Daily Development for Friday, September 8, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

CONDOMINIUMS; RIGHTS OF UNIT OWNERS; LEASING: Where original declaration contains provisions affecting use, association cannot alter rules to prohibit leasing of units by a simple bylaw amendment, and must follow formal procedures for amendment of declaration.

Shorewood West Condominium Ass'n v. Sadri, 992 P.2d 1008 (Wash. 2000).

Association sought declaratory and injunctive relief when the defendant unit owners leased their unit in violation of a bylaw provision which restricted leasing. The bylaw had been adopted in accordance with law and declaration.

The trial court entered judgment for the owners and the Court of Appeals reversed. The Washington Supreme Court reversed, holding that while a condominium association may apply a new restriction on leasing to existing owners, in this case since the restriction was included in the bylaws and not the declaration as required by the statute, the restriction was unenforceable.

The owners had first argued on appeal that they were entitled to have the rules applied to them as they existed in the original declaration. That declaration, in fact, addressed various use issues and specifically prohibited leasing for less than a thirty day term, but did not prohibit longer term leasing. The owners pointed out that they had relied upon the fact that leasing was permitted when they had bought in to the condominium, and that to force them to sell out at this time would require that they sell in a "down" market.

The court rejected the "vested rights" argument, stating that condominiums are purely creatures of statute and that the statute stated expressly that condominium declarations can be amended. Consequently, the owners were subject to changes through amendment of the declaration.

The statute also provides, of course, for the development and enforcement of bylaws, and that owners are to be bound by lawfully enacted bylaws. But the court concluded that the bylaws in this case were not "lawful," although they the process for their enactment was proper. The reason was that the declaration, by purporting to address use limitations and even leasing limitations directly, implicitly created rights in owners as to leasing restrictions that were not addressed. Consequently, these leasing rights could be changed only by an amendment to the declaration.

Comment 1: The editor has addressed this issue in an article at 38 Santa Clara Law Rev. 1081. He reluctantly agrees with the court here. Where the statute specifically authorizes amendment of use restrictions through amendment of the declaration, legitimate expectations are created in all of the unit owners that there is a dynamic mechanism for change over time. To preserve other unit owners as shielded from such changes interferes with those expectations.

Comment 2: In his article, the editor suggests that there are some changes so fundamental to the character of the development itself that they should not be viewed as changeable, even in the face of general statutory language. Usually the statutes specifically address such issues, which include changes in unit ownership or alterations in voting rights. But there may be others, to be addressed on a case by case basis. Clearly this case does not fall within that special exception.

Comment 3: The editor also suggested that in cases of special hardship a court might temper the outcome by withholding injunctive relief and awarding damages only. The court could rule that an injunction would not issue for an identified period of time to permit the owners to recoup or otherwise recover from their investment, or the court could rule that the rule applied to this unit only prospectively to new owners. Such approaches might be taken, for instance, for pet newly enacted restrictions. In the pet case, and in this case, of course, the damages collectible by the condominium association would be negligible. It's all about an injunction; and even where the technical legal rights are there, a court can "do equity" by manipulation of injunctive relief.

Comment 4: Note that the court took the easy way out here. The same issue raised in this case could be raised in the context of a residential subdivision, in which case the court would not be able to rely upon its "creature of statute" rationale. What happens then?

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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