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.  

WA Court of Appeals Rules HOA's Adopted Covenant Is Valid Change to CC&Rs

Division One of the Washington Court of Appeals recently published an opinion concerning the power of a homeowners association governed by RCW 64.38 (to be distinguished from those governed by RCW 64.90 and condominium associations governed by RCW 64.32, RCW 64.34, or RCW 64.90) to change its set of covenants, conditions, and restrictions (CC&Rs). The association's CC&Rs restricted its members from obstructing one another's views with six foot tall fences and outbuildings and granted them the authority to change it with seventy-five percent approval. The association adopted a covenant increasing the height constituting an obstruction to fifteen feet and expanding the type of obstructing object to trees and vegetation. An owner argued that this was not a change to the CC&Rs but a new covenant that was not authorized by that document.

Changing the CC&Rs cannot involve eliminating an existing covenant or adding a restriction where none existed before - only modifying that document in a manner that results in less of something (fewer things are restricted or restrictions are lessened) or more of something (more things are restricted or existing restictions are increased). The appeallate court decided that the adopted covenant was a valid change to the CC&Rs rather than an invalid new covenant because it increased certain view obstruction restrictions already in that document. 

New Law Limits Community Associations' Authority to Deny Heat Pump Applications

A new state law concerning heat pumps took effect last month. Community associations in Washington state may not effectively prohibit or unreasonably restrict owners from installing heat pumps in compliance with the new law's requirements. However, those associations may impose reasonable restrictions on heat pump installations and require owners to submit applications for approval of such installations. The term "reasonable restriction" means a restriction that does not significantly increase the cost of a heat pump or signifiantly decrease its efficiency or specified performance. If community associations require owners to submit heat pump applications, then they must approve each proposed installation if it is reasonably possible and the owner agrees in writing to (a) comply with the association's reasonable architectural standards applicable to the installation, b) engage an HVAC contractor familiar with the standards for the installation of heat pumps to assess the existing infastructure necessary to support the proposed heat pump, identify additional infastructure needs, and install the heat pump, and c) comply with the requirements of the new law.

Community associations must process and approve heat pump applications in the same manner as architectural modification applications. If heat pump applications are not denied in writing within sixty days from the date of receipt, then they are deemed approved unless that delay is the result of a reasonable request for additional information. Associations may not charge fees relating to heat pump installations except for reasonable application processing fees that apply to architectural modification applications.           

WUCIOA Will Apply to All Washington State Community Associations in 2028

Several laws relating to Washington condominium and homeowners asociations were recently approved. The most important of them states that the Washington State Common Interest Ownership Act ("WUCIOA") will automatically apply to all such community associations beginning on January 1, 2028. This comprehensive law contains many new provisions governing associations' internal affairs. You can review the full law here. 

Association boards should consider consulting with a qualified attorney to learn about their legal obligations under WUCIOA. They should also consider amending their associations' governing documents to bring them into accordance with WUCIOA.

Celebrating My Office's Fifteen-Year Anniversary!

It is hard to believe that I opened my law office fifteen years ago today. It was an exciting day, but it was also a terrifying one. Would the office succeed? I am so thankful that the answer has turned out to be a resounding yes! I look forward to providing my present and future clients with quality legal services for many years to come.       

Court of Appeals Resolves Dispute Between Competing Community Association Boards

There was recently litigation to determine which of two competing boards of directors of a community association had the right to access the association’s bank accounts. One of the litigants originally served on the association’s board as an appointed director and president. He and the other eight appointed directors failed to hold a timely election as required by the association’s bylaws. A small group of community members formed an election committee and collected signatures from 70 percent of the association’s members demanding that the board hold an election. The appointed board refused to hold an election, so the election committee organized and held a special election. The association’s members ultimately removed seven of the eight appointed directors and elected a new board. The original president contested the election. The trial court granted summary judgment in favor of the association. The original president then appealed that summary judgment, but it was upheld on appeal and he was ordered to pay the association’s appellate attorney fees.

WA Court of Appeals Rules in Favor of Association's Covenant Enforcement Action

The Washington Court of Appeals recently affirmed a trial court’s decision that a community association properly exercised its authority to enforce protective covenants requiring buildings to present a finished external appearance within one year and requiring members to keep their properties free of clutter and other unsightly structures and conditions. The Court noted that the property owner failed to install permanent roofing on his house and barn for over one year without good cause and kept piles of construction materials in places that were visible from the road. The Court concluded that the owner’s attempts to invalidate the enforcement action lacked merit and that the association had the right to remedy the covenant violations at issue. The owner was also required to pay the association’s attorney fees.

Enforcing governing documents sometimes requires litigation, and the owners in question usually attack their community association’s enforcement procedures both in general and as applied to them. Association boards that work with a qualified attorney can ensure that their enforcement procedures and actions are likely to survive such scrutiny.