Sudden Valley, Sudden Change for some HOAs
On the heels of the Washington Supreme Court's peculiar plurality decision in Wilkinson v. Chiwawa, Division One of the Washington Court of Appeals recently issued an equally perplexing decision relating to procedures employed by non-condo homeowner associations in establishing budgets and levying assessments. In the as-yet unpublished opinion called Casey v. Sudden Valley Community Association, the court held that a provision in the Association's bylaws requiring 60% approval of owners attending a meeting to raise assessments was not trumped by the HOA Act's budget ratification procedures.
As in Chiwawa, the court seemed to subjugate common sense and a basic understanding of community association law to its desire for a particular outcome based on the facts of the case. Apparently, the Sudden Valley community had, for years, attempted to give effect to both the bylaw provision requiring the affirmative vote for assessment increases and the HOA budget ratification procedure (which allows passage of a budget unless rejected by a majority of the votes in the association under RCW 64.38.025). While the budget consistently passed, the assessment was consistently voted down by a minority of owners (comprising a majority of those attending the assessment vote meeting). Frustrated with this consistent outcome, the board determined, by motion, to hold one ratification vote on the budget, which they would interpret as assent to the assessments.
In a paragraph that sums up the basic distaste for the statutory ratification process, the court seemed particularly offended that the board "combined the vote on dues and assessments with the vote on the budget" and thereby "achieved its goal of increasing dues and assessments despite the members' overwhelming vote to reject it."
In ultimately holding that the budget ratification procedure in RCW 64.38.025 does not trump a bylaw provision requiring an affirmative vote to raise assessments, the court held strong to the absurd contention that budgets and assessments are completely unrelated, which further required them to recognizing a board's ability to forego use of budgets and adopt unregulated "spending plans."
At the same time, completely absent from the opinion is any recognition of the difficulty of operating an aging association where a small but active minority of unit owners use the super majority attendee vote requirements ensure that assessments are never raised - even where the raises are objectively legitimate or even required to fund reserves. This is exactly the policy behind the statutory budget ratification procedure and why it has been interpreted to supplant affirmative vote provision.
As an unpublished opinion, the case technically has no value as precedent, but it remains to be seen whether the case will be published or appealed. If published, many HOAs in Washington may need to reverse long held positions that the HOA Act's budget ratification procedures trump affirmative vote provisions for assessments. Notably, the decision itself limits it applicability to non-condo HOA's, noting that the Condominium Act explicitly provides that assessments must be made against all units "based on a budget adopted by the association." Yet the court still refused to see the connection between budgets and assessments, meaning that for struggling associations with affirmative vote requirements in their governing documents, Sudden Valley may mean sudden death to fiscal responsibility.
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