Recently, the Oregon Court of Appeals issued a decision that may have far reaching impacts for communities looking at whether a particular project constitutes a “capital improvement” under their Covenants, Conditions and Restrictions (more commonly known as CC&Rs). The case, known as Eagle-Air Estates Homeowners Ass’n, Inc. v. Haphey, 272 Or App 651 (2015), involved whether an assessment levied by a homeowners association to pay for certain attorney fees incurred in a prior litigation constitutes a “capital improvement,” and therefore a “special assessment” under the HOA’s CC&Rs.

Relying on Black’s Law Dictionary, the Court of Appeals found that the term capital improvement “is commonly understood to mean a permanent structural improvement to property.” (Emphasis added). The Court also cited to Webster’s Dictionary’s definition of “capital expenditure,” as further explanation of the phrase, noting that a “capital expenditure” refers to “long-term additions or betterments properly chargeable to a capital assets account.”

After analyzing the above two definitions, along with the language in the HOA’s CC&Rs regarding other types of specific capital improvements, the Court of Appeals held that “[a]n assessment to pay for attorney fees in litigation. . . is not the type of expense that an ordinary person would regard as a ‘capital improvement’.” As a result, the assessment did not constitute a “special assessment” under the HOA’s CC&Rs and was therefore not subject to any temporal limits as to how long the assessment may be issued.
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This article was previously published in WSCAI’s newsletter.

Neighbors will never cease finding ways to bother each other and to be bothered. The eternal struggle for community associations is determining when this bothersome behavior rises to the level of a violation of the Association’s rules and/or governing documents, which the board must enforce, and when the Association should let the neighbors handle it among themselves.

Most governing documents include a provision that says something like: “No owners shall engage in noxious or offensive activities, or do anything which may become an annoyance or a nuisance, or in any way interfere with the quiet enjoyment of other owners.” Words like “offensive,” “annoyance,” and “nuisance” are hard to define and can be dependent on the person perceiving the behavior. Regardless of the specific words of your Association’s provision, the goal is to limit the activity of one owner, which negatively impacts another owner. Accordingly, many Associations have resolutions or rules specifically addressing smoking, pets, and noise, which are the biggest areas of “nuisance” for most Associations.
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Oregon subdivisions often have Declarations of Covenants, Conditions, and Restrictions (“CC&Rs”) with varying degrees of restrictions on the characteristics of homes to be built there. For example, some CC&Rs restrict how tall homes can be to protect views of all of the homes in the neighborhood, or may specify certain materials for roofing or siding, to keep a consistent aesthetic in the community. Other CC&Rs require levels of upkeep on homes and give the HOA the power to fine owners that do not comply. It is important that prospective purchasers and owners in communities governed by CC&Rs know the restrictions in order to avoid potentially costly disputes.
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