Law meant to protect Wash. homeowners instead pushing up condo prices

SEATTLE — In a housing market rife with new apartment complexes, there is an extremely short supply of condominiums being built and sold.

Puget Sound developers point to substantial risk in building condos, due to the Washington Condo Act, a risk that does not exist for apartment development.

Short Supply:

In 2015, the only condo project built in Seattle was Insignia, a large two-tower building with 469 units, according to the King County assessor's data.

But there were no condos built in Seattle at all going back to 2011. In the past five years in King County, condos have made up fewer than 4 percent of multi-family construction. The rest are apartments.

Lawsuits Abound:

In the search for ways to increase the supply of all housing in the area, some developers have suggested that the Revised Code of Washington needs to be changed, in the way that it describes a condo warranty.

It states a condo must be:

(a) Free from defective materials;

(b) Constructed in accordance with sound engineering and construction standards;

(c) Constructed in a workmanlike manner; and

(d) Constructed in compliance with all laws then applicable to such improvements.

Developers who have built condos told KIRO 7 that many – if not most – condo associations have used this law to sue the developer, thus making the prospect of a condo project less enticing than building apartments.

"It's vague, uninsurable, and expensive," said Joe McCarthy, a lawyer who sets up the legal framework for condo developers.

McCarthy said the language is vague and does not explicitly state what is warranted. Lawsuits result, and a jury eventually decides who is liable.

But some condo owners have found that the law in its current form needs to stay as a protection to the consumer.

Chapin Day used to live at Mosler Lofts in Belltown, where in 2011, his neighbor left the water running in a bathroom, causing at least two dozen units to be flooded.

While the flood damage was not the developer's fault, Day said the people making repairs discovered a problem in the walls, where the best measures were not in place to stop a fire from spreading.

"There had been short cuts taken in construction," Day said.

Mark Shuster, who developed Mosler Lofts and lived in the building himself, told KIRO 7 he is very proud of the quality of the building. He said he is proud that it stands strong in today's market and continues to be one of the most desirable places to live in the city. He added that ultimately, he stands behind the customers and doesn't want to be in a dispute with them.

Day said, "The folks that live here are proud of it. And I don't blame them. But for a while, they were quite angry."

Extra Expenses:

Because of the propensity for developers to be sued, insurance companies often charge exorbitant amounts to insure the units, according to several developers in the industry.

Tony To, executive director of HomeSight, developed the Pontedera condominiums, which were sold to low-income and first-time home buyers. As is the case with many condos, the building association currently has a claim against the developer.

Next to the Pontederra is an apartment complex.

Pointing at the apartments, To said, "I think the insurance premium was probably $25,000, somewhere in that range, liability. The insurance premium for the Pontedera was close to $800,000."

Day said he acknowledges the extra insurance cost would increase the price of the home.

"But on the other hand, the protection for the consumer, the homeowner, homeowner's association, really should be the dominant factor," he said.

A Happy Medium:

Developer Michael Nielson agrees there should be some consumer protection, but he feels the law allows people to play Monday morning quarterback six years later.

"I don't want to suggest by my comments that the law needs to swing back over to a 'buyer beware' side either, right? I think it's massaging the code to create a happy medium," Nielson said.

Nielson is part of West 77 Partners, who developed Washington Square Condos in Bellevue. Its homeowners association is also in litigation with the developer. Nielson said they are proceeding toward a settlement.

Cox Media Group