November 13, 2013

Condominium's Leasing Restriction Ruled Invalid by Washington Court

The Washington Court of Appeals recently issued an unpublished opinion addressing a condominium association's attempt to restrict leasing of units.  In this case, the condominium's original declaration stated that no more than twenty-five percent of the units could be leased at any one time. The declaration established a first-come, first-served waiting list for owners who wanted to lease their units but could not due to the leasing limit.  The association recorded an amendment to the declaration that allowed leased units to be sold and then leased again without giving the owners on the waiting list an opportunity to lease their units.  Owners on the waiting list argued that the amendment was not enforceable.  The Court agreed.                     

The Court first noted that restrictions on owners' ability to lease their units must be contained in a condominium's declaration or in a properly approved and recorded declaration amendment.  In this case, the condominium's declaration stated that it could be amended only by the vote or agreement of at least sixty-seven percent of the owners. Since the association did not obtain the vote or approval of sixty-seven percent of the owners before recording the amendment, it was not properly approved and could not be enforced.   

The Court went on to note that the declaration amendment would be unenforceable even if it were considered to be a house rule.  First, such a house rule would conflict with the declaration, and declarations prevail over house rules when there is conflict between the two. Second, such a house rule would be unreasonable both in purpose and in application.  The house rule's purposes (to protect the value of the original rental units and to allow a board member who bought a rental unit to bypass the waiting list) would be unreasonable because they would not be consistent with improving the health, happiness, and peace of mind of a majority of the condominium's residents.  The house rule's application (favoring one group of owners over another group of owners in terms of leasing) would also be unreasonable because it would not be uniform.  

Restriction of leasing in the condominium context is fraught with peril.  Associations should obtain legal advice if they desire new leasing standards in their communities.