Mayor Scott’s Letter

CITY OF LYNDEN ADMINISTRATION DEPARTMENT
Scott Korthuis, Mayor

February 17, 2022

Lynn Button, Representative Homestead Petitioners
8856 Depot Road, Unit B Lynden, WA 98264

RE: Homestead Residents Petition to the City of Lynden

Dear Mr. Button and the Homestead Petitioners:
This letter is written in response to the petition which you submitted to me and the Council on July 29, 2021. To date the City has declined to comment on the petition as the issues raised are part of an active lawsuit in which the City was a party. However, on February 4, 2022, the court dismissed the City as a party to this lawsuit. Please accept the following as a response from the City regarding the concerns of the petitioners.

City Response to Petition

The petition raises 11 points which are transcribed below with a corresponding City response.

1. The petition states: “The Developer/Declarant never created a homeowner’s association as required per Planned Residential Development Ordinance 19.29.020, and the Lynden Municipal Code19.29.130.”

City Response: It appears that the Council and City Attorney, at the time of approval, deemed this aspect of PRD code fulfilled. The Homestead Planned Residential Development (PRD) agreement consistently references a homeowners’ association (HOA) and their anticipated responsibilities. Likewise, staff reports and meeting minutes also reference the anticipated HOA.

Corresponding to the PRD agreement, Article IV of the City-approved master covenants, conditions and restrictions (CCRs) is titled “Owners Association” and Section 4.1 specifically states, “There is hereby established an Owners Association to be known as the “Homestead Owners Association”. However, the role of the group was clearly limited. Section 4.3 describes:
“So long as the Declarant or its successors or assigns other than Parcel Owners retains ownership of the Common Open Space, the Association shall operate in advisory capacity only to the Declarant. During the time the Association shall operate as an unincorporated association. ” (Emphasis added)

This section goes on to detail the structure of the advisory, unincorporated owners’ association. The wisdom of the structure may be debated, but the intent was clear. The Homestead Owners Association was “established” in this document, and its role was intended to be purely advisory to the Declarant until such time as the ownership of the common open space is conveyed to the Owners Association. Neither the PRD agreement nor the Master CCRs include a deadline for the transfer of ownership of the common area or the incorporation of the group when the Owners Association would assume more authority.

In the meantime, the build-out associated with the Homestead plan spanned many years and during that time the Declarant, Homestead NW, and then its successor has retained ownership of the common areas and retained control over modifications to the covenants, conditions and restrictions (CCRs).
Your petition calls for City enforcement. However, the City did not become involved in this issue for at least two reasons. First, according to the original approved Master CCRs, a homeowner’s association was established (although only advisory). Second, the Homestead PRD appeared to function smoothly from 1992 until recently in 2020, when complaints were raised by homeowners. The City found no cause to interfere when, for 28 years, the neighborhood was, by all appearances, functioning well with no complaints.

Today, Homestead’s Master CCRs would not be approvable under state law. The Washington Uniform Common Interest Ownership Act (WUCIOA), adopted in 2018 and amended in 2019, would not allow a homeowner’s association to be indefinitely relegated to an advisory role. In fact, under current law the declarant’s responsibilities must be turned over to a property owner run homeowner’s association upon the sale of 75% of the lots. Moreover, staff found that specific deadlines for transfer to property owners were included in subsequent PRD agreements approved within the City of Lynden. Nonetheless, the above WUCIOA requirement did not exist at the time Homestead was established and few of WUCIOA’s provisions may be applied retroactively. And subsequent PRD agreements approved by the City do not affect the Homestead CCRs. The City does not have the right to unilaterally revise CCRs approved 30 years ago.

2. The petition states: “The common areas for the Homestead PRO were never defined as required per PRO Ordinance 19.29.120 and 19.29.130, and LMC 19.29.090”.

City Response: The City is unclear as to the meaning of this statement. Staff research indicates that the Homestead PRD included platted common areas as well as private streets and walkways. Additionally, the original CCRs, which were approved by the City and recorded in 1992 under Auditor File No. 920624017, address common open space in Section 1.3.8, Article III, and Exhibit B.

3. The petition states: “A final PRO agreement was never approved by the City of Lynden as required per PRD Ordinance 19.29.060”

City Response: The City Council approved a final agreement on July 27, 1992 to which the city attorney attested and the mayor signed. This document was used as the basis for development within the Homestead PRD for more than two decades. Additionally, the PRD code at that time allowed the Public Works Director the discretion to approve a PRD’s final plan if it met minimum requirements and was deemed “sufficiently consistent with the preliminary development plan” (LMC 19.29.060(B) (1992)). The document in question was labeled as “preliminary.” However, the intent and the subsequent actions taken, including numerous permits approved under the watch of the Public Works Director, indicate this label is an uncorrected scrivener’s error and the PRD agreement was clearly considered final. Even if it were not a scrivener’s error, the preliminary plan was consistently treated overtime as the final plan.

