Dear plaintiffs and class members,
On July 3, 2024, more than four years after our case was filed and 2 years, 9 months, and 23 days after being assigned the case, Judge Freeman announced his decision in the case. He still left much undecided, but we at least have some direction.
The top level is that Judge Freeman ruled that the Sixth and Seventh Amendments are void because MJ Management did not have the authority to record them. When he enters his final written decision, it will include an order to that effect which we will record on title. He also ruled that the PRD Ordinance and RCW 64.90 require a homeowners association and that Homestead does not have one. That is pretty much all that he decided.
Judge Freeman said that under paragraph 3.3 of the Declaration, the declarant is required to pay the costs of maintenance. It says, “All costs and expenses of maintenance of and improvements to the Common Open Space shall be paid by the Declarant, its heirs, successors and assigns (other than the Parcel Owners or the Association).” He then said that paragraph 3.5 allows the declarant to collect a maintenance fee, and that the maintenance fee is not tied to the costs of maintenance. That is the argument I was always afraid that MJ and 18 Paradise would make. Paragraph 3.5 says
In consideration of the easement and license granted to Parcel Owners herein, each Parcel Owner shall pay and by virtue of acquisition of any parcel in Homestead agrees for themselves and their heirs, successors and assigns to pay a monthly Joint Maintenance Fee (hereinafter the “fee”) to the Declarant which shall be fixed and thereafter modified by the Declarant on the following basis:
He said that nothing in 3.5 says that the maintenance fee is tied to the cost of maintenance or limits the use of the maintenance fee to maintenance as defined by the Declaration. In the abstract, he is right. So as far as he is concerned, the declarant can increase the maintenance fee by 5% every year forever.
Freeman said he was not deciding anything about 18 Paradise divesting itself of the Common Open Space because no claim was before him for that. In truth, we asserted a claim that the private ownership of the Common Open Space is prohibited by the PRD Ordinance, but Freeman refused to consider that argument.
Freeman also said that he was not deciding anything about the form, structure, or powers of the homeowners association. The intervenors asked if he meant an advisory association, and Freeman said maybe because 18 Paradise still owns the Common Open Space. That issue is open.
Possinger asked Freeman if he would rule that the $36 amount is valid. Freeman said that he thought about that, and the MJ increases should be invalid under his reasoning for the Sixth and Seventh Amendments, but no claim was pled on that. Possinger pressed him to rule that $36 was valid, but Freeman indicated that he would leave that issue alone.
That is all that Freeman decided. He then told us to work together and prepare proposed orders. We have a hearing on July 26, and we still have a lot of work to do before then.
As I see it, Freeman ruled that there must be a homeowners association. The Declaration has five pages of provisions about the homeowners association. It says how it will be governed and what powers it has. I don’t see how we could have an HOA that did not comply with the Declaration. The Declaration says that the HOA will be formed when the declarant conveys the Common Open Space, but we now have a situation where one is required by law. No matter how or why we have one, it needs to be the one set forth in the Declaration.
We will be going to the City to see if Freeman’s ruling will get any action from it. When a property is in violation of a land use code, the City can issue a Notice of Violation. If the owner does not correct it, the City can impose fines or just make it happen at the owner’s expense. There is no statute of limitations for the City to issue a Notice of Violation. If the City can be convinced to do that, it will determine what is required for an HOA. In that respect, section 19.29.020 of the PRD Ordinance states that “To preserve community facilities and open space, every PRD shall have a homeowner’s association and agreements to fund such an organization.” Since the purpose of an HOA under the ordinance is to maintain the Common Open Space, I would hope that only one with that power would satisfy the City.
In a perfect world, we would also persuade the City to enforce Section 19.29.090(D) of the PRD Ordinance. It says that “Privately owned land may be designated as common open space, if the owner of such privately owned land: (1) Provides assurance satisfactory to the Public Works Director that the open space will be maintained in perpetuity and will only be used for the purposes intended as a part of the PRD; (2) Establish a formula for the assessment of maintenance dues by the homeowners and rules whereby the common land may be turned over to the homeowners; and (3) Reduce these provisions to writing, which must be approved by the Lynden City Council, in advance.” None of those things were done, and the City could issue a Notice of Violation for illegal private ownership of Common Open Space. We will have to see how the City reacts.
My rough estimate is that MJ and 18 Paradise collected between $150,000 and $300,000 a year under the Seventh Amendment. They collected about $35,000 under the special assessment. I think that they will owe at least $750,000 of refunds. In a sane world, that would give us a lot of leverage, but with these guys you never know.
We are appealing the dismissal of the Consumer Protection Act claim. The Court’s ruling would pretty much prove the claim.