June 26, 2012

Washington Courts Support Homeowners Associations' Efforts to Enforce Covenants

In a recent unpublished decision, the Washington Court of Appeals considered a case involving a house and garage that did not comply with setback requirements contained in recorded covenants.  The owners did not obtain the association’s approval before building those structures as required by the covenants.  The trial court ruled that the owners had violated the covenants, ordered them to tear down the home and garage, and instructed them to obtain the association’s approval before building in the future.  The association eventually agreed to allow the house to remain in exchange for a scaled-back garage and payment of the association’s attorney fees. 

The more recently published decision of Green Bank Beach and Boat Club v. Bunney also involved a homeowners association's attempt to enforce its governing documents.  In that case, a house that did not comply with a height limitation contained in recorded covenants was built without the association’s approval.  The trial court ordered the owners to modify their house, and the Washington Court of Appeals upheld that ruling.  However, the association’s covenants did not contain any provisions entitling it to an award of its attorney fees.  As a result, the association had to pay its $75,000 legal bill itself.

Washington courts generally support community associations when they seek to compel owners to comply with governing documents.  When legal action is necessary and an attorney has advised that the facts and law are on the association’s side, boards have good reason to be confident in the outcome.  Entitlement to attorney fees, on the other hand, is a separate issue.  Boards should determine at the outset whether their associations’ governing documents give them the right to be awarded attorney fees if they prevail in litigation.  This will allow them to properly evaluate the risk associated with pursuing lawsuits to enforce covenants. 

June 7, 2012

Staying Connected Helps Community Associations Weather Financial Storms

The June edition of the King County Bar Bulletin contains the following article that I co-wrote with my paralegal Elizabeth Demong.  The article describes how the presence of various types of connections within community associations can help to prevent bitter disputes over new or increased assessments.  Association boards are encouraged to take an active role in the creation and strengthening of such connections. 

In an effort to fund England's military engagements with France during the Hundred Years War, a young King Richard II levied an unpopular poll tax upon his subjects in 1381.  A large and almost certainly unanticipated uprising fueled in part by unhappiness about that tax occurred later that year.  The King’s lack of connection to his subjects helped bring about a serious conflict between ruler and ruled.   
Whether they like it or not, owners within condominium and homeowners associations are subject to their community’s governing documents and the boards that enforce them.  However, the law also requires community association boards to exercise their authority in a reasonable manner, which includes the application of proper skill and diligence to each situation.  When boards lose touch with their owners and act in ways that are inconsistent with their owners’ circumstances and opinions, political upheaval or (perhaps worse) litigation are often the unfortunate result.         

Like King Richard II, community association boards are of course sometimes compelled to deal with pressing financial concerns that have the potential to strain their connections with the owners that they govern.  However, boards should learn from King Richard II’s example and ask themselves two questions before attempting to raise large amounts of new revenue from owners.  First, are they asking for too much?  Second, are they asking too soon?  Neither question can be answered in a satisfactory manner without a strong connection to the owners.

Properly evaluating whether a board is asking for “too much” in new assessments requires both the exercise of due diligence (obtaining reports and/or bids from reputable local sources) and a strong connection to the owners.  Boards should seek to discover what is important to their owners and what challenges their owners are facing through surveys or meetings.  The ensuing connection will inform the nature and scope of the proposal and make it more likely to be successful.  Seeking new funds when connections with owners are weak can lead to ugly “civil wars” that paralyze the community.

Properly evaluating whether a board is asking for new assessments “too soon” also requires both the exercise of due diligence (obtaining reports from reputable local sources) and a strong connection to the owners.  Boards should consider the local economic and real estate climate and the challenges their owners are facing before making decisions about the timing of new assessments.  The recent defeat of a Mercer Island school bond measure illustrates the need to carefully calibrate requests for new revenue to economic realities.

Like King Richard II’s subjects, owners in community associations often lack meaningful connections to the boards that govern them.  When the only contact between board and owner concerns assessment increases, the relationship between the two is not likely to be a warm one.  On the other hand, some community association boards make it a part of their mission to nurture their connection with the owners and promote connections between them.  Those boards are likely to experience fewer intense conflicts because owners will feel that they are part of the community and that the community’s board takes their input into account.  Connected owners will make financial sacrifices to benefit the community more readily.

The creation of connections within community associations should be tailored to the community.  Suburban communities with large numbers of families will create connectivity in a different manner than urban communities dominated by young single professionals.  Once an emphasis has been selected, boards can periodically survey the owners to find out more about them and what they want.  Monthly newsletters are a particularly effective way to keep owners informed and involved.   

While the creation of connections within communities may aid in the avoidance of conflict, boards must also be prepared to handle conflict when necessary.  Sometimes this will mean “going to war” in court, but in other situations the re-establishment of the connection between the parties is the best option.  King Richard II limited bloodshed and preserved his rule by meeting with the rebel leaders and at least considering some of their demands. Community association boards can often profit from following the same course of action, whether this takes the form of an informal meeting, a negotiation with attorneys present, or a formal mediation.