Homeowners sue over donation fee

The homeowners in Village at Cold Spring have filed a lawsuit against First Story, alleging that the Covenant for Community Charitable Fee, which is attached to their homes’ titles, is illegal and should be rescinded. Their main objection is to the involuntary nature of the charitable contribution.

First Story is a nonprofit 501(c)(3), founded in 1998 by Hayden Watson of Hayden Homes, headquartered in Redmond, Oregon. They began by giving direct donations to charitable causes across the Pacific Northwest where Hayden builds homes. In 2002, First Story collaborated with Hayden Homes to build their first “grant house.”

For every new Hayden home that is sold, a donation of one-eighth of 1 percent (or .00125) of the sales price is donated by Hayden Homes, in the homebuyer’s name, to First Story to help create a sustainable funding source for their affordable housing program. For example, for a new home sold for $300,000, the donation would be $375.

The homeowners at Village at Cold Springs contend they were never informed about the charitable covenant and it only became apparent as owners began to sell their homes. A resident in Village at Cold Springs, who just recently sold her home, was informed by the title company that she had to pay the one-eighth of one percent fee at closing or the sale wouldn’t go through.

The homeowners ask how they can be held to abide by a covenant they were never informed existed on their title. They also say they never received letters disclosing the donation in their name.

Claire Duncan, executive director of First Story, told The Nugget, “In our model homes, there is a display explaining the charitable program. Our sales people brief prospective buyers on the program. The title company mentions it. It is the first item on the sales addendum. The buyers have a choice to participate in the program or not. If they elect to not participate, we actually remove the covenant from their sales agreement and title.”

A letter was sent on December 21, 2018, by Fitch Law Group of Redmond to First Story and Hayden Homes on behalf of the Village at Cold Springs Homeowners Association (HOA). In the letter, Scott Knox, then president of First Story, and Hayden Watson, manager of Hayden Homes, were directed to rescind the Covenant for Community Charitable Fee within 30 days of the date of the letter.

The attorney claimed the covenant is now illegal under ORS 93.269, which became effective January 1, 2016, and states:

“A declarant or covenant that requires the payment of a fee, commission or other payment upon the transfer of the fee simple interest in the property, to the declarant or other persons specified in the declaration of covenant, is void.”

The proceeds of a fee must go exclusively to benefit the property or to support activities that directly benefit the residents of the property that are subjected to the covenant fee, which must be executed by a public benefit corporation. The letter argues that since the fee is not directly benefitting the properties that have had to contribute to it, it is void under ORS 93.267.

The letter directs that any fees that were collected under the covenant must be reimbursed to the payers. A number of Village at Cold Springs homeowners assigned their claims to the HOA, which is acting on their behalf.

As of Monday, March 11, there had been no response from either First Story or Hayden Homes, so on Tuesday, March 12, a suit was filed by Village at Cold Springs HOA against First Story.

The suit alleges that First Story and Hayden Homes have continued to enforce the covenant even though it is unlawful. The suit asks for judgment as follows:

Declaring the covenant null and void; finding in favor of the HOA against First Story in the amount of $2,689.88 (the amount homeowners have paid in covenant fees); requiring First Story to account for all monies received pursuant to the covenant since 2007 and refunding those monies to parties who have paid, except for those who have assigned their claims to the HOA; payment of the HOA’s attorney fees and court costs; and for such further relief as the court deems proper.

When asked her thoughts on the HOA’s contention that the covenant is illegal, First Story’s Duncan declined to comment and said that their legal counsel would have to speak to that.

According to Doug Wills, HOA president, none of the homebuyers in Village at Cold Springs received any information about the covenant at the time of their home purchase. Wills reported that when the governance of Village at Cold Springs was turned over to the HOA in November 2017, the Board carefully reviewed the CC&Rs to remove any reference to Hayden Homes and never found any mention of the covenant nor was it included in information on a flash drive that was also handed over to the HOA.

Duncan remarked, “In general, it is a little puzzling why we are just hearing about this now. We don’t come across people who are in opposition to our charitable program. Maybe there is just a disconnect.”