Updated Condo Act Offers Incentives to Spark New Property Developments
There’s big news this summer for residential real estate developers, sales agents and future buyers of condominium properties in Seattle. Washington state’s updated condo act, known as SB 5334, became effective law on July 28, 2019. The new legislation eases regulations on condominium defect liabilities for residential condominium developers and management companies. That means exciting prospects for the condominium market in the city of Seattle. SB 5334 reduces concerns of risk and uncertainty that previously plagued condominium investments across Washington state.
The experienced attorneys at Holmquist + Gardiner support clients involved in all phases of the construction process including property developers, contractors, architects, engineers, management firms and individual tenants. We assist our clients with diverse issues specific to Seattle and Washington state laws and regulations. SB 5334 represents a transformative moment in Seattle’s condominium landscape and we are well-versed in all the nuances of the revised regulations.
SB 5334’s Policy Shift Feels Inevitable
Easing regulations of the original 1990s-era Washington State Condominium Act is expected to stimulate increased condo developments in Seattle. Throughout Seattle’s post-recession real estate boom, condos are widely missing from the residential landscape. SB 5334 is designed to facilitate greater condo development at a time when affordable housing is a major topic of discussion. Buyers looking to enter Seattle’s real estate market are right to anticipate a growing supply of choices in the near future, and buyers and sellers will benefit from reduced construction, liability and insurance costs that rise with greater perceived investment risks.
SB 5334 isn’t a cure for Seattle’s housing shortage, but it’s another option for consumers eyeing homeownership in downtown Seattle. “It [SB 5334] is not meant to be a lessening of consumer protections; it is not meant to allow developers to get away with things,” according to Rep. Tana Senn,D-Mercer Island. SB 5334 is a regulatory correction – a pendulum shift that is already seeing results.
In Seattle and Bellevue combined, only 2,000 condos have entered the market in the last decade. New projects slated to arrive will deliver 5,000 new condo units in Seattle in the coming years. At the same time, the market for apartments has cooled. More landlords of rental properties, even in brand new buildings, are dangling concessions to entice potential renters to fill empty apartments. It appears that the constantly increasing supply of rental properties has finally met demand. At present, condominiums are a very different story.
The Major Benefits of SB 5334
For a city looking for affordable housing solutions, SB 5334 is expected to help generate a larger supply of condominium developments. Below are several highlights of the new legislation, which are the driving force behind the new SB 5334’s broad appeal to residential property developers:
SB 5334 raises the burden of proof for condo owners who choose to sue. Instead of the building having to comply with “all laws” involving the property, the language has been reduced to focus only on associated building codes. Any lawsuit brought on by a condo owner must now prove that any physical or technical defect exists and can cause harm.
SB 5334 reduces the personal liability of members of a condo-association officers by granting HOA members immunities familiar to board members of nonprofits. Previously, HOA members often sued the management firm and property developer in order to proactively shift liabilities for defects away from the condo association.
It’s easy to see how SB 5334’s revisions help incentivize property developers to shift from apartment to condominium developments. Seattle is a thriving economy with a very tight housing market, and despite the impressive growth of commercial real estate investment, condominiums are late to the party. SB 5334 feels like an inevitable – and necessary – policy shift by the Washington State Legislature. As condo developments pick up steam and enter the market, the results could provide additional homeownership options for buyers for young adults and long-time homeowners eager to downsize.
Perhaps a late entrance to the party is better than no entrance at all.
At Holmquist + Gardiner, we understand the pressures and uncertainties facing large property investments. Our years of legal experience in the downtown Seattle construction industry enable us to provide efficient and high-quality legal services no matter the unique business concerns our clients face.
If you’re interested in learning more about SB 5334, contact us today.
