Court Upholds Association's Decision to Refrain from Enforcing Covenant

In a recent unpublished Washington Court of Appeals opinion, a lot owner had sued his homeowners association and contended that it had a duty to take certain actions with regard to parking enforcement. The appellate court disagreed with that contention on several grounds, one of them being that the declaration of covenants states that the Association has the power to enforce it but is not required to do so. The court observed as follows: 

"When a homeowners’ association makes a discretionary decision in a procedurally valid manner, we must not substitute our judgment for that of the homeowners’ association unless there is fraud, dishonesty, or incompetence .... The supreme court noted that this rule was necessary to insulate homeowner associations from being subjected to lawsuits anytime a homeowner disagreed with a discretionary choice made by the Board."

If your community association board has questions about the nature and scope of its covenant enforcement powers and duties, then it should consider retaining a qualified attorney to provide clarity regarding those issues.

My Next Presentation for the Washington Secretary of State is on November 8!

My next free virtual presentation concerning current community association legal issues for the Washington Secretary of State will take place from 12:00 p.m. until 1:30 p.m. on Wednesday, November 8. This presentation will include information regarding new state laws applicable to such associations. If you want to attend, then you should contact Teresa Glidden at the Washington Secretary of State's office at teresa.glidden@sos.wa.gov.

Washington State Community Association Budget Season Is Here!

Washington State condominium and homeowners associations' annual and special budgets are legally required to contain certain information and to be ratified by their owners. Those associations must first provide each proposed budget to their owners and schedule a meeting to consider ratification of that budget. The proposed budget must include:

(a) The projected income to the association by category;

(b) The projected common expenses and those specially allocated expenses that are subject to being budgeted, both by category;

(c) The amount of the assessments per unit and the date the assessments are due;

(d) The current amount of regular assessments budgeted for contribution to the reserve account;

(e) A statement of whether the association has a reserve study that meets the requirements of RCW 64.90.550 and, if so, the extent to which the budget meets or deviates from the recommendations of that reserve study; and

(f) The current deficiency or surplus in reserve funding expressed on a per unit basis.

Other state laws (RCW 64.34 and 64.38) require the proposed budgets of the associations to which they apply to contain additional information as well. Each proposed budget is ratified unless a group of owners of units or lots to which a majority of the total voting power in the association is allocated rejects it at that meeting.

If your board has questions or concerns about the approval and ratification of the association’s budgets, then my office is here to help!

Washington Court of Appeals Upholds Condo Declaration's Exculpatory Clause

The Washington Court of Appeals recently ruled in an unpublished opinion that a condominium's declaration exculpated the condominium association from any liability arising out of an owner's claim that the association neglected to maintain a common element. It based that ruling on a common limitation of liability clause in the condominium's declaration that broadly exculpated the association from such claims except to the extent covered by the association's insurance. The Court summarized its reasoning as follows:

"As in Scott, the exculpation from liability from water from outside or from any parts of the buildings logically includes liability based on the Association's negligence. That the exception to the exculpation exists when the Association has insurance to cover the liability implies the clause was intended to exculpate the Association from liability for damages for its own negligence."

If your condominium or homeowners association board has questions or concerns about the association's liability for an owner's claim against it, then the board should consider contacting my office.     

Two New Washington State Laws Are Designed to Increase Housing Density

The Washington State Legislature recently approved two new laws designed to increase housing density. Both laws will go into effect on July 23, 2023. The first law requires cities with over 25,000 people to allow at least duplexes in all areas and cities with more than 75,000 people to allow at least fourplexes in all areas. Community associations whose governing documents contain more restrictive housing provisions as of that date are exempt from those requirements, but they are prohibited from amending their governing documents to prohibit duplexes and other kinds of middle housing after that date. The second law states in part that the governing documents of community associations created after that date that are within an urban growth area may not impose any restriction or prohibition on the construction, development, or use on a lot of an accessory dwelling unit that the city or county where that area is located would be prohibited from imposing under that law. Those prohibited impositions are described in the new law as follows: 

