Key Points

  • Division One of the Washington Court of Appeals reversed the CR 12(b)(6) dismissal of GRE Downtowner LLC's inverse condemnation suit against the City of Seattle.
  • The court held that GRE Downtowner pleaded sufficient facts under all three Penn Central factors, and that participation in a highly regulated industry does not by itself make expectations of regulatory stability unreasonable.
  • The court applied the six-year limitations period of RCW 4.16.040(3) to partial regulatory takings claims, rejecting the city's proposed three-year personal-injury period, and held the claim timely.
  • The court held that GRE Downtowner pleaded a per se taking because the Roommate Ordinance requires it to accept uninvited nontenant third parties, bringing the claim under Cedar Point Nursery v. Hassid rather than Yee v. City of Escondido.

A Washington appeals court on Monday reinstated a Seattle landlord's suit seeking compensation for a series of city tenant-protection laws, holding that the owner of a 254-unit low-income apartment complex had adequately alleged that the laws took its property in violation of the state constitution.

Division One of the Washington Court of Appeals, in a published opinion by Judge Mann, reversed a King County Superior Court order dismissing the suit by GRE Downtowner LLC, which operates the Addison on Fourth. The panel held that the company stated two inverse condemnation claims. One alleges a partial regulatory taking. The other alleges a per se taking by the city's Roommate Ordinance.

The panel also adopted a six-year statute of limitations for partial regulatory takings claims, a question the panel said Washington Supreme Court decisions dating to 1960 had left unresolved. "The result of that series of decisions is a legal quagmire that is not clearer today than it was more than 60 years ago," Judge Mann wrote. The panel further held that an ordinance requiring a landlord to accept occupants it never invited is governed by Cedar Point Nursery v. Hassid, the U.S. Supreme Court's 2021 decision treating a union-access regulation on farms as a physical taking.

GRE Downtowner bought the Addison in 2012 for $12.5 million and invested another $26.5 million to qualify it for the federal Low-Income Housing Tax Credit program, which grants developers tax credits in exchange for restricting rents and reserving units for low-income tenants over 30 years. From 2015 through 2018, the company collected more than 90 percent of the Addison's maximum rental income, according to the opinion.

Starting in 2018, the Seattle City Council passed ordinances that bar landlords from rejecting or evicting tenants based on criminal history, bar certain evictions from December 1 through March 1, extend occupancy rights to tenants' family members and roommates, require 180 days' notice of rent increases, and require relocation payments to tenants who leave after an increase of 10 percent or more. A COVID-19 eviction moratorium ran from March 2020 through February 2022.

Rent collections fell each year from 2019, to 44.1 percent in 2023, when the complex lost $2.7 million. GRE Downtowner alleged operating losses of nearly $6 million through 2023 and a default on its mortgage. The complaint, as quoted by the court, called the Addison "functionally valueless on an income approach valuation basis."

The company sued on October 22, 2024. The trial court dismissed the case in February 2025 under CR 12(b)(6). Washington's rule, unlike the federal one, does not use a "plausibility" standard, the panel noted.

On the partial takings claim, the panel applied Penn Central Transportation Co. v. New York City, a 1978 U.S. Supreme Court decision weighing a regulation's economic impact, its interference with investment-backed expectations, and the character of the government action. Seattle argued that the losses flowed from the tax-credit restrictions, not the ordinances. The panel responded that those restrictions bar converting the Addison to anything other than low-income housing for at least 23 more years. "Any weighing of evidence at this stage is premature," Judge Mann wrote. "And for good reason: there is no evidence or record to be weighed."

The city also argued that a company in housing, a highly regulated field, could not reasonably expect regulatory stability. The panel held that "participation in a highly regulated industry—here, the affordable housing market in Seattle—without more, does not categorically make any expectations of regulatory stability unreasonable." It also wrote that it would be "incautious at this stage" to credit the city's view of the ordinances' character over the company's allegations of economic harm.

The last challenged ordinance passed on September 27, 2021, so the city's proposed three-year period would have barred the claim, the panel said. Seattle had urged the court to adopt the federal approach to actions brought under 42 U.S.C. § 1983 and apply Washington's personal-injury period. The panel said GRE Downtowner had brought no § 1983 claim and that Washington courts have long distinguished takings claims from tort claims.

The panel also rejected a 10-year period, which Washington ties to adverse possession, reasoning that because regulation never physically occupies land, that period would leave regulatory claims with no time bar. It applied instead RCW 4.16.040(3), which sets a six-year limit on actions "for the rents and profits or for the use and occupation of real estate."

On the per se claim, Seattle relied on Yee v. City of Escondido, a 1992 U.S. Supreme Court decision holding that a mobile home rent-control ordinance effected no physical taking because the park owners had voluntarily invited their tenants. The Roommate Ordinance, by contrast, grants occupancy rights to a tenant's immediate family, one additional resident, and that resident's immediate family. It defines "immediate family" to include former spouses, former domestic partners, and people 16 or older who live or have lived together and have or have had a dating relationship.

"The consequence of the Roommate Ordinance is that GRE Downtowner is required to accept uninvited, nontenant third parties, including their former spouses, domestic partners, and dating partners," Judge Mann wrote. In a footnote, the panel stated its test: "The touchstone of our analysis is whether the landlord-tenant relationship was initially voluntary: if it was, Yee applies with full force; if it was not, Cedar Point is where we look."

The panel distinguished Rent Stabilization Association of New York City v. Higgins, a 1993 decision of New York's highest court rejecting a physical-takings challenge to regulations that protected a departed tenant's family members from eviction. Those regulations did not reach an additional resident or that resident's family, the panel said.

The reversal reinstates both claims in King County Superior Court, where the panel said the factual inquiry under Penn Central belongs. A Washington Supreme Court commissioner had denied the city's motion to transfer the appeal to that court on October 10, 2025.