Casey v. Sudden Valley, Budgets v. Assessments

Casey v. Sudden Valley Community Assn, No. 70329-3-I (Wn. App. May 27, 2014)

In many associations, a board adopts a budget, the board sends a summary of the budget to the owners, and the owners ratify the budget. This practice is consistent with RCW 64.38.025(3) – the Washington Act that applies to non-condominium homeowner associations. The provision requires a board to submit a proposed budget to the members of the association for a vote at a meeting. Under this statute, the budget is ratified unless a majority or percentage specified in the governing documents reject the budget.

The typical budget summary includes any proposed assessment increases. If the budget is ratified, then the association presumably has the authority to increase assessments. RCW 64.38’s ratification provision is clearly modeled after the Washington Condominium Act.

In Casey v. Sudden Valley, Division One held that owners may ratify a budget that requires an increase in assessments while separately rejecting an increase in assessments. To get to that conclusion the Court determined that the budget summary referenced in RCW 64.38 relates only to capital reserves – a mistaken interpretation of changes to Legislation made in recent years considering that the statute required budget summaries be sent to owners before the reserve study language was added.

The Sudden Valley court essentially held that an owner-ratified RCW 64.38 budget that includes an increase in assessments is irrelevant if the governing documents require a separate vote on assessment increases and the owners, by separate vote, reject the increase. In such a case a board may unilaterally amend the budget without owner approval.

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