Board Resolutions

We are a 400 home single family HOA in South Carolina. Our governing documents state that the "affairs of the Association shall be managed by a Board of Directors".

AT our last Annual Membership Meeting an Amendment to our Covenants was proposed by an Association Member (who was also on the BOD at the time) to require that any proposed capital improvement expenditure for the improvement of existing facilities or construction of new facilities shall be approved by a majority of the Association Membership.

In the annual meeting mailing packet, as an attachment to the ballot, the BOD recommended that the membership vote yes on the amendment, which I do not feel they should have done in the first place.

At any rate, the proposed amendment failed to pass Membership vote.

Subsequently, our BOD passed a "Resolution on Capital Expenditures" which contains the same verbage as the failed proposed Amendment, essentially putting the failed proposed amendment into place.

My question is:

Since our governing documents require the BOD to manage the affairs of the Association, without restriction, and a proposed Amendment to restrict the BOD authority failed to pass the Membership vote, is our BOD within their right to pass such a Resolution which essentially is Amending our governing documents?

Sounds like they are simply saying they will take cap expenditures to the membership for approval. Since this is, in effect, broadening the opportunity for the community to be involved, it sounds benign.

Are you saying you want to restrict the community from being involved in major capital expenditure decisions?

John - I guess my question is whether an Amendment to the documents is required to place a spending restriction on the BOD when the documents contain no such restriction; or can the BOD place that restriction on themselves and future BODs through the resolution process?

George - I have always been a proponent of letting an elected BOD manage the association and make spending decisions in the best interest of the community as a whole and within their fiduciary duty and duty of care. I am not a fan of placing too many restrictions on a BOD. That being said, I do not have a great deal of pain with this restriction. My main concerns are that we are like most HOAs with a membership that is quite apathetic, especially when it come to participation in electing BOD members, voting on issues, etc. We also, like many associations, have our share of members who feel that "if I don't use it, I don't want it.

For a hypothetical example, tennis courts are proposed for our community. The project cost is $75,000. Combine the apathetic members who don't vote with those who "don't use it so I don't want it" and it becomes difficult to get anything done.

Leaving the decision to a good BOD acting in the best interests of the community eliminates the hurdle of getting the majority of the membership to approve it.

I believe the INTENT was Resolution on Capital Improvements

NOT on all expenditures which would include routine 'reserve' spending.

It is a GOOD thing to put Capital IMPROVEMENTS requiring expenditure to a membership vote

BUT

a waste of time and effort to vote on preplanned and funded reserve expenditures.

D'OH

Our documents do not define capital improvements, so we would revert to a legal definition of the term. Below is one legal definition.

A capital improvement is the addition of a permanent structural change or the restoration of some aspect of a property that will either enhance the property's overall value, increase its useful life or adapt it to new uses.

The comment about tennis courts was just a hypothetical example.

Bill

Most Covenants/Bylaws have a guideline/restriction on any new capital expenditures and/or on any special assessments. Typically requiring at least 2/3rds of all owners, and in many cases 75%, to approve such.

As said, any Rule by a BOD can be overridden by that BOD or any other BOD at a later time.

A capital improvement would be something THAT IS NOT covered in a reserve study, or might be a substantial upgrade, is new or is not a budgeted expense.

Two examples I had/have recently.

Somewhere the association decided to maintain the homeowners mailboxes (not in the CCRs) They had non-locking standard mailboxes costing $25.00. The Board wanted to upgrade to $100.00 locking mailboxes. While it was in the reserve study, the reserves covered the $25.00 version. The difference between the two was more than the 5% of annual budgeted expense and required a secret ballot vote by the Owners to approve. A Board member was not happy.

Same association has two parks. One has electrical and a light, the other doesn't. The components in the one park are in the reserve study. A Board member wanted to add electricity and light to second park. Again, not in reserve study and not a budgeted expense and over 5% of the annual budgeted expense. Again, Owners are required to approve the capital improvement. Same Board member, again, not happy.

Well, I will share something that was pointed out to me when we had this problem of a resolution that was actually an amendment to the by-laws. Someone said was it actually incorporated into the bylaws? Good question. It's recorded at the county as a bylaw change, but it says on the actual paper that it's a Resolution, not a bylaw change.

So any board now or in the future can do away with it, my question is WILL THEY? And if no one does before X amount of time, does that Resolution become binding, having been duly recorded and not legally challenged?

Mostly I decided not to worry about it. After reading that many of the items are in conflict with the DECLARATION itself, I decided no matter how long it sits there it will never be valid. It doesn't even purport to have properly changed the declaration.

In your case, I happen to like the idea of the resolution, I don't think that the BOD should be able to do what you want it to be able to do, but since you don't like it, perhaps it is also a moot point for you if it conflicts with governing documents.

I responded to GeorgeH46 on another thread, asking him to start a new thread.

Top left above thread listing .... “Add New Topic.”

I agree with this. They have the power and authority to manage the association without restriction. They decided to seek owner approval for some expenditures.

The resolution is only as good as long as the board wants to abide by it. It can be rescinded at will and at any time by the board if and when they decide they don't like it.

All of that leads me conclude that the resolution is worth something less than the paper it's printed on.

I appreciate all the input from all in this thread. And now my head is swimming trying to interpret and digest all that has been said. Can someone give a yes or no answer to the questions:

Since our declaration authorizes the BOD to manage the affairs of the Association, without restriction, is a resolution to require a majority of members to approve a capital expenditure of more than $50,000 (which places a restriction on the BOD not presently in the declaration) a proper resolution for the BOD to enact?

OR

Does it constitute amending the declaration by resolution?

if bylaws do not have a cap in it, then the board can make a resolution to do it.. if bylaws all ready has a cap then they can not do it.

ahh nm i see what you mean, it says with out restrictions. thus no there resolution can not put restrictions on it.

Ok so here is a straight answer for you my opinion. Can they do it : yes. Can they enforce it: no. Bylaws > resolutions. Thus when the bylaws and the resolutions conflict you go with the bylaws. (assuming this is in conflict)

The conflict is the bylaws says "with out restrictions" and needing a vote for spending is a restriction. So unless the bylaws says else where that a vote would be needed to spend xxxxxxx Amount. They do not need to.

problem will be what is considered a restriction. For this you may have to go to an lawyer. The lawyer may say adding a xxxxxx amount resolution for capital purchases does not "restrict running the affairs of the HOA".

Hope this helps and is clear
Cheers
Glen