With housing demand at record highs in the Puget Sound region, many have wondered why so few of the cranes dotting the landscape are building new condominiums. A decade of condominium litigation lawsuits deterred both developers and their insurers from pursuing this important sector for home ownership.
The Washington Legislature is considering an initial step toward improving the legal landscape to encourage more condominium development. On January 31, the House Judiciary Committee will hold a hearing on House Bill 2831. The bill sponsored by Rep. Tana Senn, D-Mercer Island, requires condominium homeowner associations to undertake some significant due diligence with its membership — including taking a vote — before initiating any litigation over construction defects. The bill is patterned after a measure that was adopted in Colorado last year.
Prior to serving a summons and complaint against a construction professional (the definition of which includes developers, contractors, subcontractors and design professionals), the association board would be required to provide all homeowners and each construction professional against whom an action is to be commenced a notice describing:
Any construction professional against whom the defect action is proposed must be invited to attend the meeting and must be given an opportunity to be heard. The construction professional may, but is not required to provide an offer to remedy any alleged defect.
The association must include in the notice information necessary for the homeowners to make an informed decision, including the following:
A majority vote of the homeowners association is required prior to commencing the action. The only exceptions are if the defect involves the portion of the premises used for non-residential purposes or if the cost to repair the alleged defect does not exceed $100,000. The bill would exclude units owned by a “development party” defined as a contractor, subcontractor, developer or a builder responsible for design, construction or repair of any portion of the common interest community and any affiliates from being counted in the vote. Any units owned by banking institutions is excluded from voting “unless a vote from such an institution is actually received by the association.”
The bill appears to be a step forward in improving transparency in the process that condominium homeowner associations use to make decisions before commencing litigation. Additional reforms may be necessary to reduce the legal risks of condominium development.
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