CEO 82-50 -- July 29, 1982

CONFLICT OF INTEREST

SCHOOL BOARD MEMBER LISTING PROPERTY FOR SALE BY SCHOOL BOARD WITHOUT RECEIVING COMMISSION

To: Mr. William W. Caldwell, Attorney for School Board of Indian River County

SUMMARY:

A prohibited conflict of interest would be created were a school board member who is a real estate broker to list for sale property owned by the school board, where neither he nor any associate of his real estate firm would receive a commission from the sale. Here, the school board member would be employed by a business entity which is doing business with the school board, in violation of subsection 112.313(7), Florida Statutes. An exemption for transactions not exceeding $500 would not apply to this situation since the value of the real property apparently would exceed $500. See Section 112.313(12)(f), Florida Statutes. However, the exemption for sealed competitive bidding would apply if such a procedure were used for the arrangement between the school board and the real estate firm. See Section 112.313(12)(b), Florida Statutes.

QUESTION:

Would a prohibited conflict of interest be created were a school board member who is a real estate broker to list for sale property owned by the school board, where neither he nor any associate of his real estate firm would receive a commission from the sale?

Your question is answered in the affirmative, subject to the exception noted below.

In your letter of inquiry you advise that Mr. Richard Bolinger is a member of the School Board of Indian River County and also is a registered real estate broker. In addition, you advise that the School Board owns certain real property in the County which it has declared surplus and which it intends to sell. The subject Board member has offered the services of his firm to list the property with the county board of realtors multiple listing service. Neither the subject Board member nor any of the associates in his firm would receive any commission from either the Board or the purchaser. The subject Board member would pay for the cost of the listing service. If the property were sold through the multiple listing service through the efforts of a participating broker, that broker would receive a commission, but the Board member's firm would receive no compensation for its efforts. In that instance, the commission paid would be one-half of the normal commission for vacant land transactions. If the Board member's firm were to be the selling broker as well, no commission would be paid by the School Board at all.

The Code of Ethics for Public Officers and Employees provides in part:

DOING BUSINESS WITH ONE'S AGENCY. -- No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes (1981).]

This provision prohibits the subject School Board member from acting in an official capacity to purchase realty or services for the School Board from his real estate firm. In addition, the provision prohibits him from acting in a private capacity to sell any realty or services to the School Board. However, under the circumstances you have presented, we do not find that the subject Board member would be "selling" any services or realty to the School Board. Rather, he would be donating his firm's services at his own expense, as his firm would not be receiving any commission from the sale of the property and would be paying for the cost of the listing service.

The Code of Ethics also provides:

CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP. -- No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business with, an agency of which he is an officer or employee . . . ; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1981).]

This provision prohibits a School Board member from having any employment with a business entity which is doing business with the School Board. In our view, if the subject School Board member's real estate firm were to undertake to sell property for the School Board, the School Board would be "doing business with" the real estate firm with which he is employed. Having undertaken to act for his employer, a real estate broker creates a fiduciary relationship with that employer which requires a duty of good faith; the failure to act in good faith renders the broker liable to his principal for damages suffered as a consequence of his breach of duty. 7 Fla. Jur. 2d Brokers, Sections 64-68.

The Code of Ethics contains several express exemptions to the prohibition of Section 112.313(7)(a). See Section 112.313(12), Florida Statutes. Of these exemptions, it appears that only two might be relevant to the situation you have described. Section 112.313(12)(f) exempts transactions if the "total amount of the subject transaction does not exceed $500." Since we assume that the value of the real property which the School Board wishes to sell exceeds $500, we find that this exemption would not apply here. In past opinions, we have applied the $500 limitation to the amount of the underlying sale, rather than to the amount of commission to be received. See CEO's 77-160 and 80-30.

However, we are of the opinion that the following exemption would apply here, if the School Board were to select a real estate broker on the basis of a sealed, competitive bidding system:

The business is awarded under a system of sealed, competitive bidding to the lowest or best bidder and:

1. The official or his spouse or child has in no way participated in the determination of the bid specifications or the determination of the lowest or best bidder;

2. The official or his spouse or child has in no way used or attempted to use his influence to persuade the agency or any personnel thereof to enter such a contract other than by the mere submission of the bid; and

3. The official, prior to or at the time of the submission of the bid, has filed a statement with the Department of State, if he is a state officer or employee, or with the Clerk of the Circuit Court of the county in which the agency has its principal office, if he is an officer or employee of a political subdivision, disclosing his, or his spouse's or child's interest and the nature of the intended business. [Section 112.313(12)(b), Florida Statutes (1981).]

Accordingly, we find that a prohibited conflict of interest would be created were the subject School Board member to list for sale property owned by the School Board under the circumstances described above, unless the arrangement between the School Board and the real estate firm is entered into in accordance with the competitive bid exemption of Section 112.313(12)(b), Florida Statutes.