4. The petition states: “Neither a Preliminary or a Final PRD agreement was recorded with Whatcom County as required per PRD Ordinance 19.29.150, and LMC 19.29.100.

City Response: Agreed. For reasons unknown, the final PRD agreement was not recorded with the Whatcom County Auditor’s Office. However, failure to record the document does not invalidate the approval of the City Council.

5. The petition states: “Privately owned land has been designated as common open space without meeting the requirements of PRD Ordinance 19.29.090. D.”

City Response: The Lynden City Council and the Public Works Director in place at the time of approval found that the Homestead PRD agreement and Article lll-“0pen Space” of the CCRs sufficiently addressed the three points listed under the 1992 version of LMC 19.29.090(D) and about 8 acres of property was designated as open space. Specifically, “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 opens space will be maintained in perpetuity and will only be used for the purposes intended as a part of the PRO.

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.

3. Reduce these provisions to writing, which must be approved by the Lynden City Council in advance.” LMC 19.29.090(0) per Ord 905 (1992)

6. The petition states: “Amendments to the CC&Rs (including amendments 6 and 7) were never reviewed and approved by the COL as required by the PRD Preliminary Agreement (PRD Agreement) Sect. 17, and LMC 19.29.130”

City Response: The City understands that the validity of the 6th and 7th amendments remain a live subject in the pending lawsuit and notes that on February 10, 2022, Judge Freeman entered an order denying plaintiffs summary judgment motion seeking to invalidate the 6th amendment.
Unfortunately, the language is somewhat nebulous in both LMC 19.29.130 and the Homestead PRD Agreement. In 1992, LMC 19.29.090 allowed for a designee of the City Council to review and approve. The PRD Agreement language states the City must give “consent”. Neither account outlines the path or process for “approval” or “consent” whether by Council action or otherwise. Documentation from 1992 and subsequent years does not give us a clear picture of how the City may have given “consent” to modifications to the CCRs. We do know that code, at that time, gave the Public Works discretion to administratively approve modifications to PRDs as long as they did not significantly alter the character of the project. Modification to the CCRs may have received administrative consent from a Council designee without a clear record of the modification being created and preserved.

For the more recent changes to the CCRs in the 6th and 7th amendments, no formal consent was obtained from the City of Lynden. Planning Director Heidi Gudde recalls that representatives of the Declarant met to discuss the assessment increase reflected in amendments 6 and 7. Although the City, by no means, would consider that discussion an approval of the amendment, it could have been interpreted, by the Declarant as consent.

We also know that the structure of the Homestead PRD gave the Declarant unilateral ability to modify CCRs. In 1992 the City Council approved Section 8.2.1 of the Master Covenant which states that:
“So long as the Declarant retains ownership of the Common Open Space the Declarant specifically reserves for itself, its successors and assigns the absolute, unconditional right to alter, modify, change, revoke, rescind or cancel any and all of the restrictive covenants contained in this Declaration or hereinafter included in any subsequent Declaration provided that nothing herein shall prejudice or otherwise impair the security of any mortgagee of record as to any lot or parcel. Within forty-five (45) days after any such change in the Declaration the Declarant shall provide written notice of the change to Parcel Owners.”

As we consider City “approval” or “consent” of modifications it is vital to keep in mind the purpose of City review of a CCR document. The City’s goal is to ensure consistency between the development standards outlined in the PRD agreement and those appearing in the CCR document. For example, if the agreement called for a specific landscape buffers or maximum building height it is important that the CCR document does not provide a conflicting standard or one that does not meet City code. The City’s role and the purpose behind any consent requirement for CCR revisions is not to review or second guess the modification of maintenance assessments. The City is not party to the associated costs of private common areas, streets, and stormwater facilities, nor does it have a role in the audit of such expenses. In short, it is not the City’s legal responsibility to review CCR revisions of private assessments. The City reviews CC&R changes only for consistency with City development standards.

7. The petitions states: “Being that there is no established Homeowners Association accepted by the COL, the COL has failed to enforce the responsibility of the golf course owners to provide private street cleaning, maintenance, snow removal and storm drain maintenance as required per the PRD Agreement Section 14.”

City Response: The City disagrees with this characterization. The Homestead PRD agreement and CCRs approved in 1992 indicated that the City accepted the HOA structure as proposed. That is, an unincorporated HOA that had an advisory role until the conveyance of common open space was executed. Article IV of the CCRs provide detail as to the formation and voting structure of the Owners Association. The City is not subsequently obligated to ensure this group is formed or enforce a requirement for this group to meeting as this is a private function under the development’s CCRs.

The PRD agreement is an agreement between the City of Lynden and the PRD developer. The PRD agreement outlines areas of the Homestead PRD which are to be privately maintained rather than maintained by the City. The intent of these sections is to clarify that the City will not perform the maintenance or cover associated costs. Unless otherwise agreed by the City Council, the City has not performed these functions. Failure to perform maintenance of private streets or common areas to the standard of the Homestead homeowners are not enforced by the City of Lynden but must be addressed as a breach of the CCRs and a private dispute between the Declarant and the homeowners.

