This past year for residential landlords has been a whirlwind of changes and new laws. Washington passed several laws that rewrote much of their state’s landlord and tenant laws, resulting in an incremental win for tenants. To keep you informed, Bluestone & Hockley has summarized the 2019 legislative changes.
Landlord and Tenant Law (Senate Bill 5600)
Senate Bill 5600 made a plethora of updates to Washington’s landlord and tenant laws. Some of these updates include:
- Amending the eviction process and creating a fund to pay monetary judgements for reinstated tenants.
- Extending the notice period for a pay or vacate notice from 3 to 14 days, before a landlord can file a summons and complaint for an unlawful detainer. Nothing in the bill language mandates a grace period before a landlord can issue a pay or vacate notice for nonpayment in a particular month.
- Created a definition of “Rent” that includes recurring changes in the rental agreement and utilities. The definition excludes non-recurring charges such as deposits, utilities, damage fees, late fees and attorneys’ fees. Security deposit payment plans are specifically allowed under the definition of rent.
- If at the commencement of the tenancy, the landlord has provided an installment payment plan for nonrefundable fees and security deposits and the tenant defaults the landlord is allowed to treat the default as rent owing.
- Preventing a landlord from obtaining a writ of restitution to remove the tenant from the unit for charges that are not contained in the new definition of rent, although they are still owed by the tenant and may be pursued in other civil actions, like small claims court.
- Creation of a new easy to read pay or vacate notice in statute which modernizes the language of the standard form Summons and Complaint, and requires the Attorney General’s office to maintain a website that contains common notices in the 10 most used languages in Washington and provides reference to tenant legal services.
- Remove the requirement for a court order to serve an unlawful detainer summons and complaint by posting. The landlord may now post the summons and complaint after three attempts at personal service. The judge will address the issue of appropriate service before entering a judgement. Service by posting still only allows for a writ of restitution and does not create jurisdiction for monetary judgements.
- Remove language requiring the tenant to place the amount of a monetary judgement into the court registry in order to stop execution of a writ of restitution.
- Caps the amount of money that can be awarded in a monetary judgement for unlawful detainer to $75. All late fees are owed and may be pursued in other civil actions.
- Create standards by which a judge can award reasonable attorneys’ fees. If the parties appear for a show cause hearing, the judgement must be for an amount more than two month’s rent, or $1,200 (whichever is greater) for the judge to order reasonable attorneys’ fees. If the tenant files a motion for reinstatement, attorneys’ fees for the proceeding may be awarded if the tenant is reinstated but may not be awarded if the tenant is not reinstated by the court.
- Allow for a tenant who has had a judgement finding them guilty of unlawful detainer to request that the court reinstate the tenancy and set up a payment plan for the tenant to pay off the monetary judgement. Current law allows for reinstatement of tenancy if the tenant is on a rental agreement, and the tenant pays the monetary judgement in full within five days. If the tenant makes this request of the court, the judge must apply seven factors to determine reinstatement and terms of any payment plan. The judge will take into account the following:
- the tenant’s willful or intentional failure to pay rent;
whether the nonpayment was caused by exigent circumstances that are not likely to recur;
- the tenant’s ability to pay rent;
the tenant’s payment history;
- whether the tenant is otherwise in substantial compliance with the rental agreement;
the tenant’s hardship if evicted; and
- conduct related to other notices within the past six months.
- the tenant’s willful or intentional failure to pay rent;
Note: Reinstatment through judicial discretion can only be ordered for nonpayment of rent and not for other violations of the lease agreement. A tenant may not be awarded reinstatement if the tenant has received three pay or vacate notices within the last 12 months.
- Any payment plan for the monetary judgement between landlords and tenants must be paid off in 90 days. The bill creates a $50 penalty to the tenant for each subsequent unlawful detainer after reinstatement has been awarded.
- The tenant must pay off one month’s rent in the monetary judgement within five business days in order to be eligible for the plan. The tenant must then pay the cumulative amount of at least one month’s rent within 30 days of the reinstatement. The tenant then must pay the cumulative amount of at least one months’s rent within 60 days of the reinstatement. The tenant must then pay the balance within 90 days. If the tenant defaults on any of these benchmarks to the payment plan, the landlord may execute a writ of restitution from the original unlawful detainer with three days’ notice to the tenant.
- The tenant must also stay current on new rent owed during the payment plan period or the landlord may also execute a writ from the unlawful detainer. If the judgement is ordered after the 15th of the month, the tenant has the option to prorate the first month’s new rent into the payment plans, under the existing benchmarks for timely payments.
- Landlords will be able to submit a request to have the entire monetary judgement paid by the Department of Commerce Landlord Mitigation Program. After submitting the application, the Department of Commerce will take 30 days to approve the claim, and another 15 days to pay the landlord. The tenant will then be responsible to pay back the state, independent of the landlord-tenant relationship.
- If there is insufficient funds in the Landlord Mitigation Program for the payment of the monetary judgement, the landlord may execute the writ to remove the tenant, and may hold the request for payment to be paid by the state on a first come, first served basis, when the fund is replenished.
- The 2019 State Legislature appropriated $1 million dollars in the capital budget for the Landlord Mitigation Program payment of monetary judgements that have received judicial discretion reinstatement. Future legislatures will need to appropriate further budgetary funds in the supplemental budget process and in further budget cycles.
Notice of Rent Increases (House Bill 1440)
House Bill 1440 is a new statewide law that changes the increase in rent notice from 30 days to 60 days for any amount of rent increase. The law prohibits the increase from becoming effective before completion of the term of the rental agreement.
Armed Forces Exceptions for Giving Notice (House Bill 1138)
House Bill 1138 updates the regulatory framework around the legal termination of a lease agreement by a member of the Armed Services and their spouse or dependent. It allows a member of the Armed Services (and spouse or dependent) to give a 20-day notice to their landlord if they need to break their lease obligation under specific circumstances, if they have have been released from active duty, or have been assigned to a new permanent change of station that is more than 35 miles from their current location or they have received deployment orders.
Notice of plans to demolish, rehabilitate or change use of premises (House Bill 1462)
House Bill 1462 requires a landlord to give 120 days’ notice for termination of a month-to-month tenancy when the termination is for the property to be substantially rehabilitated, has a change of use, or is demolished.
Substantial rehabilitation is defined as, “extensive structural repair or extensive remodeling of premises that requires a permit such as a building, electrical, plumbing, or mechanical permit, and that results in the displacement of an existing tenant.”
Change of use is defined as conversion from residential to non-residential, or to another form of residential use. Displacing a tenant due to an owner or their immediate family occupying the unit does constitute a change of use.
A property owner in violation of the policy is liable in a civil action up to three times the monthly rent.
Real Estate Excise Tax (Senate Bill 5998)
For real estate activity in the State of Washington, there is a new graduated increase in the real estate excise tax effective January 1. While this may not apply to those planning on holding their investments, the tax also applies to transfers of controlling interests in entities that own property in the state and adds reporting requirements to disclose any such transfers of 16% or more.
As you can see, there were a lot of legislative changes in 2019 that impact 2020 and beyond! The goal of this article is to give visibility to the massive amount of change owners of real estate faced in this last legislative session. The biggest challenges for all of us will be to review these bills and change policies to meet the new regulations.
Links to full text of legislation
Landlord and Tenant Law (SB 5600)
Notice of Rent Increases (HB 1440)
Armed Forces Exceptions for Giving Notice (HB 1138)
Notice of plans to demolish, rehabilitate, change use or premises (HB 1462)
Real Estate Excise Tax (SB 5998)