March 27, 2012

Disputes Between Owners Pose Risks to Community Associations

It is always unfortunate when disputes between neighbors escalate into litigation. The Washington Court of Appeals was recently confronted with just such a case. The first sentence of its unpublished opinion last month sets the tone: “Tensions arose among neighbors in a Redmond cul-de-sac after the Wherretts began parking numerous vehicles and buses on their property and on the street.” Police involvement, surveillance, civil anti-harassment orders, and a lawsuit followed. The court notes during the course of its opinion that taking numerous photographs and videos of items in public view for the purpose of documenting alleged misconduct did not form the basis for a legal claim against one of the owners. The court ultimately affirms the summary judgment dismissal of the plaintiff’s case.

Community association boards must choose their approach carefully when owners quarrel. Do they stay out of the dispute entirely? Do they provide a forum to discuss the dispute? Do they convey a position regarding the dispute? All of those choices involve varying amounts of risk that the association will be sued by one of the owners. Minimizing that risk is an important (some would say the most important) consideration when boards are evaluating how to respond to disputes between owners.

Boards understandably tend to prefer the “stay out of it” approach to owner disputes whenever possible, and this is a legitimate response in many instances. However, boards must verify that disputes do not involve a violation of their association's governing documents before selecting that option. If a board fails to do so and the dispute does involve such a violation, then one of the owners may be able to successfully argue that the association is also liable for damages.

March 1, 2012

Super Priority Lien Gives Washington Condo Associations Leverage Over Lenders

The Washington Condominium Act grants condominium associations a super priority lien over mortgage holders. This super priority lien ensures that some delinquent assessments (those that are due during the six months immediately preceding the foreclosure) will be paid by lenders if foreclosures occur. It can also be a powerful weapon if lenders do not respond to associations’ foreclosure actions. In the recent decision of Summerhill Village Homeowners Association v. Roughley, the Washington Court of Appeals held that a mortgage on a unit can be completely eliminated by a condominium association’s foreclosure action if an association has a super priority lien and the lender does not respond.

If a Washington condominium’s declaration was recorded after July 1, 1990, then it automatically has the right to claim the super priority lien contained in the Washington Condominium Act. If a Washington condominium’s declaration was recorded on or before July 1, 1990, then its association can probably not take advantage of the super priority lien until its declaration is amended to include it. All Washington condominium associations that cannot currently claim the super priority lien should strongly consider amending their declarations to give themselves the ability to do so.

A condominium board that wants to amend its declaration should consult with an experienced real estate attorney to ensure that all applicable legal requirements are met. Failing to obtain such legal advice can have dire consequences. In a recent unpublished decision, the Washington Court of Appeals affirmed a trial court’s ruling that an amended set of covenants for a homeowners association was void and unenforceable because it was not properly executed.