In Wilkinson v. Chiwawa Cmtys. Ass ‘n, the Washington Supreme Court determined that homeowners may offer their home to short-term vacation renters without violating community covenants restricting lots to single-family residential use. In so holding, the Court looked to the full text of the covenants and found that the drafters anticipated short-term rentals by dictating the size of rental signage that residents could hang. Though duration was absent from the discussion of rentals, the court held that “silence as to duration does not create ambiguity.” If this language is picked up in future contract interpretation cases, it could provide useful clarification about the application of the context rule of interpretation announced by the Court in 1990’s Berg v. Hudesman and debated by lawyers ever since.
The Court further found that Community Association did not have the power to amend the covenants to explicitly forbid short-term rentals by vote of a simple majority vote because the rental restriction would be a new covenant. This holding is at odds with the covenants themselves which contain no such distinction between new covenants and amending covenants. Instead the covenants provide a majority of owners may “change these protective restrictions and covenants in whole or in part.” However, the Court drew on Washington’s strong respect of private property rights to read narrowly the provision to apply only to “changes” i.e. amendments of existing covenants. Accordingly, the Court found that new covenants required unanimous consent to be effective. No restriction had existed on rental duration, so unanimous consent was required to create a covenant restricting rental duration.
The Court emphasized that its decision was guided by the language of the covenants. The take away for developers and their attorney advisors is clear: the Court will read narrowly restrictions on private property usage rights. If a community wishes at the outset to prohibit a specific activity, such as vacation rental, a covenant needs to explicitly restrict rental terms. The homeowner’s association cannot depend on the courts to read that provision in later or to allow the association to tack the restriction on to another covenant, even when the purposes are consistent. If the community decides at a later point that a new property usage restriction is required to meet community needs, they will have to muster unanimous consent or learn to deal with the unwanted activity in their midst.