Equity and Basic Rules of Fairness (Buck Mountain Owners’ Association v. Prestwich, No. 167714-4-1, (Wash. Ct. App., filed March 4, 2013))

Equity and Basic Rules of Fairness require owners to share common expenses, even in the absence of an agreement to do so. Buck Mountain Owners’ Association v. Prestwich, No. 167714-4-1, (Wash. Ct. App., filed March 4, 2013) (unpublished). That’s neither a radical nor a novel concept.

The facts are as follows. Owners shared a roadway. Some owners were subject to a covenant to pay, some were not (developer error). Notwithstanding the absence of an agreement or covenant, before owners Prestwich and Bentley the long-standing practice had been for the owners without an express agreement to pay 62% of the annual assessments paid by the members of the association subject to a covenant to pay.

Then along came Prestwich and Bentley. The association sued Prestwich and Bentley under equitable principles when Prestwich and Bentley refused to pay. The trial court ruled against Prestwich and Bentley.

The trial court concluded that the owners Prestwich and Bentley, who were not subject to any agreement, had to pay their share of road maintenance expenses for a common road. That seems fair. The trial court then imposed a binding covenant and agreement that created a lien for unpaid maintenance costs.

The owners appealed. The Court of Appeals, relying on Bushy v. Weldon. 30 Wn.2d 266, 191 P.2d 302 (1948), held that the trial court had inherent equity power to resolve a cost-sharing dispute between users of a shared roadway, premised on basic rules of fairness, but that it had no authority to impose a binding covenant. Slip op., at 11, 23.

The amount of damages was $11,132.44 in past due assessments. The association did not request attorney’s fees. The owners and the third-party defendant that created the development paid their own attorney’s fee. Slip op., at 26-27, 27 n.4. There is no mention of the amount of fees that the parties paid. One can imagine they are substantially more than the amount in controversy.

The two interesting issues in this case are: one, can a party force the recording of a covenant that runs with the land on another owner? and two, how do you measure the division of fair and equitable costs among users of a shared asset?

A covenant has the added benefit of binding future owners and, presumably, making the promise to pay one that is secured by a lien against the property. So, a ruling that recording the covenant exceeded the trial court’s authority is a disappointment to a party trying to find a way to make the other party’s (duty) promise to pay of value. Many attorneys aren’t very good at math, so I guess we can expect more litigation on how to measure “fair”.

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2 Responses to Equity and Basic Rules of Fairness (Buck Mountain Owners’ Association v. Prestwich, No. 167714-4-1, (Wash. Ct. App., filed March 4, 2013))

  1. jlockwood says:

    I have found a condo that I would like to purchase. In doing the financing paperwork they found that the developer has never set up a condo reserve. There are 8 condos (4 duplexes) the developer owns 3 of the 8. The original loan on the condo went through with Fannie Mae financing – now it is not eligible for Fannie Mae because of the failure of the developer to set up a condo reserve. Is this legal in WA state? If I do decide to buy the condo who then is responsible for the exterior repairs? Or is this even a huge concern. If I purchased a house I would need to make sure I had my own money in reserves to the any repairs. Should I see this as a huge red flag?

  2. accura09 says:

    I purchased a 3-Bedroom condo in Dec 2013. This HOA has eighteen units of 1-BR, eight 2-BR, and one 3-BR. The HOA dues were assessed by the unit values set in 1978. The 1-BR unit values were around 2.88% to 3.24%, 2-BR 4.03%-5.40%, and the 3-BR was 11.25%. Currently, 1-BR units pay about $350 per month, 2-BR units about $500 per month, and $1367 for my 3-BR unit. I found that RCW 64.34.360 Common expenses Assessments ask that the costs of utilities must be assessed in proportion to usage. I should not pay $178 per month for cable while the rest of 1-BR units pay $46 per month. I wrote a letter to the Property Manager in Dec. After three months with several e-mails and phone calls, the Board presented the revised HOA dues on 3/24/14. Cable services will be cancelled. The utilities fees will be assessed by number of bedroom since we don’t have meters installed. The 1-BR units will pay 2.70% (even lower than now), 2-BR pay 5.41%, and the 3-BR pay 8.11%. My question is that all three Board Directors own 1-BR units. The 18 units of 1-BR are the majority. How can I, the only 3-BR owner, seek the fairness in this HOA?

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