Does your Association have a Rental Cap?

Many condominium Boards of Directors have considered putting a limit on the number of condominium units that can be rented out at any one time. Rental cap policies have been considered mostly as a measure to retain value for the condominium as a whole. The general idea is that having too many renters lowers the value of the condominium because owners take better care of their property than renters do. Additionally, Fannie Mae has limitations it places on the percentage of units that can be rented in a condominium to receive financing through Fannie Mae.

In order to amend the Association’s governing documents to allow a rental cap and limit the number of units that can be rented at any given time, the Declaration (also known as the CC&Rs) must be amended. To amend the Declaration, a vote of the membership of the Association must be held and at least ninety percent (90%) of the votes in the Association, and one hundred percent (100%) of the units particularly affected by the amendment, need to vote in favor of the amendment.

The section of the Washington Condominium Act concerned with amendments to the Declaration, RCW 64.34.264, states, in pertinent part:

(4) Except to the extent expressly permitted or required by other provisions of this chapter, no amendment may create or increase special declarant rights, increase the number of units, change the boundaries of any unit, the allocated interests of a unit, or the uses to which any unit is restricted, in the absence of the vote or agreement of the owner of each unit particularly affected and the owners of units to which at least ninety percent of the votes in the association are allocated other than the declarant or such larger percentage as the declaration provides.

As can be seen from the numbers required to amend a Declaration related to “uses to which any unit is restricted”, the 90% requirement is a large hurdle. Additionally, any units which have been rented out at the time of the proposed amendment will need to be “grandfathered” in to meet the “100% of the units particularly affected” requirement. Finally, the voting provisions of many Declarations also require affirmative votes of over fifty percent (50%) of the “Eligible Mortgagees” of the units, which are the lenders who have submitted written requests for notice of such votes of the Associations. Amending the Declarations of condominiums to restrict or prohibit rental of the units can be done, but it is a large task with a number of hoops to jump through to accomplish.