Love it or hate it (or both), short-term rental homes (vacation rentals) is a trend that has shown no signs of abating in popularity. For those who fall into the “hate it” camp in the state of Washington, the Wilkinson v Chiwawa Communities Association[1] case presented a major roadblock to their efforts to curb the practice. The Wilkinson opinion, written at a (relatively) early point in the short-term vacation rental boom and signed on by a narrow 5-4 majority of the Washington Supreme Court, established two legal holdings – one that’s important to the vacation rental fight, and one that’s important to any developer (and their counsel) setting up or amending a restrictive covenant regime for a development:
- Restrictive covenants barring commercial uses of residences and restricting lots to single family residences do not prohibit short-term rentals.
- Language that allows a majority (short of unanimity) of homeowners to amend or change restrictive covenants is not deemed to allow that majority to create new covenants.
The first principle – short term rental is not a commercial use – is a widely and nationally accepted rule at this point. (So much so that it wasn’t even challenged by the plaintiff in the Twin W Owners’ Association case mentioned in the title, which we’ll turn to in a moment.)
The second principle – allowing majorities to “amend” but not “create” restrictions – constituted something of a departure from past precedent. Previously, new covenants were permissible by majority vote, provided the covenant “coincided with the original general plan of the development” (according to the Meresse v. Stelma[2] case). This distinction has been, and will continue, to be dissected by the commentariat.
The plaintiffs in Twin W Owners’ Association[3] attempted to bar short-term rentals via amendment, despite an HOA declaration that merely stated that “[a]mendment of these covenants shall be by 60% vote.” The document was silent about creation of new restrictions and so was obviously a loser under the Wilkinson case ruling.
Accordingly, the Twin W Owners’ Association plaintiffs sought to have the Wilkerson case overturned and replaced with Idaho’s “unconscionable harm” standard when looking at changes in HOA restrictive covenants. But the Washington appellate court didn’t take the bait, and elected not to go against the senior court’s ruling regarding the Wilkerson rule.
In the alternative, the Twin W Owners’ Association plaintiffs attempted to distinguish certain facts in their case from Winkinson, based on wording in their declaration. A review of the court’s rejection of those arguments is probably beneficial to all transactional real estate attorneys, as a reminder of how the courts will go about picking apart their documentation once executed and subject to litigation. But it doesn’t merit further discussion in this short blog post.
In the end, Twin W breaks no new ground, but does serve as a useful reminder that the Wilkinson decision, despite its controversy, isn’t going anywhere. It also is a excellent reminder, when drafting restrictive covenants for new HOAs, to always specifically provide for the ability to “create” “new” restrictive covenants with a mere majority vote, if that’s the intent of the original parties.
[1] Wilkinson v Chiwawa Communities Association, 180 Wash. 2d 241, 24, 327 P.3d 614 (2014) 1.
[2] Meresse v. Stelma, 100 Wash. App. 857, 999 P.2d 1267 (2000).
[3] Twin W Owners’ Association v. Murphy., No. 39299-6 (Wash. Ct. App. Div. III. May 16, 2023).
Tags: Real Estate and Land Use, Commercial Real Estate
