WA Court of Appeals Upholds HOA's Enforcement of Home Business Restriction

Division Two of the Washington Court of Appeals recently published an opinion concerning the validity of an owner's business-related activities within a homeowners association. It decided that the owner's conduct violated one of the covenants that governed the property. The court also rejected the owner's argument that the association had waived its right to enforce that covenant.   

The association’s common space contains an airstrip that all property owners have a right to use for their private planes. The use of the airstrip is subject to restrictions outlined in a set of recorded covenants, including a prohibition on home businesses unless they are entirely within the owner's residential structures and operate in a manner that gives no outward appearance of a business.

The owner's business trained five or six students daily on wing walking within their hangar. Wing walking is climbing from the cockpit to the upper wing rack and along the lower wing and climbing around the exterior of the plane with a safety harness and cable. Training included lessons, photos, and a flight. Students arrived around 8:30 a.m. in four to six cars. Three planes were kept on the property and shuffled in and out of the runway. Only one student could be trained at a time while the others congregated inside and outside the hangar structure. The court held that operating this home business in this manner gave an outward appearance of a business and thus violated the covenant at issue. 

The court also decided that the association did not waive its right to enforce the home business restriction. It first pointed out that the set of covenants expressly includes a provision that failure to enforce any covenant or restriction is not a waiver of the right to do so in the future. The court further noted that there was no evidence that the association had stated an intention to relinquish its right to enforce this covenant.

Incorporated Associations Must Now File Beneficial Owner Information Reports

A federal law named the Corporate Transparency Act was recently ruled to be applicable to incorporated community associations. This ruling imposes new reporting obligations on those associations and their directors.

 

Incorporated community association boards must file a Beneficial Owner Information (BOI) report with the U.S. Treasury by December 31, 2024. The BOI report requires certain information to be disclosed about property owners who have substantial ownership or management interests in the association, including the current members of its board of directors. Each director must first obtain what is called a FinCEN number. A designated director must then complete a BOI Report listing the name of the association, its tax ID number, and the FinCEN numbers of its current directors. Associations are required to update their BOI Report within 30 days the date that they appoint a new director or a director resigns.

Incorporated community associations should consult the FinCEN guidelines, their accountants, and their legal counsel if they have questions about this new reporting requirement. 

UPDATE: A federal district court in Texas has issued a nationwide temporary injunction against the enforcement of the Corporate Transparency Act. Associations are not obligated to file BOI reports until that injunction is removed.  

Court Rules HOA May Not Enforce Time-Based Restriction on Political Yard Signs

The Washington Court of Appeals recently affirmed that homeowners associations (HOAs) that are still subject to RCW 64.38 may not impose time-based restrictions on owners' display of political yard signs. RCW 64.38.034(1) (which governs HOAs created before July 1, 2018, but not condominium associations of any age) states that HOAs' governing documents "may not prohibit the outdoor display of political yard signs by an owner or resident on the owner or resident's property before any primary or general election." Those documents may only "include reasonable rules and regulations regarding the placement and manner of display of political yard signs."   

HOAs created on or after July 1, 2018 and older HOAs that have adopted RCW 64.90 in its entirety are governed by RCW 64.90.510(2), which expressly authorizes them to "adopt rules governing the time, place, size, number, and manner" of political signs. This court decision does not affect those associations.