Ordinance could help condo sellers and buyers

Banks wary of lending on older, nonconforming multifamily units
By Brian Soergel | Apr 26, 2019
Courtesy of: City of Edmonds

What happens when you want to sell your condo but no bank will finance the sale?

That is happening in Edmonds right now, and City leaders on Tuesday, April 23, unanimously approved a temporary 180-day ordinance that could satisfy sellers, buyers and lenders.

The issue is with nonconforming buildings, those that once met zoning and site development standards but are now outdated. This applies mostly to older apartment and condo developments in the city – many built decades ago and which can be found on Fifth Avenue South and to the west.

The problem? These buildings no longer conform to current standards due to new zoning amendments.

According to City code: “If a nonconforming building or structure is destroyed or is damaged in an amount equal to 75 percent or more of its replacement cost at the time of destruction, said building shall not be reconstructed except in full conformance with the provisions of the Edmonds Community Development Code.”

So, to simplify: If more than 75 percent of the value of the Edgewood condos on Fifth Avenue South were to be destroyed or damaged – by earthquake or fire, for example – the 1966 building would have to rebuilt to current code, which includes a height limit of 30 feet.

Edgewood now has 20 units. Under the code, only 10 – or half – would be allowed.

In all, there are about 633 units at 25 sites – condos or apartments – that today could be affected, according to Environmental Programs Manager Kernan Lien.

“This is not a comprehensive list and only includes the condominiums that have been identified thus far that exceed the density allowed by the current zoning,” he said. “There are likely more nonconforming multifamily buildings that have not yet been identified that exceed the density and/or height allowed under the current zoning classifications.”

Who would decide who gets to rebuild? You can see the problem for sellers, buyers and those making loans.

“Banks have become reluctant to loan on anything where they find out this applies,” Development Service Director Shane Hope said. “Now, in the past, perhaps they didn't always know where this occurred. But, increasingly, lenders are looking more closely.”


The interim ordinance allows the existing condos and similar multifamily buildings that don't meet current code for the number of units, setbacks, or building dimensions to be "grandfathered in."

So if the buildings suffer major damage, they can be rebuilt to the same number of units, setbacks or building dimensions as they are now, Hope said.

“This also means that people can buy, sell, or rent their units without the risk of being denied by banks or insurance companies on the basis of whether they meet all current zoning standards,” she added.

On Tuesday, councilmembers also gave the go-ahead to move quickly on a longer-term ordinance. It would likely be along similar lines, but could consider other factors, Hope said, such as addressing dimensions and setbacks.

The longer-term ordinance needs to go through a public process, including Planning Board review. It could come back to the City Council for a public hearing and decision as early as May 14.

Recently revisited

Before the 1980s, multifamily buildings were allowed by zoning code to have more density and height than today.

Although the original codes and subsequent revisions have been in the City’s code for decades, the issue has only come up recently. At its April 8 meeting, the council’s Planning, Public Safety and Personnel Committee reviewed the issue and agreed that the proposal to work on a solution should go to the full City Council for direction.

Edmonds resident Jan Trierweiler was one of several citizens explaining their situations at last week’s City Council meeting, in addition to Tuesday’s meeting.

She said that the nonconforming code was changed after her condominium community was built in the late 1970s. A senior citizen on a fixed income, she said she made a decision to sell her condo on Jan. 5. Because the market has been good, and other units in the complex have sold in recent years, she said she decided it was a good time to make a change and move to a smaller community.

After finding a buyer, and during the process of applying for financing, she said she was shocked to learn her bank declined to finance the sale due to risk if the building were severely damaged and the code enforced.

“No one in the condo complex was aware of the code change,” she said, “and the noncompliance matter was surprisingly not found when other units were sold.”

Trierweiler said she now must pay the mortgage and monthly expenses on a condo she no longer lives in as well as for her new home.

City officials have known of this situation for some time, she added, yet nothing has been done to change the code.

In fact, the nonconforming issue has not even been a blip on the real estate radar.

At the April 16 council meeting, Wendy Kondo of Windermere Real Estate in Lynnwood said she learned about nonconforming condominiums when selling Trierweiler’s condo. She explained that she’d been selling condos in Edmonds for the last 35 years, but it was still a shock when the bank denied Trierweiler’s loan.

This is a huge problem, as appraisers and lenders have gotten stricter about financing, Kondo said, with banks having loaned money for previous condominium sales apparently unaware of this issue.

As a realtor, she said she is required to share this information with potential purchasers.

At the April 16 council meeting, councilmembers voted to spend a little more time on the issue.

This came although Councilmember Mike Nelson introduced the draft interim emergency ordinance that would allow such buildings to be permitted for reconstruction up to 180 days from the date of the ordinance’s passage.

But will the new short-term ordinance satisfy a financial institution asked to loan money for this purpose?

“What we need to have mostly for people who have a unit for sale – we need the City to write a rebuild letter,” Kondo told councilmembers Tuesday.

“That is what I’ve been asked for from the bank that I have been working with the sale of Jan’s condo. They need a letter from the City Planning Department that the building can be rebuilt to the density that it is. They don’t want to lend money to a condo that couldn’t necessarily be rebuilt if a fire happened or something.”

Hope said that could be an option.

“It’s been my observation that banks have been tighter and tighter in the last several years,” she said. “An interim ordinance allows us to move forward and issue a letter to a bank, because we would be stating that, under the existing code, (a building) would be allowed to be rebuilt.

That would probably satisfy a bank. At least for now. But we don’t know for sure.”


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