8. The petition states: “Being that there is no established Homeowners Association accepted by the COL, the COL has failed to enforce the responsibility of the golf course owners to provide maintenance of all trees planted along private and public streets within the PRO per the PRO Agreement Section 14.

City Response: The City is not obligated to ensure that the Owners Association is formed or holds regular meetings as this is a private function under the development’s CCRs. Failure to maintain street trees to a standard desired by the homeowners must be addressed as a private dispute between the Declarant and the Owners Association. The City will not enforce private CCRs. However, if a failure to maintain street trees begins to violate the Lynden Municipal Code (LMC) or the City’s Engineering Design Standards then it becomes a violation enforceable by the City. The City, has in the past, worked with the Declarant’s agents to correct issues that were violations of the City’s code including those related to trees and brush clearing.

9. The petition states: “Homestead PRO owners have been denied the opportunity to elect to have The Uniform Common Ownership Interest Act (CIOA) apply entirely as required by RCW 64.90.095”

City Response: The Homestead CCRs clearly allow unilateral control by the Declarant until such time the common open space is conveyed to the Owners Association. The proffered argument is one between the PRD owners and declarant’s successors. The City has no authority to decide such private disputes.

10. The petition states: “Homestead PRO owners have been denied the opportunity to adopt a budget as required by RCW 64.90.095.”
City Response: See response to no. 9 above.

11. The petition states: “Homestead PRD owners have been denied the opportunity to determine assessments for common or specifically allotted expenses as required per RCW 64.90.080(1) andRCW64.90.525.”

City Response: See response to nos. 9 and 10 above.

For the reasons set forth above, in response to the first four (4) of seven (7) petition requests (those made to the City), the City respectfully declines to take the requested actions. It can be useful to research past actions, and we have done so here. However, in this case, the City firmly asserts that looking forward, rather than backward, is the most productive approach. That the Homestead PRD CCRs would not be consistent with state law today, or that the City would not approve them today, makes little difference. We must look for the best solution under the current conditions.

The City of Lynden fully supports the Homestead homeowners in their desire to have representation through an incorporated homeowner’s association.
The City is also fully supportive of the future success of the Homestead Farms Golf Course. Its attractive appearance and top-notch reputation benefit every homeowner within the Homestead PRD as well as the City of Lynden. To see the golf course fall into disarray or financially fail would be detrimental to us all.

Remedies:
The City recommends consideration of the following steps to achieve a remedy to the current situation:
• Formation of the unincorporated, advisory Owners Association according to the structure outlined in Article IV of the Homestead CCRs.
• Incorporation of the Owners Association to establish the group as a non-profit corporation (or equivalent entity).
• Execution of an agreement with the Declarant which will convey the ownership of the common open space to the incorporated HOA. The City recommends that this agreement, at a minimum will:

o Provide an estimate of maintenance costs associated with the residential component of the Homestead PRD including common open space, private streets and walkways, street trees, and stormwater facilities.

o Provide for a short transitional time during which agents for the Declarant has an opportunity to evaluate and discuss with the Owners Association short and long- term maintenance needs before establishing a corresponding assessment.

o Recognize the benefit that a well-maintained, functioning golf course has for all Homestead homeowners. Benefits include increased property values, aesthetics, and recreational opportunities such as golfing and walking paths.

o Incorporate a tiered assessment of properties depending on their type and location whereby condo owners would be assessed differently than detached single-family homes and homes with golf course frontage would be assessed differently than homes without golf course frontage.

o Revoke CCR amendments 6 and 7 and assume that, if assessments are due, they are equal only to the previous assessment until such time a new assessment can be established based on documented costs associated with the residential portion of the Homestead PRD and any recognizable benefit of support for the Homestead Farms Golf Course.

o Address the standard by which common open spaces and neighborhood entrances must be cared for so as to maintain the high standards associated with the Homestead neighborhood.

o Outline the roles of an incorporated HOA and the Declarant in regards to the appearance of residential neighborhoods, the operation of the golf course, the maintenance of stormwater facilities, and the use and maintenance of common open spaces and pathways.

o Establish new property assessments based on establishment of roles and responsibilities identified above.

City administration, City legal counsel, and staff are available as resources for the execution of these next steps or to facilitate an agreement between the Declarant and the Owners Association. I strongly encourage each homeowner to consider that the most productive and cost-effective path forward may be one of facilitated mediation rather than continued legal wrangling.

If you would like to discuss this further, please contact me at (360) 354-1170 or korthuiss@lyndenwa.org.

Sincerely,

Scott Korthuis, Mayor
Bob Carmichael, City Attorney
John Williams, City Administrator Heidi Gudde, Planning Director
Steve Banham, Public Works