Wilkinson et. al. v. Chiwawa River Pines (Chelan County Superior Court Case No: 09-2-00896-0) / Outcome of Cross-Summary Judgment Motions

Statement of Facts from the Chiwawa Community Association Board of Trustees

Background: Chiwawa River Pines is a beautiful planned community consisting of 367 lots located in Leavenworth, Washington. The community is located in an area zoned as Rural Waterfront and is subject to protective covenants. The 1988 and 1991 Amended Protective Covenants restrict use to single-family residential use and prohibit commercial use, nuisance, and offensive use.

Many owners were troubled by the increasing number of properties being used to generate high volume, short-term occupancy for commercial gain. This issue has been debated by the community for the past few years. In November 2007, the Board sent a survey to owners to collect feedback about nightly rentals and how to proceed. At the annual meeting held on April 26, 2008, the Board reviewed the advisory vote, which decided to separate low-impact, service-oriented businesses from the short-term rental issue and allow the owners to vote on each item on its own merits. At the special meeting held on September 27, 2008, the owners were asked to vote to whether to allow each of the following as an exception to industrial or commercial use: low-impact, service-oriented businesses, long-term rentals (duration longer than six-months), and short-term rental (duration shorter than six-months).
The owners approved the proposal to allow service-oriented businesses and long-term rentals. The owners did not approve of the exception for short-term rentals. Three hundred and one owners (301) were eligible to vote. Two hundred forty owners (240) voted. One hundred sixty owners (160), an overwhelming majority, chose not to allow short-term rentals as an exception to commercial use.

The Lawsuit: Nine owners sued the Chiwawa Communities Association for a declaratory judgment to overturn the 2008 Amended Protective Covenants. The Board defended the suit and counterclaimed for declaratory and injunctive relief because it has a fiduciary duty to enforce the Protective Covenants.

At the heart of this matter is that Plaintiffs and the Association have fundamentally different views on ownership rights. Plaintiffs believe they have property rights that cannot be restricted. Owners, however, do not have unrestricted property rights when they live in a planned community.

Lawsuits involving covenant interpretation are very case-specific—that is, the outcome depends on the specific facts before the court. The outcome in this current lawsuit may not apply to another planned community with different facts. In addition, Chiwawa River Pines is one of the few planned communities in the area. The ruling in the current case would not apply to properties not subject to restrictive covenants.

Outcome: On January 5, 2010, Honorable T.W. Small of the Chelan County Superior Court issued an oral ruling on the cross-motions for summary judgment and directed counsel to draft a joint order incorporating his ruling for his review and signature.

At the start of his remarks, Judge Small provided an analysis of applicable laws. In conflicts between homeowners regarding the interpretation of restrictive covenants, the Court places a special emphasis on arriving at an interpretation that protects homeowners’ collective interests. In construing restrictive covenants, the Court’s primary task is to interpret the drafter’s intent. Extrinsic evidence is admissible to determine the meaning of the specific words and terms used in the covenants. In the case of an ambiguity, the Court will look beyond the document to ascertain intent from the surrounding circumstances.

The Court found that it was undisputed that the Board took enforcement actions against short-term rentals in the past. The Association submitted a 1987 letter informing an owner that a daily rental was a violation of the Protective Covenants and 1991 Board minutes memorializing the request for an owner to remove a sign for lodging. In addition to these undisputed facts, the Court distinguished the present case from case law cited by Plaintiffs because of the broad language of the Protective Covenants. In Chiwawa, the Protective Covenants not only restrict use to single-family residential use, but there is also language prohibiting commercial use, nuisance, and offensive use.

In summary, Judge Small ruled that rentals for a duration of less than one month are a commercial use and violate the prior Protective Covenants. He believes the frequency of use does change the residential nature of use. Judge Small, however, also ruled that the 2008 Amendment over-reached in prohibiting rentals for a period of more than one month but less than six months. An express reservation of power authorizing less than 100 percent of property owners to adopt new restrictions is valid, provided such power is exercised in a reasonable manner consistent with the general plan of development. Judge Small found the pre-existing covenants allowed month-by-month rentals; therefore the 2008 Amendment was not a reasonable amendment and the prohibition against short-term rentals for less than six months is invalid.

Lastly, Judge Small ruled that each party is responsible for their own attorney fees.

The Association’s attorney is also seeking a clarification from the judge regarding the provision of the 2008 amendment providing an exception for low-impact, service-oriented businesses and the Association’s request for an injunction against Plaintiffs. Another update will be provided shortly, as well as a copy of the final order. The attorneys for both parties are scheduled to speak with Judge Small on January 21, 2010.

If you would like more information on this topic, please contact the Chiwawa Community Association Board of Trustees at 509-763-4309 chiwawa@nwi.net or on the web at http://www.chiwawariverpines.wordpress.com

Thank You:

Board of Trustees, Chiwawa Community Association