What you need to know:
A Declaration can be amended to allow certain units to exit an association provided the governing documents and relevant statutes are followed, but obtaining an attorney opinion first will likely help you if the matter goes to court.
Coleman v. Cook, 2023 WL 2127581 Not Reported in Pac Rptr (Wash 2/21/2023)
Issue: Can some but not all of the members of an association vote to allow certain members out of the association? YES, provided the law and governing documents are followed.
Facts: VGC was a planned community in the State of Washington. It consisted of 14 phases including approximately 240 homes. The covenants provided that membership could only be terminated by “selling or disposing of an ownership interest or property interest covered under the [CCRs].”. In December of 2017 the board of VGC held a special meeting to vote on the exit resolutions of Phases 3, 4, 9 and 14. The resolutions passed.
Suit: In 2018, two members filed suit against various board members and the property manager for failing to enforce covenants to require all property to pay toward the maintenance fund and that the exits from the association were illegal and “requesting the court hold the exit amendments void.” The board members in part had relied upon “the expert declaration of attorney Scott Miller” for their decision.
The Trial Court: The trial court found that the core issue was the validity of the exit amendments and held in favor of the association stating:
The Court’s review of the record shows that we have volunteers who were following the advice of counsel. The resolutions that were presented to the membership back in December of 2017 showed the members what they were voting on with enough detail for that to be sufficient. The Court believes that the plaintiffs’ argument is too technical, that it is reading documents in a vacuum, and is not, therefore, taking into account the governing documents on the whole…. The evidence shows the board acted within the scope of its power and authority. There’s no evidence beyond speculation that the board acted for any improper motive.
The plaintiffs appealed claiming the trial court erred by dismissing exit amendments claim.
Court of Appeals: Despite numerous arguments by the plaintiffs relative to the exit amendments, the appeals court held as follows:
Articles of Incorporation grant the board broad powers, including “all powers as allowed by law.” [Plaintiff] does not cite any law that prohibits [the association] from amending the covenants to allow phases to exit. Thus, we conclude that the governing documents allow [the association] to make such amendments to the CCRs…
[Plaintiff] next argues that allowing phases to exit results in an increased financial burden on members, which in effect creates a new covenant. This argument is unsupported by citation to authority or logic. Nevertheless, the covenants do not prohibit amendments that create a new covenant.
[Plaintiff] next argues that the exit amendments are void because they destroyed the general plan or scheme of VGC as it was intended and sold to residents. We disagree.
[Plaintiff also argued] that the board violated the CCRs’ amendment procedure [because] (a) the membership did not vote on the specific language of the amendments, (b) no homeowner proposed the amendments, (c) there was no quorum, (d) the board did not use proper communication equipment, (e) the board members used proxies, which are not permitted under Washington law, (f) [the association] violated RCW 58.17.215 by failing to obtain a written agreement from all VGC members allowing alteration of the subdivision, and (g) [the association] violated its duty to act in the best interest of its homeowners.
Plaintiff lost all of these arguments as well with the court taking the time to go through why each of these arguments failed. Ultimately, the Court of Appeals held that the amendments were (i) properly presented to the membership in accordance with the covenants and statutory law, (ii) approved by the membership in accordance with the covenants; and (iii) valid. Accordingly, the Court of Appeals affirmed the trial court’s ruling dismissing plaintiff’s claims on the exit amendments.