Posted on November 10, 2022 by Harman Bual
With the rise of planned communities in Seattle, it is becoming more and more common for properties to be organized and operated as a Homeowner Association (“HOA”). An HOA is typically form as a separate entity with the intention of making and enforcing the rules for the properties and residents within the planned community. The rules will either permit or limit certain activities in the community.
If you are considering the expansion of your real estate portfolio with the addition of a property that is part of an HOA, your ability to rent your property on short term rental sites such as VRBO or AirBNB may be restricted by the restrictive covenants enforced by the HOA. The rental landscape has been immensely impacted by COVID-19 and the rise of short-term rental platforms, which allow owners to rent their spaces to travelers for a short time. Short term rentals, also known as vacation rentals, include the renting of a home, apartment, or condominium for a few nights or a few weeks without entering into a formal rental agreement.
HOAs have concerns with short term rentals because of issues that are often attendant to having short-term renters. Short-term renters may cause an increase in noise, traffic, and potentially breach community rules. A number of HOAs have already incorporated short-term rental limitations that restrict the number of units within the community that can be offered as short-term rentals. Other HOAs have revised their covenants to either completely restrict short-term rentals or to enforce a minimum rental term requirement to limit the impact of short-term rentals in their communities.
If your HOA is looking to amend the restrictive covenants to ban shot-term rental activity, then it is imperative to determine whether the HOA is permitted to make amendments to existing portions of the covenants and the proper process for completing the amendment. Courts have determined that while an HOA is authorized to make amendments to covenants, it is not permitted to create a new covenant that has no relation to an existing covenant. Ebel v. Fairwood Park II Homeowners’ Ass’n, 136 Wn. App. 787, 793, 150 P.3d 1163 (2007).
Under Washington law, “a simple majority [vote] cannot add new restrictive covenants that are inconsistent with the general plan of development or have no relation to existing covenants” when the covenants permit the majority to change covenants, but not create new ones. Wilkinson v. Chiwawa Communities Ass’n, 180 Wn.2d 241, 256, 327 P.3d 614 (2014). The creation of new restrictive covenants requires unanimous consent. Id. at 258.
In Washington, the authority of a simple majority of homeowners to adopt new covenants or amend existing ones in order to place new restrictions on the use of private property is limited. The court in Wilkinson held that a prohibition on short-term rentals was unrelated to the prior covenants and could not be adopted by a simple majority vote. If an HOA wishes to create new restrictive covenants limiting or restricting short term rentals, then the association needs unanimous consent from all parties entitled to a vote.
Simply put, your HOA is authorized to conduct a vote on the creation of a new restrictive covenant prohibiting or otherwise limiting short-term rentals within the community if the limiting terms already exist. However, an HOA is not entitled to enact and enforce a new covenant without first obtaining a unanimous vote from the HOA members consenting to the new restrictive covenant.
If you – or your HOA – have questions about this or other issues related to planned communities in Seattle, the Business Litigation team at Lasher is here to assist.