The Conflict Waiver

“Transparency” is the buzzword du jour. A recently passed state law requires co-op and condo boards to prepare an annual report that lists all contracts in which a director had a vested financial interest. With the issue of transparency now front and center, some boards are seeking to make the board/management/contractor relationship even more transparent by having their lawyers draw up what are called “conflict waivers.”

“We draft agreements with contractors on behalf of our cooperatives and condominiums all the time,” says attorney Julie Schechter, a partner at Montgomery McCracken Walker & Rhoads. Typical language says: “The contractor warrants and represents that no money, gift, gratuity, compensation, consideration, bonus, fee, or another thing of value has been or will be, directly or indirectly, paid to any agent, representative, officer, director, or employee of the owner, or their spouses or immediate families, to secure this agreement, or in connection with the work set forth in this agreement.”

Just because a manager recommends a contractor is not a conflict per se. “He’s supposed to know contractors,” says attorney Geoffrey Mazel, a partner in Hankin & Mazel. “That’s part of what you pay him for.” Adds attorney Lisa Smith, a partner in Smith, Gambrell & Russell: “It’s only a conflict when the manager has a stake in the contractor’s company. That has to be disclosed.”