Owners Should Be Thankful for Their Community Associations

The Washington Court of Appeals issued an unpublished opinion earlier this month concerning a challenge to the termination of a membership in a private social club.  The membership termination came as the result of a dispute over whether or not a member could bring an eleven-foot wide trailer onto the property.  The width of the trailer allegedly ran afoul of the club’s bylaws.  Finding no significant procedural irregularities, the appellate court upheld the club’s membership termination.

A concurrence to the court’s opinion noted that a slightly different standard would have been applied if this had been a case involving the restrictive covenants of a community association.  In that situation, the court would have interpreted those covenants "in such a way that protects the homeowners' collective interests and gives effect to the purposes intended by the drafters of those covenants to further the creation and maintenance of the planned community."  In other words, the interests of the community as a whole are entitled to great weight when there is a dispute about what the covenants governing Washington condominium and homeowners associations mean. 

At their best, community associations promote high property values and a pleasant living environment.  They make owners’ lives better by pursuing the common good.  On this Thanksgiving, owners should remember to be thankful for the benefits that they enjoy due to their membership in a community association.     

How Does the Washington Condominium Act Describe Unit Boundaries?

Condominium boards need to know where the boundaries between units and the rest of the property are located.  The section of the Washington Condominium Act entitled "Unit boundaries" provides a fairly straightforward description of those boundaries: 

"Except as provided by the declaration, the walls, floors, or ceilings are the boundaries of a unit, and all lath, furring, wallboard, plasterboard, plaster, paneling, tiles, wallpaper, paint, finished flooring, and any other materials constituting any part of the finished surfaces thereof are a part of the unit, and all other portions of the walls, floors, or ceilings are a part of the common elements." RCW 64.34.204(1) (emphasis mine)

This section goes on to indicate that porches, balconies, patios, exterior doors, and exterior windows are limited common elements allocated to the adjacent units (except as provided by the declaration).

Since condominium declarations are explicitly permitted to deviate from the Act with regard to boundaries, it is prudent for condominium boards to determine whether their declarations establish different boundaries than the ones described in the Act.  This can have major consequences when repairs and related assessments are necessary.  Attorneys can help boards quickly obtain a clear understanding of this crucial issue.     

Court Grapples with Distinction Between Repairs and Capital Improvements

The Washington Court of Appeals issued an unpublished opinion earlier this month concerning a condominium association's authority to fund a major construction project without a prior vote of its owners.  The project involved the installation of a $2 million "rain screen" building envelope system (an upgrade over the previous system) following the discovery of significant water intrusion. The court ruled that the project funding concerned "repair" of the building, which did not require owner approval, rather than a "capital improvement", which required owner approval over a certain amount.   

The court's analysis relating to the meaning of the term "repair" in the condominium's declaration is noteworthy.  The court first points out that the declaration contains a section investing the board with broad authority to acquire goods and services for the proper functioning of the condominium, including repair of units if necessary in the board's discretion to protect the common area or preserve the appearance and value of the condominium.  The court then concludes on the basis of that section that a "repair" includes anything necessary in the board's discretion to protect the common area or preserve the appearance and value of the condominium.

  

Establishing the meaning of terms used in condominium declarations sometimes requires legal interpretation.  Attorneys can help boards ensure that they are understanding their declarations correctly. A condominium board that wants to fund a construction project without obtaining owner approval should strongly consider asking an attorney whether the declaration permits this.

I Will Appear on Local Radio Show Brashenomics Thursday Afternoon!

I had the privilege of guesting on local radio show Brashenomics this morning.  I joined a panel of local professionals to discuss issues related to the Puget Sound real estate market.  The show airs on Thursday, October 25 at 4:00 on 1150 AM.   

UPDATE: My Brashenomics segment can be viewed here. 

HUD Announces Changes to FHA's Condominium Approval Policies

The U.S. Department of Housing and Urban Development (HUD) recently announced changes to the Federal Housing Administration's (FHA's) condominium approval policies. Among other adjustments, HUD altered its policies governing the maximum levels of delinquency and leasing in FHA-approved condominiums.

Under the new FHA standards, no more than 15% of the total units in a condominium can be more than 60 days past due on assessment payments. This percentage includes units that are occupied, bank-owned, or vacant. HUD warned that it will not grant exceptions to this rule. 

The new FHA standards retain the requirement for completed condominiums that are over a year old to be at least 50% owner-occupied. For condominium projects that are proposed, under construction, or less than a year old, however, HUD now requires a minimum owner-occupancy percentage equal to 30% of the condominium’s declared units.

HUD's letter describing the complete set of changes to the FHA condominium approval policies can be found here.