Cooperative and condominium boards are entrusted by apartment owners with responsibility for managing the affairs of their building. Boards make many types of decisions, from deciding (in the case of co-op boards) who gets to purchase an apartment to choosing the color of the carpet in the building's hallways. Apartment owners generally understand that board members are fiduciaries and therefore expect that boards must make such decisions and take actions which are in good faith and in the best interest of the cooperative or condominium community as a whole, and not for a board member's personal interest or gain.

But what happens when a director has a personal interest that is separate and apart from the interest of the cooperative or condominium, collectively, on whose board they serve? A director in this position may have a conflict of interest.

A frequently encountered example of such a facial conflict is when a director has also brokered a transaction for the sale of an apartment in the building, which transaction the board is evaluating. On the one hand, such a broker/director wants the transaction to proceed to closing and collect a brokerage commission; on the other hand, the director also has the responsibility of fully vetting the potential purchaser and, if appropriate, rejecting the purchase application. What course of action should the broker/director and, more importantly, the board take in order to comply with the law and avoid potential litigation?