary duty. Understanding how to identify and document them is the first step toward protecting both your property and your community’s integrity.

• A “conflict of interest” exists when a director has a material financial interest in the decision. Common examples include awarding a contract to the director or a family/friend business, granting special fee waivers or privileges to friends/family, or using insider information for personal gain.
• A conflicted director cannot vote on that matter. Civil Code 5350(b) prohibits voting when a director has a material financial interest. Best practice is full disclosure on the record and complete recusal from discussion and vote.
• Interested-director transactions are voidable unless strict requirements are met. Corporations Code 310 and 7233 require full disclosure of material facts, approval by a majority of disinterested directors or members, and that the deal be fair and reasonable to the HOA at the time of approval.
• Meeting minutes should reflect disclosure, recusal, and disinterested approval. Minutes that document these steps help validate proper process. Minutes that omit them are a red flag.
• Records prove or disprove conflicts. Use Civil Code 5200 to request meeting minutes, agendas (including those for executive session meetings), bank statements, vendor contracts, invoices, and reimbursement records. Those categories are effective for revealing cozy vendor deals and self-dealing patterns. For a deeper dive into how to use a Civil Code 5200 demand to get all the documents you need, see my full article, “Forcing HOA Transparency: The Power of Civil Code § 5200 to Demand Records.” I also have a full chapter dedicated to the power of Civil Code 5200 in my book, HOA HELL | California Homeowners’ Definitive Guide to Beating Bad HOAs.
• If a conflicted vote affected the outcome, homeowners can challenge the decision. Available tools include Davis-Stirling Act-related alternative dispute resolution, including IDR under Civil Code 5900 et seq., ADR under Civil Code 5925 et seq., and if absolutely necessary, court action to void the transaction and seek appropriate remedies under Corporations Code 310 and 7233, and Civil Code 5975(c) for fee recovery.
• Persistent conflict behavior is a governance problem, not just a one-off. Organize evidence, watch for selective benefits, and prepare to use election remedies, including recall, under Civil Code 5100–5145 and related Corporations Code procedures. For a quick-guide on how recalls work, see my Fact Sheet, “HOA Recalls in California: How Homeowners Can Remove Their HOA Board.” I also have a podcast dedicated exclusively to that topic as well: “How to Recall Your HOA Board in California: Legal Process, Signature Rules, and Strategic Tips.”

Conflicts of interest are actionable when a homeowner can show a material financial interest, failure to recuse, or a defective approval process. If you suspect that one or more of your HOA’s directors has a conflict of interest, you should verify whether that director has properly disclosed the conflict and recused him or herself from related decisions. Ultimately, a well-documented Civil Code 5200 records demand followed by IDR, recall, or court enforcement is often the most effective way to correct the abuse.

FAQs

About MBK Chapman Fact Sheets

Homeowners searching for answers online will often come across articles that appear authoritative, but are actually written as search-engine marketing content rather than by an experienced HOA lawyer. These pieces tend to prioritize keyword density over clarity, accuracy, or legal context, which often leaves homeowners more confused than informed.

At MBK Chapman, our Fact Sheets are part of our HOA Law Library and are written by Michael Kushner, an HOA lawyer with decades of hands-on experience representing California homeowners. In fact, Michael Kushner is the HOA lawyer who pioneered the systems and strategies used by some of California’s most successful homeowner-side HOA law firms.

Each Fact Sheet is deliberately concise, statute-based, and designed as a quick-reference guide to help homeowners understand key HOA laws and enforcement rules at a glance.

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