The Building Manager and ‘Conflict of Interest’

Definition: A conflict of interest (COI) occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.

In any industry, there is a responsibility to ensure that individuals and organisations operate with the utmost integrity and transparency.

At Vertical Asset Management, we urge all of our clients as part of their due diligence to insist on the sighting and auditing of the Conflict of Interest Policy for any of their suppliers.

Facilities Managers, Building Managers and Owners Corporations (OC) alike assume full responsibility for budgets varying in size (with some as little as a hundred dollars to larger amounts in the millions of dollars) each year. As such it is imperative that individuals and companies operate with the utmost professionalism and transparency.

Under the Strata Schemes Management Act, a person nominated for election to an Executive Committee (EC) must disclose any financial, business or family connections they have with the developer or caretaker. This requirement does NOT necessarily extend to service contractors.

Executive Committee members are bound to an ethical code of conduct when assuming responsibility as an elected member, much like company directors who assume a Fiduciary duty in their proposed operations.

A fiduciary relationship is a legal relationship of confidence and trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances that give rise to a relationship of trust and confidence. The word itself is derived from the Latin fides (meaning faith) and fiducia (meaning trust).

In Strata terms, there are often relationships formed with a variety of stakeholders with differing interests in an asset. The modern Facilities Manager on a daily capacity will forge relationships with a variety of stakeholders including the property owner, occupant/tenant, suppliers, agents and service providers.

As such it is imperative that your current Building Management Firm outlines its ‘Conflict of Interest Policy’ and how it intends to disclose and manage these relationships.

An example of such a conflict recorded in Strata in NSW is where an Owner seeks appointment to the Executive Committee to receive the benefits associated with such an appointment. The example in being referred is a Real Estate Agent who once appointed to the EC received access to the entire highrise building, (Not just common areas and the floor of residence), with such access available, the agent was then in a position to canvass for clients through the distribution of marketing material.

In this particular case, the Agent also used the position of Secretary to gain access to the Strata Roll (List of all owners within the building) again for the purposes of distributing marketing material for the interest of their business rather than that of the building.

Conflicts of this nature occur each and every day; as such we recommend that all professional service providers clearly outline their Conflict of Interest management policy from the outset.

This policy should also be linked to the procurement strategy to ensure transparency in all appointments or purchasing.

It is well known that there are cowboy Facility Management operators that do exsist in our industry where back hand deals are done at the determent to Building Owners. Quite often these operators offer cheap services and make up the rest through back hand deals once appointed.  Often the cheapest option is not the best, and one way or another, the OC will pay.

Given this blight on industry, we urge all stakeholders to understand their responsibilities by exemplifying a superior level of conduct during business dealings.

Do not take a risk with the integrity of your operations, ensure that clear guidelines are developed and implemented from the outset. This will ensure the integrity of all professional relationships benefiting all stakeholders.