[WSBARP] new case HOA statute

Tue Mar 8 11:39:53 PST 2016

Interesting new published Div. II case about what a HOA is, Walsh v. Halme,
out today. The statute at issue is 64.38.005(11), which defines homeowners'
associations:

RCW 64.38.010(11) defines a “homeowners’ association” as a corporation,
unincorporated association, or other legal entity, each member of which is
an owner of residential real property located within the association's
jurisdiction, as described in the governing documents, and by virtue of
membership or ownership of property is obligated to pay real property taxes,
insurance premiums, maintenance costs, or for improvement of real property
other than that which is owned by the member.

and the precise point is, what means the first part of this - "a
corporation, unincorporated association, or other legal entity?" Some
questionable analysis leads to the conclusion that the recorded documents
must refer to some sort of entity other than the owners themselves, that is
something more than your run-of-the-mill unincorporated association:  

The HAA does not define “unincorporated association” or “legal entity,” and
no Washington case addresses the meaning of these terms in the homeowners’
association context. Use of the word “other” before “legal entity” suggests
that “unincorporated association” as used in RCW 64.38.010(11) must be a
“legal entity.” However, unincorporated associations generally are not legal
entities. Newport Yacht Basin Ass’n of Condo. Owners v. Supreme Nw., Inc.,
168 Wn. App. 56, 74, 277 P.3d 18 (2012). Therefore, RCW 64.38.010(11) seems
to require something more than a “typical” unincorporated association.

According to the court, when the statute says "unincorporated association,"
that is modified by "other legal entity," so the governing documents
actually have to refer to something more than a typical unincorporated
association, whatever that is. Age has its privileges; mine includes the
privilege to say, no, that is not what the Legislature meant, and this is
statutory interpretation of the most outcome-based sort. If the court were
right, and "other legal entity" modified unincorporated association, then
the only unincorporated associations that would count would be legal
entities, which by definintion they are not. Oops. The court no doubt
recognized this when it said that the statute "seems to require something
more than a 'typical' association." So it went ahead and helped the
Legislature out by providing its own rule.   

At any rate, the analysis then goes on to a discussion of what a typical
unincorporated association is; it never gets to a discussion of what
something more than a typical unincorporated association might be. 

Regardless, the result is that any HOA is at risk of challenge if its
governing documents do not refer in some unspecified way to some sort of
unspecified category of association of members. And that includes a whole
lot (at least hundreds if not thousands) of very long-established and
successful HOAs with that one-page set of minimal restrictive covenants that
many were using in the 1960s; you know, the ones that include, 

No noxious or offensive activity shall be carried on upon said Tract or any
part thereof, nor shall anything be done or maintained thereon which may be
or become an annoyance or nuisance to the neighborhood.

Look, this is a serious issue and always has been, since the HOAA was
adopted. Does it really apply all of the HOAA rules to small water or road
maintenance associations? But the answer to the issue, politically, is to
find a way to amend the statute to aim the HOAA rules to actual HOAs and not
impose a bunch of silly requirements or powers on small associations that
don't have or want rules about structure or behavior limitations. Here,
according to this court, the answer is to interpret the statute to require
that the governing documents include some reference to something more than a
typical unincorporated association. 

Right now, this is simply a statutory interpretation issue - what does
"unincorporated association" mean in this context?  

As for me, I don't think "other legal entity" defines or limits
"unincorporated association," citing to Homer Simpson ("duh") (what did you
want the Legislature to say, "unincorporated association, or other entity
that has some legal status in addition to unincorporated and incorporated
associations?") (and how can "other legal entity" apply to an unincorporated
association that is by definition not a legal entity?); and I think this
term, "unincorporated association," is meant to include an association of
people. If we read the dictionary definitions of "association" in Google we
can find one to suit every need and taste, including, "a connection or
relationship between things or people," and a"group of persons banded
together for a specific purpose." Road maintenance agreements and water
agreements qualify under these definitions.

Finally, if anyone thinks that this opens the door to water or road
maintenance associations starting to control the color palette for front
doors, please remember the limitations of Wilkinson v. Chiwawa: is it
already a covenant? (can't add new ones unless the old ones say you can
specifically); can't add additional burdens; must be consistent with the
general scheme of the development. Etc.

Your obedient servant,

Rob

Robert D. Wilson-Hoss 
Hoss & Wilson-Hoss, LLP 
236 West Birch Street 
Shelton, WA 98584 
360 426-2999

www.hossandwilson-hoss.com
rob at hctc.com

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