(a) The city or county may not assess impact fees on the construction of accessory dwelling units that are greater than 50 percent of the impact fees that would be imposed on the principal unit;

(b) The city or county may not require the owner of a lot on which there is an accessory dwelling unit to reside in or occupy the accessory dwelling unit or another housing unit on the same lot;

(c) The city or county must allow at least two accessory dwelling units on all lots that are located in all zoning districts within an urban growth area that allow for single-family homes in the following configurations:

(i) One attached accessory dwelling unit and one detached accessory dwelling unit;

(ii) Two attached accessory dwelling units; or

(iii) Two detached accessory dwelling units, which may be comprised of either one or two detached structures;

(d) The city or county must permit accessory dwelling units in structures detached from the principal unit;

(e) The city or county must allow an accessory dwelling unit on any lot that meets the minimum lot size required for the principal unit;

(f) The city or county may not establish a maximum gross floor area requirement for accessory dwelling units that is less than 1,000 square feet;

(g) The city or county may not establish roof height limits on an accessory dwelling unit of less than 24 feet, unless the height limitation that applies to the principal unit is less than 24 feet, in which case a city or county may not impose roof height limitation on accessory dwelling units that is less than the height limitation that applies to the principal unit;

(h) A city or county may not impose setback requirements, yard coverage limits, tree retention mandates, restrictions on entry door locations, aesthetic requirements, or requirements for design review for accessory dwelling units that are more restrictive than those for principal units;

(i) A city or county must allow detached accessory dwelling units to be sited at a lot line if the lot line abuts a public alley, unless the city or county routinely plows snow on the public alley;

(j) A city or county must allow accessory dwelling units to be converted from existing structures, including but not limited to detached garages, even if they violate current code requirements for setbacks or lot coverage;

(k) A city or county may not prohibit the sale or other conveyance of a condominium unit independently of a principal unit solely on the grounds that the condominium unit was originally built as an accessory dwelling unit; and

(l) A city or county may not require public street improvements as a condition of permitting accessory dwelling units.

(2)(a) A city or county subject to the requirements of this section may not:

(i) Require off-street parking as a condition of permitting development of accessory dwelling units within one-half mile walking distance of a major transit stop;

(ii) Require more than one off-street parking space per unit as a condition of permitting development of accessory dwelling units on lots smaller than 6,000 square feet before any zero lot line subdivisions or lot splits; and

(iii) Require more than two off-street parking spaces per unit as a condition of permitting development of accessory dwelling units on lots greater than 6,000 square feet before any zero lot line subdivisions or lot splits.

(3) When regulating accessory dwelling units, cities and counties may impose a limit of two accessory dwelling units, in addition to the principal unit, on a residential lot of 2,000 square feet or less.

New Laws Apply to Washington State Community Associations

The Washington State Legislature recently approved several new laws that affect existing community associations. The first new law prohibits community associations from prohibiting, unreasonably restricting, or limiting the use of properties for licensed family home child care or as licensed child daycare centers. An association may require properties being used in that manner to: 1) provide direct customer access from the outside of the buildings or through publicly accessible common areas, 2) be licensed by the state, 3) indemnify the association against all claims related to that use except for claims that arise in common elements that the association is solely responsible for maintaining under the governing documents, 4) obtain daycare insurance or provide self-insurance, and 5) provide the association with signed waivers from the guardians of each child being cared for that release them from legal claims related to that use. An association may impose reasonable rules pertaining to family home child care and licensed child daycare centers, but those rules must apply equally to all other association members. This law took effect on May 1, 2023.

The second new law permits community associations to require owners who lease their properties to use a tenant screening service or obtain background information, including criminal history, pertaining to their prospective tenants at the owners’ sole cost and expense before executing leases and to require proof that this has been done. However, associations may not require that tenant screening reports or any background information pertaining to tenants be furnished to them. This law takes effect on July 23, 2023. 

