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Tom Kelly
Tom Kelly
The Real Estate Adviser

May 17, 1996

REAL ESTATE ADVISOR: CC & RS: PROTECTION AND SOME PERIL

BY TOM KELLY
The Real Estate Advisor

I once had a friend who researched a piece of real estate on the Eastside for his future home. He followed the area for years, and knew just how long the commute would be, the reputation of the elementary school his children would attend, even the delis in the area that carried Cougar Gold cheese.

What he did not anticipate hit close to home. He was angry he did not discover the restriction in his research and resented the fact he had to alter his master plan: The community did not allow driveway basketball hoops. Much to his chagrin, the kids refined their shooting skills on a hoop mounted inside the garage.

Restrictive covenants are drafted for a variety of reasons. Often they are an attempt to safeguard a community from the chance that a substandard or out-of-place dwelling could devalue the community in any way.

The popular phrase "CC and Rs" means the conditions, covenants and restrictions adopted by a developer or homeowners' association to govern what can be built and how it should be maintained. This usually means the review of new home designs and fees for common landscaping, recreation and security.

However, restrictive covenants also need to be clear and concise. If they are not, litigation often follows with costs and anxiety everyone could do without.

A good example is a recent Court of Appeals case, Riss V. Angel, where the court affirmed a trial court's decision and ruled that a couple's home design in the Mercia Heights subdivision of Bellevue's Clyde Hill met the ambiguous requirements of the association.

Here's the case in a capsule: According to court papers, all lots in Mercia are subject to covenants where the Risses wanted to build a large home. The covenants specify an approval process by which the board of the association reviews designs of proposed construction for compliance for minimum square footage (1,400 square feet) and maximum height restrictions (20 feet). The covenants do not contain any specific references to maximum limitations on the size, square footage or bulk of a residence.

The homeowners objected to the bulk of the Risses proposed home and created a different setback requirement. The Risses met all minimum requirements under the covenants, fought the associations' objections and all parties ended up in court. The Risses prevailed.

"Riss v. Angel is an interesting case for several reasons," said Seattle attorney Rob Crichton. "For one thing, most homeowners who are members of homeowners' associations don't consider the possibility that they can be held jointly and severally liable -- for example a plaintiff can collect 100 percent of a judgment against any one member, whomever looks the most promising -- for the actions of the association."

According to court documents, the member homeowners in the Riss case argued that the trial court erred in holding them jointly and severally liable for damages to the Risses. They claimed the trial court could not impose liability without knowing how each homeowner voted.

The appeals court disagreed with the homeowners and backed the trial court. It noted that the Supreme Court has stated that "each member is individually liable for all of the debts of the association to third parties." Before the trial, the Risses offered each homeowner the opportunity to withdraw from the case and be released of liability in exchange for an agreement not to oppose the Risses' home plans. Five households accepted. The appeals court upheld the trial court in holding the remaining households liable for damages.

"Most restrictive covenants provide for an award of attorney's fees to the prevailing party," Crichton said. "Thus, if the association loses a suit brought by an owner, if will be liable for the owner's attorney's fees.

"In addition, restrictive covenants are construed narrowly and cannot be stretched beyond their lateral reach in an attempt to intimidate property owners."

That means, among other things, that an owner's association usually cannot change the rules for one house. The court ruled that it was "unreasonable" for the homeowners to create a different setback requirement for the Risses from the one clearly expressed in the covenants.

If you are a member of a homeowners' association, make sure your "CC and Rs" are in line and iron-clad. Remember if you lose a lawsuit brought against the association, you could be juicy target -- especially if most of the members are broke and you're driving a shiny new car.



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