Is Your Condominium Rental Restriction Amendment Enforceable?
As you may have heard, a recent Washington State Division One appellate court case ruled that at least 90% voter approval is required for new act condominiums to adopt an amendment that imposes leasing restrictions. The case is Filmore LLP v. Unit Owners Association of Centre Pointe Condominium, 333 P.3d 498, Wash. App. Div. 1 (2014) (“Filmore”) and as we work through its implication with our clients, we are finding that it raises more questions than it answers.
In Filmore, the court was faced with the issue of whether a rental cap amendment must have 90% or only 67% voter approval to be properly adopted. The court focused on the language in the Condo Act at RCW 64.34.264(4) that requires 90% voter approval if the amendment restricts “the uses to which any unit is restricted”. The association in Filmore argued that “use” as it is used in RCW 64.34.264(4) should be interpreted narrowly to mean whether the unit is for commercial or residential use and therefore, should not apply to rental restrictions because restriction does not modify the residential nature of the unit. The unit owner in Filmore argued for a broader definition of use that would include rental restriction. The court sided with the unit owner, ruling that a rental restriction is a restriction on use under RCW 64.34.264(4) and therefore 90% voter approval is required. Because the association did not obtain the required 90% approval, the court deemed the amendment void.
The Filmore decision answers one question: the voting percentage required for rental restriction amendments. However, it leaves a host of equally important questions unanswered, some of which are discussed below.
Under RCW 64.34.264(4), amendments for modification of uses can only be adopted with 90% voter approval and the vote or approval of “each unit particularly affected.” Given that lease restrictions have the potential to affect every unit, it is possible a court could require 100% approval. The Filmore court did not address this issue at all.
The Filmore court also failed to address whether leasing-related requirements other than pure rental caps constitute use restrictions. For example, is it a restriction on use if an amendment only changes procedural lease requirements like ensuring that each lease incorporates the terms of the Declaration or creating rental intercepts for assessment collection? Those questions were not answered in the Filmore decision.
The Filmore court also did not address what happens for Associations that adopted rental caps more than one year ago. RCW 64.34.264(2) states that “No action to challenge the validity of an amendment adopted by the association pursuant to this section may be brought more than one year after the amendment was recorded.” Thus, if an amendment was adopted more than a year ago, but less than 90% of the owners approved it, it is unclear whether the amendment is or is not enforceable now.
While we can hope that the legislature will take notice of the Filmore decision and take steps to provide more clarity on all of the foregoing issues, it remains the law of the land for now, at least in Washington. Because of all of the unanswered questions, every new act condominium that has adopted a lease restriction amendment should revisit their amendment with counsel and determine how best to proceed. Please consult your attorney on the best course to take.
We at Barker Martin stand ready to provide additional guidance on this issue to any that need it.