The third new law requires community associations to keep and maintain the following records: 1) the current budget, detailed records of receipts and expenditures affecting the operation and administration of the association, and other appropriate accounting records within the last seven years, 2) minutes of all meetings of its owners and board other than executive sessions, a record of all actions taken by its owners or board without a meeting, and a record of all actions taken by a committee in place of the board on behalf of the association, 3) the names of current owners, addresses used by the association to communicate with them, and the number of votes allocated to each property, 4) its organizational and governing documents, including all amendments, 5) all financial statements and tax returns of the association for the past seven years, 6) a list of the names and addresses of its current board members and officers, 7) its most recent annual report delivered to the Secretary of State, if any, 8) copies of contracts to which it is or was a party within the last seven years, 9) materials relied upon by the board or any committee to approve or deny any requests for design or architectural approval for a period of seven years after the decision is made, 10) materials relied upon by the board or any committee concerning a decision to enforce the governing documents for a period of seven years after the decision is made, 11) copies of insurance policies under which the association is a named insured, 12) any current warranties provided to the association, 13) copies of all notices provided to the owners or the association in accordance with state law or the governing documents, and 14) ballots, proxies, absentee ballots, and other records related to voting by owners for one year after the election, action, or vote to which they relate.

Community associations’ records must generally be made available for examination and copying by all owners, holders of mortgages on the properties, and their respective authorized agents during reasonable business hours or at a mutually convenient time and location and at the offices of the association or its managing agent. However, records retained by associations must have the following information redacted or otherwise removed prior to disclosure: 1) personnel and medical records relating to specific individuals, 2) contracts, leases, and other commercial transactions to purchase or provide goods or services currently being negotiated, 3) existing or potential litigation or mediation, arbitration, or administrative proceedings, 4) existing or potential matters involving federal, state, or local administrative or other formal proceedings before a governmental tribunal for enforcement of the governing documents, 5) legal advice or communications that are otherwise protected by the attorney-client privilege or the attorney work product doctrine, including communications with the managing agent or other agent of the association, 6) information the disclosure of which would violate a court order or law, 7) records of an executive session of the board, 8) individual property files other than those of the requesting owner, 9) unlisted telephone number or electronic address of any owner or resident, 10) security access information provided to the association for emergency purposes, and 11) agreements that for good cause prohibit disclosure to the owners. Prior to disclosure of the list of owners, an association must also redact or otherwise remove the address of any owner or resident who is known to the association to be a participant in an address confidentiality program.

Community associations may charge a reasonable fee for producing and providing copies of any records and for supervising an owner's inspection of records, but an owner is entitled to receive a free annual electronic or paper copy of the list of owners from the association. The right to copy records includes the right to receive copies by photocopying or other means, including through an electronic transmission, if available, upon request by an owner. Associations are not obligated to compile or synthesize information for an owner who requests to review or receive records. This law takes effect on July 23, 2023.

The fourth new law imposes additional requirements on community associations related to the collection of past due assessments. Associations must mail a specified pre-foreclosure notice to delinquent owners along with the first notice of delinquency for past due assessments and the same notice again before beginning a foreclosure action against those owners’ properties. The second notice may not be mailed sooner than sixty days after the first notice is mailed. Associations may not begin foreclosure actions against delinquent owners’ properties unless they owe a sum greater than: 1) three months or more of assessments, not including fines, late charges, interest, attorneys' fees, or costs incurred by the association in connection with the collection of the delinquent owner's account, or 2) $2,000 of assessments, not including fines, late charges, interest, attorneys' fees, or costs incurred by the association in connection with the collection of a delinquent owner's account. This law takes effect on July 23, 2023.

The laws that apply to community associations grow more numerous and complex every year. It has unfortunately become virtually impossible for associations to comply with all of those laws without legal guidance. Community association boards should strongly consider consulting with an attorney who specializes in this area on a periodic basis.

