Condo Act | Condominium Act amendments mean big changes
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Aug 24, 2006
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Published August 2005
By: Grant S. Degginger
Condo Act
Condominium Act amendments mean big changes
New condominium starts have been hampered by extraordinary price increases and, in
some cases, the unavailability of liability insurance for builders. A study commissioned by
the Washington Legislature found that, where available, liability insurance premiums ran
about five to eight percent of construction costs, losses were $2.50 for every dollar of
premium, and loss expenses were about twice those of other states.
In 2002, the Legislature enacted several amendments to the Condominium Act, including a
requirement that condominium owners give developers notice of defects and the
opportunity to cure them before commencing suit. A new warranty insurance program was
authorized last year but has not attracted interest from the insurance industry.
Last month, the Legislature passed a series of measures to improve building envelope
design and installation, along with an innovative set of procedures aimed at encouraging
early dispute resolution and discouraging protracted litigation. The new provisions apply to
all building permits for residential structures with more than two attached dwelling units for
which a building permit will be issued on or after August 1, 2005. The inspection and
disclosure provisions of the Act also apply to any condominium conversion for which an
offering statement is delivered on or after August 1, 2005.
The Act’s new provisions generally fall into three categories: Plan submission, inspection
and dispute resolution. Each section is briefly described below:
Plan Submission.
Any person applying for a building or rehabilitative construction permit (defined as work on
the building enclosure that will cost more than five percent of the building’s assessed value)
must submit copies of the building enclosure design documents to the building department
prior to the start of construction. Any changes to the building enclosure design documents
that alter its waterproofing, weatherproofing or moisture protection also must be stamped
by the design professional and submitted in a timely manner to the building department and
the person performing the course of construction inspection. The building department
cannot issue a construction permit unless the building enclosure design documents contain a
stamped certification that they meet the weatherproofing requirements of the Act.
The building department is not required to evaluate the quality of the building envelope
design. It is only required to confirm that the required documents and certification have
been provided.
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Inspection.
The inspection requirements have two elements. The first relates to inspections during the
course of construction. The second relates to inspections in connection with sale after initial
occupancy.
• Construction Inspection. The Act requires (1) water penetration resistance testing of a
representative sample of windows and window installations in accordance with industry
standards; and (2) periodic inspection during construction to determine if the construction
has been performed in "substantial compliance” with the building enclosure design
documents. The inspector must provide a written certification of substantial compliance
before the final certificate of occupancy can be issued.
• Sale Inspection. With limited exceptions, no condominium can be conveyed without the
testing described above unless a qualified inspector performs an inspection that includes
intrusive testing to determine how the building envelope was constructed and whether the
manner of construction will adversely affect performance of the building enclosure. The
inspector must prepare a report identifying design or construction defects and
recommended repairs. If the unit was built in a building subject to a five-year sale
prohibition, all of the recommended repairs must be completed before the sale can close. If
the building was constructed before the Act took effect or if a five-year sale prohibition has
expired, then the inspections and disclosures must be made but completion of the repairs is
not mandatory.
The inspections can be performed by the architect or engineer who approved the building
enclosure design documents, the architect of record, engineer of record or any other person
with "substantial and verifiable training and experience” in building envelope enclosure
design and construction. Employees, officers, directors, or anyone with a financial interest in
the development or homeowners association cannot serve as the inspector. The Act does
not create any independent basis for liability against an architect, engineer or inspector for
work performed under the Act. The architect, engineer or inspector and the developer who
retained them can contractually agree to limit the extent of the inspector’s legal liability.
Failure to provide the inspection and repair reports to potential purchasers constitutes a
violation of the Act and creates an independent cause of action for which attorney’s fees
may be awarded.
Dispute resolution.
The revisions to the Act have also created several novel alternative dispute resolution
procedures, each of which is described below:
• Arbitration Option. Within 90 days of the start of the lawsuit, any party can demand that
the matter be resolved through arbitration rather than trial. If elected, claims over $1
million will be heard by a panel of three arbitrators. The Act requires any arbitrator to be an
attorney or judge with experience in construction defect disputes.
• Mandatory Mediation. The Act requires parties to participate in mediation within seven
months of the commencement of suit. In order to facilitate a productive mediation, the
parties and their experts are required to "meet and confer” in advance of the mediation
date, with the objective of narrowing the issues.
• Neutral Expert Option. Any party can request that the court or arbitrator appoint a neutral
expert to address any or all disputed issues. Such a request must be made early in the
case. Initially, the requesting party is responsible for the costs associated with the neutral
expert’s work. It is up to the court or arbitrator to determine the significance of the neutral
expert’s conclusions.
• Fee Shifting Provisions. The Act applies a version of the procedures found in the Rules of
Civil Procedure involving offers of judgment. Within 60 days of mediation, a declarant (i.e.,
developer), association, or party unit owner may serve an adverse party with an offer to
allow entry of a judgment. The offer must specify the amount of damages, not including
fees or costs, which the offeror is willing to pay or receive. If the offer is coming from a
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declarant, it must include a commitment to pay costs and fees that may be awarded. Any
offer not accepted within 21 days is deemed rejected. More than one offer can be made.
If the declarant’s offer is accepted, the association or unit owner is deemed the prevailing
party and is entitled to an attorney’s fee award, the amount of which is determined by the
court. If the ultimate judgment is less favorable to the offeree than the offer of judgment,
then the offeror is deemed the prevailing party and is entitled to an award of fees and costs
incurred after the date that the last offer of judgment was rejected and through the date of
final judgment. There are monetary caps on the amount of fee awards based upon the
assessed value of the condominium building or the individual unit at issue.
These new changes to the Condominium Act have significant implications for developers,
design professionals, unit owners and purchasers. Only time will tell if they bring stability
and predictability to the condominium market.
Grant S. Degginger is a shareholder at Lane Powell PC where he is chair of the firm's
Environmental, Land Use, Construction and Condemnation Litigation Practice Group. His
practice focuses on construction, environmental and commercial disputes.
He can be reached at deggingerg@lanepowell. com or (206) 223-7390.
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8/24/2006