A resolution is simply a written motion, many times a very detailed motion. Resolutions are used by legislative bodies, nonprofit corporations, and large and small for-profit corporations. The terms corporate resolution and board resolution are synonymous. In some cases, and areas, the term “resolve” is used instead of, or in addition to, “resolution.” For-profit corporation’s board of directors utilize resolutions for many operational issues, such as to purchase or sell real estate. Homeowner association (HOA) board of directors use resolutions on an array of issues as well, such as when obtaining a bank loan. A resolution such as this in a corporate or HOA board of directors’ environment, is to give third parties, such as a lending institution, the assurance of who has authority to act on behalf of the organization.
In parliamentary procedure, the resolution process is a motion in a formal proposal made before a deliberate assembly. With the express purpose of bringing forth a topic before this deliberate assembly for deliberation and action. A deliberative assembly or a deliberative body is a meeting of members of an organization who utilize parliamentary procedure to conduct the organization’s business.
The foundation of parliamentary procedure is the orderly and effective progression of an organization’s business during a meeting of the organization. The ultimate objective of parliamentary procedure is to reach a purposeful consensus of the majority while still allowing the minority the ability to differ with and express their position. This is all achieved with respect to the rights of all the members of the organization whether in attendance or not. To help accomplish these tasks, most non-governmental and some governmental deliberate assemblies utilize Robert’s Rules of Order Newly Revised.
In practice, a resolution should be a written or printed instrument, that can be either adopted or rejected by a deliberative assembly. For detailed motions of significance, it is beneficial to have the motion written or printed out beforehand for simplicity of the debate and the voting. One benefit of an adopted motion in a single resolution document form is the dissemination to other parties, such as the membership or perhaps a financial lender.
For all practical purposes, the basis of the resolution can be any matter that can normally be proposed as a motion. This being matters within the purview of the organization. For example, a homeowner association board adopting a resolution for worldwide nuclear weapons disarmament. While a board of directors could adopt this resolution, it is not within the purview of the HOA board of directors with no practical implication to the HOA. Additionally, the resolution must abide by and not conflict with the other association governing documents. For example, unless the governing documents specifically prescribed, a resolution would not be the appropriate method for increasing the number of directors on the board of directors.
Once this motion is voted on and if passed, it becomes an adopted resolution and is legally binding upon the homeowner’s association. Legally binding in that the board of directors is agreeing to what is within the resolution on behalf of the HOA, and the resolution is within the board’s ability and authority. A HOA board of directors, as with any deliberate assembly, should be operating within the parameters of parliamentary procedure, and adopting resolutions is the formal method of recording actions of the deliberate assembly.
In the context of homeowner associations, resolutions most often come up when the HOA opens a bank account or obtains a bank loan. In most cases, the bank or lending institution will draft the resolution for the board of directors to vote on and sign. Bank resolutions typically address corporate operational matters, such as who makes up the board of directors, who is authorized to sign on behalf of the board of directors, or who is authorized to sign loan documents. A bank requires a resolution from a HOA board, or any corporation board for that matter, to determine who are the principals of the organization, and thus, who has the authority to bind the association to the terms of the loan.
Resolutions also come up when homeowner association boards must document infrequent, but important events. The appointing of a new board member to fill a vacancy could be a reason for a resolution. Possibly, but not necessarily, the establishment of the HOA’s collection policy could be to a level to warrant a resolution. This could be the case when state statutes mandate a formal written HOA policy on collections.
As previously noted in this blog, it is preferable, if the elements of a resolution are known before a meeting of the assembly, that the resolution be preprinted and ready for adoption if passed. If a preprinted resolution is not feasible, it is acceptable to hand print the resolution and adopt it as presented to the board of directors. When the resolution is voted on and adopted, the resolution should be signed by all the directors. There are exceptions when it can be acceptable to have just the majority of the directors who supported the resolution sign the actual physical resolution. However, bank resolutions, resolutions involving a legal matter, or state statutes, may make it necessary to obtain each director’s signature on the physical resolution. If an issue such as this arises, the board of directors should consult the HOA’s attorney for guidance.
Once a resolution is fully adopted (debated, voted on, and signed) the physical resolution becomes a part of the permanent records of the homeowner’s association. Generally speaking, resolutions typically are not required to be filed with a governmental agency, such as the county register of deeds or the secretary of state.
However, some instances may require a resolution to be filed. For example, in South Carolina, there was an addition to the state statutes in 2018 regarding the enforceability of declarations of covenants, conditions, and restrictions and other HOA governing documents. This statute mandates that governing documents, to be enforceable, must be recorded with the county register of deeds. This filing requirement in this statute included relatively “fluid” documents such as the homeowner association’s rules and regulations. So, if a resolution was something in addition to, or related to, the rules and regulations or other governing documents, it may need to be filed per this statute. However, in most cases, an enforceable issue such as what would be in the rules and regulations or covenants, should not be addressed with a resolution. In most instances, issues of this nature should be addressed with an amendment to the declarations or an amendment to the rules and regulations. (Continued with Part Two)
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