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. 

Washington Court of Appeals Affirms HOA's Covenant Amendment

The Washington Court of Appeals recently affirmed a trial court's decision that a homeowners association had the authority to adopt an amendment to the covenants governing the property without a unanimous vote of the owners. The Court noted that an express reservation of power authorizing less than 100 percent of property owners within a subdivision to adopt new restrictions (as opposed to changing existing covenants) respecting the use of privately owned property is valid if such power is exercised in a reasonable manner consistent with the general plan of the development. After reviewing the association's covenants, the Court ruled that the plaintiffs failed to show that any portion of the amendment at issue was inconsistent with the general development plan, imposed unreasonable disparate impacts on their property, or were otherwise invalid.      

Washington Appellate Court: Condominium Bylaws Amendment Is Invalid

A recent Washington unpublished opinion concerned the amendment of a condominium association’s bylaws.  The condominium’s declaration stated that amending the bylaws required the approval of a majority of the unit owners.  The bylaws were amended in 2015 without the approval of a majority of the unit owners, and an owner challenged the validity of that amendment.  The Court of Appeals ruled that the bylaws amendment was invalid.

The invalid 2015 bylaws amendment authorized the condominium association to impose assessments for limited common area expenses against the individual unit owners to which the limited common areas were assigned.  Since the declaration and the applicable state law did not authorize the imposition of limited common area expense assessments, the Court of Appeals ruled that the association could not impose such assessments.

Washington condominium and homeowners associations should obtain legal advice before they seek to amend their governing documents.    

Legal Challenge to Amendment Restricting Leasing Held Untimely By WA High Court

The Washington Supreme Court recently unanimously ruled that a legal challenge to a recorded condominium declaration amendment restricting leasing was barred by a one-year statute of limitation in the Washington Condominium Act.  

A condominium declaration amendment received board approval, received at least sixty-seven percent owner approval, and was recorded.  A person bought a unit subject to that amendment and then argued in a lawsuit over four years later that the amendment required ninety percent owner approval (based on a different subsection of the WCA) because it changed the uses to which units were restricted. The Washington Supreme Court responded that "it is not immediately apparent which vote total was needed to approve the amendment" and that the legislature "may well wish to clarify" the WCA with regard to whether the definition of "use" includes the leasing of a unit.  However, the Court also noted that the amendment was voidable (rather than void from its inception, as in the case of fraud) from a legal perspective due to the process by which it was approved.  The Court therefore held that a one-year time bar for challenges to amendments in the WCA applied to this challenge regardless of the required approval percentage.  The Court concluded that "[t]o hold otherwise would render the time bar meaningless." 

Happy Cinco de Mayo to those WCA condominium associations that recorded declaration amendments restricting leasing with at least sixty-seven percent owner approval more than one year ago.

Washington Court Affirms Application of Statute of Limitation in Condo Act

In a published decision issued last month, the Washington Court of Appeals affirmed a trial court's application of a one-year statute of limitation contained in the Washington Condominium Act.  The section of the Act governing declaration amendments states that a challenge to an amendment "adopted by the association pursuant to this section" may not be brought more than one year after that amendment is recorded.  However, the court ruled that the statute of limitation did not apply in this case because the declaration amendment was recorded without the consent of any of the other unit owners and was therefore void from its inception. As a result, an owner's successful challenge to the declaration amendment in the lower court was upheld.

Condominium association boards should consult with experienced attorneys before seeking to amend their declarations.   

Washington Supreme Court Limits HOAs' Ability to Create New Restrictive Covenants

The Washington Supreme Court issued a published opinion this past April that significantly limited the ability of homeowners associations to create new restrictive covenants that have no relation to existing covenants.  The case involved a dispute between a homeowners association and a group of owners over the validity of a majority-approved covenant amendment prohibiting short-term vacation rentals.  The owners contended in their lawsuit that the covenant amendment required unanimous owner consent because the existing covenants did not contain any durational limitations on leasing and only gave the association the power to change existing covenants by majority vote (as opposed to the power to create new covenants that have no relation to existing covenants). The Court agreed with the owners and invalidated the covenant amendment. It held that if a homeowners association's existing covenants only authorize it to change existing covenants by majority vote, then that association may only adopt a covenant amendment imposing new restrictions on the use of the property by majority vote if that amendment is "consistent with the general plan of development and related to an existing covenant."  It is notable that two dissenting opinions argued at length that the correct legal standard in this situation is whether the amendment was adopted "in a reasonable manner [and is] consistent with the general plan of development."

As a result of this decision, some homeowners associations may seek to amend their covenants to permit the creation of new restrictive covenants by majority vote.  If your association wants to amend its covenants in any manner, then it should strongly consider consulting an attorney who is familiar with the laws that apply to such amendments.

Washington Court Rules that Condominium Leasing Restrictions Require 90% Approval

The Washington Court of Appeals ruled in a published opinion earlier this month that 90% owner approval is necessary to amend the declarations of condominiums created after July 1, 1990 in a manner that restricts owners' ability to lease their units.  The Court based its ruling on a provision in the Washington Condominium Act that requires 90% owner approval for declaration amendments that change "the uses to which any unit is restricted."  Leasing was deemed to constitute a "use" of property.  Interestingly, the Court declined to award the prevailing party its attorney fees "given the debatable issues of law presented in this case."  This decision is now being appealed.

