Shorewood West Condominium Ass'n v. Sadri, No. 67529-5.

• Court: United States State Supreme Court of Washington
• Writing for the Court: GUY, C.J.
• Citation: 992 P.2d 1008,140 Wash.2d 47
• Parties: SHOREWOOD WEST CONDOMINIUM ASSOCIATION, a Washington Condominium Association, Respondent, v. Asghar SADRI and Dorothy Grazul, Petitioners.
• Decision Date: 10 February 2000
• Docket Number: No. 67529-5.

992 P.2d 1008
140 Wash.2d 47

SHOREWOOD WEST CONDOMINIUM ASSOCIATION, a Washington Condominium Association, Respondent,
v.
Asghar SADRI and Dorothy Grazul, Petitioners

No. 67529-5.

Supreme Court of Washington, En Banc.

Argued September 14, 1999.

Decided February 10, 2000.

Reconsideration Denied April 21, 2000.

992 P.2d 1009

Landerholm & Memovich, Zachary Harry Stoumbos, Jean Marie McCoy, Vancouver, for Petitioners

Michael C. Simon, Vancouver, for Respondent.

GUY, C.J.

In this case, petitioners Asghar Sadri and Dorothy Grazul seek review of the Court of Appeals decision holding that the respondent Shorewood West Condominium Association's (Association) restriction on the leasing of condominium units was valid and could be applied to them.¹

We reverse. We first hold that because the property rights of individual condominium unit owners are creations of a condominium statute and are subject to that statute, restrictions on leasing adopted after the owners purchased their unit may be applied to such owners if the restrictions are in accordance with the statute. Such leasing restrictions, if in accord with the statute, may be applied to Sadri and Grazul. Nevertheless, we also hold that a restriction on use which appears in a condominium apartment owners association's bylaws but not in its declaration

992 P.2d 1010

is not in accordance with the Horizontal Property Regimes Act, RCW 64.32. The Association may not promulgate a restriction on leasing in a bylaw without first amending its declaration. The bylaw restricting leasing is invalid and this court may not enforce it

Having decided this case by finding the lease restriction not in accordance with the statute, we need not reach the further issues of how we should review condominium association rules and whether the restriction on leasing was equally applied. We leave for another day the question of whether to adopt a standard of review for condominium association rules. We reverse the award of attorney fees and award fees to Sadri and Grazul.

FACTS

The declaration establishing Shorewood West as a condominium under the Horizontal Property Regimes Act dates from 1978. Clerk's Papers at 24. The declaration contains this restriction on use: "the property, units and limited common areas as described herein are restricted and intended to be utilized solely for residential purposes, and no rental or lease shall be permitted for less than a 30-day term." Clerk's Papers at 16. The units are further restricted to single-family occupancy. Clerk's Papers at 16.

In the 1990s the Association's Board became concerned about the devaluation of the condominium units due to the percentage of units being rented. Clerk's Papers at 53. The Board received information from realtors and financial institutions that having a high percentage of rental units in a condominium can adversely affect the value of the units and affect the ability of prospective buyers of units to obtain financing. Clerk's Papers at 86; see also Clerk's Papers 87-104. As a solution to this problem, the Board recommended that the condominium owners pass an amendment to the Association bylaws which would prohibit owners from renting or leasing their units: "Shorewood West Condominiums are to be an owner-occupied development. Except for those units leased as of August 11, 1994, no owner may lease a unit. Upon the sale of any unit previously leased, it must be sold to an owner-occupant who will reside in the unit. Thereafter the unit will not be leased." Clerk's Papers at 79. The amendment and the rules implementing it allowed leasing for such exceptions as sabbatical, job relocation, and other special circumstances. Clerk's Papers at 83. On August 11, 1994, the amendment was approved by over 70 percent of the interests in the condominium. Clerk's Papers at 146-47. The declaration required only a majority of the percentage votes of the unit owners to approve an amendment to a bylaw. Clerk's Papers at 18. The bylaws themselves required a 60 percent favorable vote of the percentage interests of the units to amend a bylaw. Clerk's Papers at 77.

Sadri and Grazul purchased Unit 7501 in Shorewood West Phase II Condominiums for $150,000 in December of 1993. Clerk's Papers at 121. An important consideration in their decision to purchase the unit was that they would be able to lease it if they decided not to reside in the unit. Clerk's Papers at 122. When Sadri and Grazul heard of the proposal to amend the bylaws to restrict leasing, they objected to the Association in writing and voted against the amendment. Clerk's Papers at 139, 123. Because the price for units in the Shorewood condominium had been declining, a restriction on leasing would force Sadri and Grazul to sell in a bad market if they ever decided not to occupy their unit. Clerk's Papers at 122. In the spring of 1995, they moved out of their unit and executed a lease in May with an effective date of July 1, 1995, nearly a year after the bylaw had been amended to restrict leasing. Clerk's Papers at 123-24.

On January 25,1996, the Association, seeking a finding that the amendment of its bylaws was proper and that Sadri and Grazul must remove their tenants from their unit, filed a complaint for declaratory judgment and injunction. Clerk's Papers at 3, 6. The trial court found that although the Association had the authority to amend its bylaws to restrict leasing, the amendment was only valid as to those persons purchasing units after August 11, 1994. Clerk's Papers 259, 262. The amendment was unenforceable against existing owners, such as Sadri and Grazul. Clerk's Papers at 262. The trial

992 P.2d 1011

court also awarded Sadri and Grazul $1,180 in attorney fees. Clerk's Papers at 263

The Court of Appeals reversed in Shorewood West Condominium Ass'n v. Sadri, 92 Wash.App. 752, 754, 966 P.2d 372 (1998). Finding that Washington had not yet adopted a standard to review condominium rules, the court adopted a reasonableness standard. Id. at 754, 756, 966 P.2d 372. Applying the standard to this case, the Court of Appeals held that the leasing restrictions were reasonable, that the amendments may apply retroactively to existing owners, and that "grandfathering" existing rentals is reasonable. Id. at 759-61, 966 P.2d 372. Attorney fees were awarded to the Association. Id. at 762, 966 P.2d 372.

Sadri and Grazul petitioned for review by this court.

ISSUES

(1) Under the Horizontal Property Regimes Act, may a restriction on leasing adopted after owners of condominium units purchased their units be applied to those owners?

(2) Is a restriction on use which appears in a condominium homeowners' association bylaw but not in the declaration in accordance with the Horizontal Property Regimes Act?

DISCUSSION

Sadri and Grazul claim that amendments which seriously restrict property rights are not applicable to those persons already owning the subject property. Pet. for Review at 9. In effect they argue that owners are bound only by those...