Modifications to Washington Condominium Act Aimed at Preventing Frivolous Construction Defect Lawsuits – WSHB Plays Role in Drafting Legislation
The narrative regarding condo development in Washington State is well-known: It is almost universally accepted that the nearly 30-year-old condominium statute’s implied warranties provide unfair and uncertain standards that fueled near-certain litigation. Too often, these suits involve frivolous claims of "defects" in construction, which neither affected building performance nor were of material concern to any reasonable homeowner. Condo association board members feel pressured to sue or risk personal liability. Plaintiff attorneys capitalized on this low hurdle of a liability standard and seek heavily exaggerated repair costs. Developers, builders, and insurance carriers pay enormous sums for repair of technical violations, which often times are not repaired with the money paid to condo owners. All of this disincentivizes condominium developers and drives up the cost of condominiums for consumers.
A recent revision to the condominium statute is designed to curtail those suits and boost development of this vital segment of the housing market. SB 5334, which reforms the state condominium liability law, was signed into law by Gov. Jay Inslee. The new law will take effect July 28, 2019. The bill was sponsored by Senator Jamie Pederson and involves revisions to the existing statute—not a complete overhaul—aimed at reducing meritless construction defect lawsuits and maintaining proper recourse for valid claims. WSHB Partner Tim Repass, who regularly litigates condominium defect cases on behalf of developers and general contractors, was involved in the drafting of the new law.
The 2018 Washington Uniform Common Interest Ownership Act was a near-wholesale revision of state law governing multi-family use, including the 1989 condominium statute, but the implied warranties were not revised.
The new law includes a subtle modification of the implied warranties of quality that a developer declarant provides under the Washington Condominium Act. Generally, it refines and restricts what will pass as a defect under the implied warranty. The revised language requires that any warranty breach amounts to more than a technical violation and must be “significant to a reasonable person”. Removed is the requirement constructed must be in accordance with "all laws". The new law instead requires the building be constructed "in accordance with engineering and construction standards, including applicable building codes, generally accepted in the state of Washington at the time of construction". There is also a requirement to prove that the allegedly defective condition has caused, or will cause, physical damage to the unit, materially impair the performance of a building system, or present an unreasonable safety risk. This language replaces the uncertainty of the vague standard of showing an "adverse affect" to the unit.
Further, the new law explicitly provides immunity from liability to members of a condominium association board, in the event they decline to file a defect suit, assuming they are acting in good faith and with ordinary care. The prior statute was silent on this point and board members who could be coerced into authorizing a lawsuit, should be less inclined to file lawsuits for fear of being personally liable.
WSHB Partner Tim Repass was part of a small group of attorneys in the Seattle construction community that helped bring these statutory revisions into law. In June of 2018, Mr. Repass testified in front of the Washington State Senate Law & Justice Committee regarding Washington Condominium Act liability and the real-world impact on builders and developers. Mr. Repass, along with a handful of other attorneys involved in construction development and litigation, then participated in drafting the language of the new law.
"The new law was a compromised effort between multiple interests. We would have liked to see the changes go even further, but given the need for balance of these interests, this is about as far as it could have gone at this point." Mr. Repass commented. "We will see if the modified warranty language changes the way these cases are litigated and how the courts interpret these new standards. I don't think this will correct all of the problems we have seen over the last couple of decades with condominium defect suits, but it should help get developers and builders back on proper, and more equitable, footing." He added.
Why this legislation is important:
Developers and builders have long been fighting for changes to the Washington Condominium Act to swing the pendulum back to a place of reason with a better definition of "construction defect". The current law provides a significantly heightened liability standard over single-family and other non-condominium uses. The recent modifications of the implied warranties and board immunity under the condominium statute are a much needed recalibration in the right direction.