Defendant in Covenant Violation Lawsuit Ruled to be Entitled to Attorney Fee Award

A recently issued court opinion in Washington state concerned a line of cypress trees near the boundary between two properties that allegedly blocked a view of sunsets and downtown Portland in violation of restrictive covenants on those properties. A significant issue was whether the plaintiffs were responsible to pay the attorney fees incurred by the successful defendants. The court ruled that both owners who violate covenants and owners who unsuccessfully pursue claims that other owners are violating covenants are liable to pay the other party's attorney fees. The court pointed out that "interpreting the CCRs to provide recovery for homeowner-versus-homeowner litigation encourages compliance and discourages spurious litigation among neighbors, which is consistent with the law's directive to interpret HOA covenants in a manner that supports all the owners' collective interests."       

Many Community Association Directors Are Not Permitted to Vote by Proxy

Directors of condominium and homeowners associations may sometimes want to vote by proxy rather than attend a board meeting. However, Washington state law does not permit many of them to do so. First, the Washington Uniform Common Interest Ownership Act ("WUCIOA") prohibits directors of communities that were created on or after July 1, 2018 or that have amended their governing documents to apply that law's provisions from voting by proxy. Second, the Washington Nonprofit Corporation Act as restated in 2021 prohibits directors of nonprofit corporations (as many condominium and homeowners associations are organized) from using a proxy to count toward quorum or to vote. As a result, only directors of communities that are both not governed by WUCIOA and not nonprofit corporations may vote by proxy.

It is often difficult for boards to understand what laws apply to their communities. If your board is unclear about that issue or wants to confirm its legal status, then it should consider contacting my office. 

Conducting a Vote Without a Meeting

Community association boards often ask me whether they may conduct a vote without a meeting. Washington state law does permit this, but only under the conditions stated below. If your board has questions or concerns about how to interpret and apply this law, then it should consider contacting my office to obtain guidance. The association's governing documents may need to be amended to conduct such a vote in the manner that is desired.   

Unless prohibited or limited by the declaration or organizational documents, an association may conduct a vote without a meeting. In that event, the following requirements apply:

(a) The association must notify the unit owners that the vote will be taken by ballot.

(b) The notice must state:

(i) The time and date by which a ballot must be delivered to the association to be counted, which may not be fewer than fourteen days after the date of the notice, and which deadline may be extended in accordance with (g) of this subsection;

(ii) The percent of votes necessary to meet the quorum requirements;

(iii) The percent of votes necessary to approve each matter other than election of board members; and

(iv) The time, date, and manner by which unit owners wishing to deliver information to all unit owners regarding the subject of the vote may do so.

(c) The association must deliver a ballot to every unit owner with the notice.

(d) The ballot must set forth each proposed action and provide an opportunity to vote for or against the action.

(e) A ballot cast pursuant to this section may be revoked only by actual notice to the association of revocation. The death or disability of a unit owner does not revoke a ballot unless the association has actual notice of the death or disability prior to the date set forth in (b)(i) of this subsection.

(f) Approval by ballot pursuant to this subsection is valid only if the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action.

(g) If the association does not receive a sufficient number of votes to constitute a quorum or to approve the proposal by the date and time established for return of ballots, the board of directors may extend the deadline for a reasonable period not to exceed eleven months upon further notice to all members in accordance with (b) of this subsection. In that event, all votes previously cast on the proposal must be counted unless subsequently revoked as provided in this section.

(h) A ballot or revocation is not effective until received by the association.

(i) The association must give notice to unit owners of any action taken pursuant to this subsection within a reasonable time after the action is taken.

(j) When an action is taken pursuant to this subsection, a record of the action, including the ballots or a report of the persons appointed to tabulate such ballots, must be kept with the minutes of meetings of the association.

Technology Has Expanded Access to Specialized Legal Services

In many counties in Washington state, there are no attorneys specializing in community association law located there. In the past, this would have limited the ability of community associations in those areas to obtain quality legal services in a timely manner. However, electronic mail and virtual meetings have made it possible for them to obtain such services from attorneys located anywhere in the state. If your association is located outside of the Puget Sound area and desires to work with an attorney with substantial experience assisting community associations, then you should consider contacting my office to find out how I can help you with your legal needs.