Conflict of interest
What is it?
A conflict of interest arises when a person or entity has competing interests that may affect their ability to make impartial decisions. This situation presents ethical and financial risks, as it can compromise objectivity and hinder the ability to act in the best interest of all parties involved.
In real estate investing, conflicts of interest are particularly relevant due to the complexity of transactions and the variety of stakeholders involved — such as developers, investors, managers, and advisors. For example, a conflict of interest might occur if a manager favors a project in which they have a personal benefit, even if other projects could be more advantageous for investors.
Key aspects to consider
To avoid conflicts of interest and ensure transparency, it is essential to implement control measures such as:
- Full disclosure: All parties involved must report any relationships or interests that could influence their decisions.
- Separation of duties: Clear boundaries must be maintained between decision-making roles and supervisory responsibilities.
- Codes of conduct: Internal rules should be adopted to promote ethical behavior and impartiality.
- External oversight: Independent auditors or regulators should review key operations and decisions.
In real estate investment, protecting investors depends on the ability to identify, manage, and mitigate conflicts of interest. A trustworthy environment is built through transparent practices and a strong commitment to integrity throughout the entire investment process.
Regulatory compliance and the adoption of ethical standards are essential to minimize the risks associated with conflicts of interest and to ensure decisions are made in the best interest of all stakeholders.