SUMMARY: Due to a September 2, 2014 court decision, condominium and homeowner associations need to consult with their attorney to determine the enforceability of their rental cap restriction, or face the risk of a lawsuit for violating the Washington Condominium Act and the association’s declaration. See, Filmore LLLP v. Unit Owners Association of Centre Pointe Condominium (Wash. Ct. App. Div. 1, Sept. 2, 2014).
BACKGROUND: The Court invalidated the association’s amended declaration–which contained its rental cap restrictions–because the amendment was not approved by 90% of the unit owners. In May 2011 Filmore LLLP, an investor, purchased Unit D-3. In October 2011 the association adopted (with a 67% approval vote based on RCW 64.34.264(1)) and recorded an amended declaration that restricted leasing to 30% of the condo units. In September 2012 documents were recorded to divide Unit D-3 into 35 separate units. Filmore LLLP obtained a $3.6 million commercial loan to finance the construction project. In October 2012 Filmore sued the association, alleging the association violated the Condominium Act and the association’s own declaration by enforcing the rental restriction without obtaining the 90% approval vote required by RCW 64.34.264(4) (“no amendment may … change … the uses to which any unit is restricted, in the absence of the vote or agreement of the owner of each unit particularly affected and the owners of units to which at least ninety percent of the votes in the association are allocated …”).
THE PARTIES’ ARGUMENTS: The Association argued only 67% approval was required, not 90%, because the word “uses” in the phrase “the uses to which any unit is restricted” in RCW 64.34.264(4) only applies when the association tries to change use from a residential to a nonresidential use; and the rental cap did not change the use to a nonresidential use. Filmore LLLP, on the other hand, argued “use” is defined broadly to include restrictions on leasing.
THE COURTS’ DECISIONS: The trial court, on summary judgment, sided with Flmore LLLP and concluded “uses” in “uses to which any unit is restricted” includes leasing, not just changes from residential to nonresidential use. Accordingly, the trial court invalidated the rental cap amendment because the association did not get the required 90% approval. The association appealed, but lost again before the Court of Appeals.
PLAN OF ACTION: Condominium and homeowner associations should call their attorney to determine if their rental caps are enforceable. This is especially true considering the potential for a lawsuit and the chance that an association is ordered to pay a unit owner’s costs and attorneys’ fees (based on attorney fee provisions in associations’ governing documents) for enforcing an invalid rental cap restriction.
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2013-2014 REAL ESTATE CASES IN WA
Click on the above link for a summary of Washington case law from 2013 through April 2014 on topics such as residential and commercial foreclosures, condominium and homeowner associations, construction disputes, easements, adverse possession, residential and commercial landlord-tenant disputes, title insurance, and various other real estate related topics. If you have any questions about these or other legal issues, please do not hesitate to call Zeno Bakalian at 425-822-1511.
Environmental Real Estate Considerations
Have you ever wondered what your liability exposure is based on environmental concerns related to your land? Or how about the purchase and sale of potentially contaminated land? The above link leads to a document authored by experienced environmental law attorney Allan Bakalian that addresses these and other questions. The document identifies the pertinent laws and the environmental liability risks faced by owners, buyers and sellers of real estate. It also contains useful tips. If you own property with environmental issues, or are considering buying or selling such a property, do not hesitate to contact Mr. Bakalian by phone at 425-822-1511 x224, or by email at firstname.lastname@example.org.
In Washington, the Department of Ecology regulates compliance with stormwater laws. Federally, the U.S. Environmental Protection Agency is the regulatory body. The above link leads to a document authored by attorney Allan Bakalian, which contains examples of DOE and EPA enforcement actions and helpful tips for avoiding liability.
SEPA – Emerging Issues
As a follow-up to the previous post, the above link takes you to a document authored by environmental law attorney Allan Bakalian that identifies emerging SEPA issues and discusses court cases that address those issues.
SEPA – Overview
SEPA was adopted to ensure the government takes the environment into consideration during the decision-making process. SEPA is codified at Chapter 43.21C of the Revised Code of Washington (RCW). The Washington State Department of Ecology adopted administrative rules that supplement the RCW. Those rules are found at Chapter 197-11 of the Washington Administrative Code (WAC). If you click the above link you will find an overview of SEPA prepared by Allan Bakalian, a partner at Zeno Bakalian P.S. Mr. Bakalian has over twenty five years of experience in all aspects of environmental law, including SEPA matters.