In what appears to be a pretty outcome-driven split decision, the Washington Supreme Court in Wilkinson v. Chiwawa Communities Association, No. 86870-1 (April 17, 2014) struck down the Association’s amendment restricting short-term rentals, determining that the association had no authority to amend because the amendment was inconsistent with the original intent of the Association’s covenants.

Ultimately, because the court analyzed the amendment in comparison with the “original intent” of the covenants, this case increases the risk of a successful owner challenge of CC&R amendments in Washington homeowner associations in certain circumstances. It’s applicability to condos in Washington, which are governed by separate statutes, should be limited although it certainly should be considered in the analysis of any proposed amendment. The case has no precedential value in Oregon, although it’s always helpful to see how courts in other states are approaching community association issues.

The Court’s decision turned on interpretation and application of the Chiwawa governing documents that authorized amendments that “change [the] protective restrictions in whole or in part.” The court interpreted this language very narrowly, finding that the authority to “change [the] protective restrictions in whole or in part” does not authorize the association to “create new” covenants.

The court reasoned that the original covenants for Chiwawa did not include a restriction on the duration of rentals, and therefore an amendment restricting short-term rentals “would be inconsistent” with those original covenants. The Court went on to find, that the rental restriction constitutes a “new” restriction (as opposed to a change to the protective covenants) and therefore, the association did not have the authority to amend to add the restriction.

Attempting to clarify the limits of the opinion, the Court stated that associations are not completely prohibited from limiting the duration of rentals. In fact, the opinion suggests that the outcome may have been different if the CC&R’s included broader authority to amend. However, by narrowly interpreting the association’s authority to adopt a rental restriction when the governing documents allow changes to the protective restrictions “in whole or in part,” the Washington Supreme Court calls the authority of homeowner associations’ into question for any declaration amendment.

The dissent pointed out the traditional view that homeowner’s rights as listed in the governing documents are limited to the extent that the homeowners have the ability to amend those governing documents by a vote of the owners.

The particular facts of the case may have contributed to the outcome. The Chiwawa association was well established as an association with substantial vacation rentals, a previous attempt to limit short-term rentals was struck down and amendments of the CC&Rs required only a simple majority. Thus, the court may have felt a strong desire to protect the original investment nature of the property and thus interpreted the association’s ability to amend more narrowly than it would in most cases.

The take away from this case is that homeowner associations contemplating amendments or facing challenges to previously adopted amendments should consider the impact of this new case. Careful analysis and crafting of amendments is imperative to limit the risk of a challenge from owners that disagree with the applicable restrictions.

 

The implications of this ruling extend not only to short-term rental restrictions, but any CC&R amendment. 

As always, please feel free to contact me with specific questions on this or any topic of interest to you regarding community associations.