Sunday, May 10, 2009

THE RIGHT THING: Minding Your Neighbor's Business?

A reader who is a member of the board of a condominium association in Ohio recognizes that, as a board member, he is responsible for making sure that the association's bylaws are followed.

One of those bylaws requires anyone buying a unit in the condo complex to pay $1,000 to the association's reserve fund. Wanting to know if a unit currently being rented to someone with an option to buy had actually been sold, the board member accessed the county auditor's Web site.

His search revealed that the unit had not been sold, so the association was not due the $1,000 fee. He discovered, however, that the condo's owner was receiving a 2.5-percent reduction in his property taxes because he stated that he occupies the unit ... which he does not.

This discovery leaves the board member in a quandary. Now that he has the information, what should he do with it?

"Is it ethical for me to notify the county auditor of the situation?" he asks. "Or would I be wrong in doing this?"

OK, no one likes a busybody. Few of us can stomach folks who stick their noses into other people's business. But an accidental discovery during a legitimate investigation is a different story from rummaging around looking for dirt.

So long as the board member did not break any laws by accessing the county auditor's site, he has every right to be concerned about what he found. If the condo owner is not paying the full property taxes due on the property, he is defrauding the community in which he lives, or in which he says he lives. That is not only illegal, but also unethical. His misrepresentation steals money from the community and forces others to pay more than necessary to run the local government's operations.

There is, of course, a risk that, if my reader fingers this owner, others in the condo association might turn out to be doing the same thing and, if so, surely wouldn't appreciate being called out.

That consideration should not stop him from reporting the scofflaw, of course. But the right thing for him to do, before reporting the condo owner, is to discuss the issue with his fellow board members. A good rule of thumb, when making an ethical decision, is to discuss the issue and possible responses with other stakeholders. They may offer valuable feedback both about the options in a particular situation and also about how it might affect the community more broadly.

The board might, for example, decide that it's time to remind all condo owners about the $1,000 purchase fee and also to point out that, if they are renting their units, they are not entitled to the tax reduction for residency. The board might feel that the best response is to tell the tax-ducking condo owner that the situation has come to the board's attention and that it will be reported unless he decides to report it himself -- and pay whatever back taxes are necessary -- by a specified date.

One thing my reader should make clear to the board, however, is that the option of not reporting the issue isn't on the table. If the board won't act on the matter as a group, he will do so as an individual.

Knowing that the law is being broken -- especially in this case, when the violation could directly affect the board's interests -- and doing nothing would make my reader and the rest of the board complicit in a situation that never should have happened in the first place. The question is not whether to sit on this information, in short, but only how to go about remedying it.

c.2009 The New York Times Syndicate (Distributed by The New York Times Syndicate)

4 comments:

Anonymous said...

Instead of first going to the county auditor's Web site, why didn't the condo board member simply ask the condo owner whether he/she had yet sold the unit?

While the Internet makes it easier to track down this information rather than ask the person directly, it did raise this other ethical dilemma because he found more information than he originally sought.

This gets back to your point about busybodies. Instead of being forthright and asking the question, he "investigated" and found something unethical, illegal, possibly an oversight, but regardless, none of his business. He has willingly stuck his nose where it didn't belong, so now he has an ethical problem of his own.

Perhaps the board member should use this opportunity to talk with the condo owner directly and ask him to rectify the situation, and then stay out of it. And perhaps the lesson on ethics for your readers should be to talk to people first and not immediately jump online to snoop?

Bill Jacobson said...

Jeffrey,

I don't believe that the board member has an ethical obligation to turn in his neighbor and that may be unwise to do so.

Condo owners and their board members are partners in a joint operation - the condo complex. Business partners owe one another a fiduciary duty of loyalty to work towards a common interest. It takes an extraordinarily compelling competing duty to override the duty owed to your business partner.

There are certainly situations which could override this fiduciary duty - if the partner's actions interfered with the board's operations or duties, implicated the board or its fiduciaries (the other owners) either civilly or criminally or if the owner's individual actions raised to a level to be of a serious public concern, such as violent crime (but not jaywalking), but these facts do not appear to raise to that level.

The possibility that an individual owner may have (even intentionally) misfiled his property's status does not impact the board's operations, does not impede on other owner's rights and does not raise to the level to be of serious criminal concern. The best that the board member can muster is that the owner is cheating the government, and therefor all of us will pay more. This is a pretty weak competing interest and certainly does not override the duty of loyalty he owes his business partner.

Neither the board nor the board member should inform the county of their discovery. The board may choose to inform the condo owner that they discovered the property was miscategorized but if the condo owner fails to correct the issue, they should not report him.

Sometimes the right, and therefor ethical, course is to to balance justice with mercy, especially when one shares common interests.

William Jacobson
Cypress, CA

Anonymous said...

The miscreant owner is violating two laws in Ohio. Anyone who rents their property in OH must register the property with the state through their County Recorders Office.

http://www.clermontauditor.org/upload/RESIDENTIAL_RENTAL_PROPERTY_REGISTRATION.pdf

Louise Macaulay said...

I will side with the first blogger. If the board had questions, the direct approach is always best. The internet makes it far too easy for "busybodies" to mess in and avoid one on one communication. When one volunteers to participate on a board, he/she should be willing to have those crucial conversations.

Don't let the personal get in the way of the bigger picture

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