A recently decided Washington Court of Appeals case, Kawawaki v. Academy Square Condominium Association, has emphasized that use restrictions must be contained in a condominium’s Declaration. In 2005, the Kawawakis purchased a condominium intending it to be a potential rental investment. However, at the time they purchased the unit they were aware of a use restriction in the condominium Declaration that limited rental units to 25% of the total condominium units. The Declaration provided for a first-come, first-served rental unit waiting list, which the Kawawakis were placed on since the cap on rental units had already been reached.
Two years later, while the Kawawakis remained on the rental waiting list, the condominium association Board adopted a house rule allowing rental status to follow a sold rental unit. The Kawawakis objected to this rule, since a new purchaser of a rental unit could bypass the rental waiting list and rent the unit immediately. They argued that the house rule changed the permitted condominium units’ uses, and that this had to be accomplished by amending the Declaration. When the Board tried to enforce the rule by fining the Kawawakis, litigation between the parties started, leading to the decision we discuss here today.
Under the Condominium Act, a condominium Declaration must contain “[a]ny restrictions … on use, occupancy, or alienation of the units.” RCW 64.34.216(1)(n). The Declaration must be recorded so that prospective purchasers are put on notice of such restrictions. In an earlier case, Shorewood West Condominium Ass’n v. Sadri, the Washington State Supreme Court held that a leasing restriction constitutes a use restriction under the Horizontal Property Regimes Act, the predecessor to the Condominium Act. The Kawawaki court decided it was logical and consistent to follow the Shorewood court’s position on what constitutes a use restriction, even though the Condominium Act applied in this case.
The court held that the Declaration cannot include only the plan’s general outline to restrict the residents’ use of their condominiums, with the Board providing details of the restriction in a later-adopted rule. Rather, prospective buyers must have more detailed notice of use restrictions at the time of purchase. The Kawawaki court held that the Board’s house rule allowing rental status to follow a sold rental unit effectively created a new use restriction that had to be included in the Declaration to be valid. Because the restriction was not contained in the Declaration, the Kawawakis did not have sufficient notice of the new restriction when they purchased their unit and the house rule (which was really an attempt to amend the Declaration) was invalid.
The takeaway: use restrictions must be contained within the condominium Declaration so that prospective buyers have detailed notice of the restrictions at the time of purchase.