This new ruling regarding leasing restriction approval does not apply to condominiums created on or before July 1, 1990 unless they have amended their declarations to incorporate the amendment standards contained in the Washington Condominium Act.  Furthermore, it does not invalidate declaration amendments restricting leasing rights that received less than 90% owner approval that were recorded more than one year ago by condominiums created after July 1, 1990 due to a statute of limitation contained in the Washington Condominium Act.  However, this new ruling does make declaration amendments restricting leasing rights that received less than 90% owner approval that were recorded less than one year ago by condominiums created after July 1, 1990 vulnerable to legal challenge.

Community association law is constantly being amended and clarified by legislatures and courts.  Attorneys who focus their practices on community associations are in the best position to keep abreast of those developments.  Wise boards seek advice from such attorneys before proposing amendments to their associations' governing documents.

Internal Appeal Procedures and Dispute Resolution Standards Can Reduce Lawsuits

The Washington Court of Appeals recently issued an unpublished opinion relating to the Prince Hall Grand Lodge of Free & Accepted Masons of Washington.  A member of the Grand Lodge was suspended after he raised allegations that one of the Grand Masters and the Grand Lodge Entertainment Committee had mismanaged funds.  The member sued to contest that suspension.  However, the Grand Lodge Constitution states that “no member … shall resort to civil courts to establish any right or to redress any grievances arising out of the membership in the Order or connected therewith until … he shall have exhausted the remedies within the Order and in a manner provided by the Constitution, law and regulations of this Grand Lodge.”

The appellate court upheld the requirement that members of the Grand Lodge must exhaust its internal appeal procedures before filing lawsuits.  It emphasized Washington courts’ unwillingness to interfere with private associations’ interpretations of internal rules and procedures unless they are arbitrary and unreasonable.  The court affirmed the dismissal of the member’s lawsuit because he did not pursue the proper appeal procedure (vote of the members at the next annual meeting) before filing it.     

Some Washington condominium and homeowners associations have internal appeal procedures and dispute resolution standards in their original governing documents.  Many others do not.  For those associations in the latter category, amending the declaration or covenants to require exhaustion of internal appeal procedures and fulfillment of dispute resolution requirements (such as mandatory mediation) can help defuse some future disputes with owners before they turn into lawsuits.          

Enhancing Your Association's Bylaws

A community association’s bylaws focus on procedure. The Washington Homeowners’ Associations Act and the Washington Condominium Act contain similar requirements regarding bylaws. Under both laws, bylaws must describe the number of board members and officers, their qualifications, their powers and duties, their terms of office, and the manner of their election and removal. Both laws also require bylaws to specify which, if any, of the Association’s powers the Board may delegate to a managing agent. The Washington Condominium Act (but not the Washington Homeowners’ Associations Act) also states that bylaws must include a statement of the applicable standard of care for officers and board members (ordinary and reasonable care for elected positions).

Some associations’ bylaws may impede good policies by imposing unduly burdensome procedural requirements. Associations may want to reduce quorum size, allow electronic notices, or allow voting by mail to facilitate action on issues that affect them. However, boards that are pursuing such changes should confirm that the proposed amendments to the bylaws are consistent with their associations’ declaration or covenants and state law. If they are not, then the amendments will be invalid.

Amending Your Association's Declaration or Covenants

The original United States Constitution has been amended 27 times in the 222 years since its adoption. There have also been 6 other proposed amendments that passed Congress but were not ratified by enough states to become binding amendments. Most condominium and homeowners associations also find it necessary to amend their declarations or covenants from time to time to correct inconsistencies, shift responsibilities, and furnish themselves with additional tools to address recurring problems.

Condominiums created before July 1, 1990 are legally required to obtain the approval of at least 60% of the owners to amend their declarations. Condominiums created after July 1, 1990 are legally required to obtain the approval of at least 67% of the owners to amend their declarations. Those newer condominiums must also secure the approval of at least 90% of the owners (including the owners of all affected units) to enact certain types of amendments (including those that change unit boundaries, allocated interests, or uses of units). Some condominium declarations state that higher percentages of owner approval and the consent of a specified number of mortgagees are required for amendments. Washington law does not specify a minimum amount of owner consent that homeowners associations must obtain to amend their covenants, so it necessary to review those covenants to determine what is required to amend them.

Governing document amendments can take many forms. Some amendments require owners to maintain and repair specified portions of the property (such as windows) and repair damage to common property if certain circumstances are present. Others restrict the ability of owners to alter their property (such as by installing hard surface flooring) without the board’s consent. Amendments can provide associations with more options to collect delinquent assessments (including non-judicial foreclosure) and can enhance their lien rights in some cases. They can also place limits on how owners may use the property (for example, by imposing a cap on rentals). If an association’s governing documents contain contradictions (documents that make maintenance and repair of limited common elements the responsibility of owners in one place and the association in another are surprisingly common), amendments can fix those mistakes.

An association’s governing documents reflect its values and priorities. Seeking input from the association’s property manager, attorney, and owners at an early stage will make the amendment process as smooth and productive as possible. The end result will be a document that empowers the board to better serve the needs of the community in the future.