A recent Division II Court of Appeals case has set out a two-prong test for determining whether a house rule is reasonable. The case, Kawawaki v. Academy Square Condominium Association, concerned a dispute over a newly implemented house rule that dictated that rental status runs with the condominium unit and not with the owner. The condominium’s Declaration, which contained a restriction limiting the number of rental units to nine of the thirty-six total units, provided for a “first-come, first-served” rental waiting list. The Kawawakis, who were on the rental waiting list, argued that the house rule allowed new rental unit owners to bypass the rental waiting list. The condominium association argued that the house rule was a reasonable mechanism for implementing the use restriction in the Declaration. See earlier blog post for more details.
In determining whether a house rule is reasonable, the Kawawaki court noted that there are two considerations. A court must consider (1) whether the rule is reasonable in purpose and (2) whether the rule is reasonable in application. Citing an earlier Washington Supreme Court case, Shorewood West Condo. Ass’n v. Sadri, the court held that a house rule has a reasonable purpose when it is one that is reasonably related to the promotion of the health, happiness, and peace of mind of the unit owners. To be reasonable in application, a house rule must not be selectively enforced.
The court held that the house rule in question was not reasonable in purpose because it was not consistent with improving the health, happiness, and peace of mind of the majority of the condominium’s residents. Instead, the facts indicated that the rule’s only purpose was to protect the value of the original nine rental units and to ratify the actions of a Board member who had bought a rental unit and bypassed the waiting list. Second, the court held that the rule was unreasonable in application because it denied those on the waiting list their expected rental investment opportunity, while allowing new purchasers of rental units to immediately benefit from their investment. Accordingly, the court found the house rule was not uniformly applied was thus unreasonable in application.
Keep this two-pronged test in mind when evaluating the “reasonableness” of a rule, whether it is one to which you object (as a homeowner) or one your board is considering for adoption.
