Every conversation about Washington’s rent stabilization law focuses on landlords who are subject to the cap. The landlords who own newer construction properties and are exempt from the 9.683 percent annual limit are largely missing from that conversation.
That is a problem, because being exempt does not mean being unconstrained. And it does not mean being permanently exempt. The new construction exemption under Washington’s HB 1217 has a built-in expiration date, a documentation requirement that must be met every time you raise rent, a set of compliance obligations that apply regardless of exemption status, and a hard transition moment that most new construction landlords are not planning for.
This article is for the landlord who owns a newer Eastside building or single-family rental and has been operating under the assumption that the rent cap simply does not apply to them. You are probably right for now. But there is a lot more to it than that.
What the New Construction Exemption Actually Says
The exemption is established in RCW 59.18.710, enacted as part of HB 1217. The statutory language is specific: a tenancy is exempt from the rent increase cap if “the first certificate of occupancy for the dwelling unit was issued 12 years or less before the date of the notice of the rent increase.”
Three things in that sentence matter more than most landlords realize:
- “First” certificate of occupancy. The statute uses the word “first” deliberately. As Stoel Rives noted in their HB 1217 legal analysis, this language “suggests the legislature did not intend for this exemption to extend to rehabilitated or renovated buildings.” If you own a property that was substantially renovated or converted, the 12-year clock runs from when the original structure received its certificate of occupancy, not from when your renovation was completed. If you did a major renovation of a 1995 building in 2021, you are not exempt because of the renovation.
- “For the dwelling unit.” The exemption is unit-specific, not building-wide. In a multifamily building where some units were completed earlier than others, the 12-year clock runs independently for each unit based on that unit’s certificate of occupancy date. A building that opened in phases may have some units that are still exempt and others that have already crossed the threshold.
- “Before the date of the notice.” The clock is measured from the certificate of occupancy to the date the rent increase notice is served, not the date the increase takes effect. If your property’s certificate of occupancy was issued exactly 12 years before the date you serve a rent increase notice, you are exempt. If it was 12 years and one day, you are not.
How to verify your certificate of occupancy date
The most reliable source for King County properties is the King County Assessor’s eReal Property database, which includes permit and inspection records for most properties. For Snohomish County, use the county assessor’s parcel search. You can also request permit records directly from the city or county building department that issued the permit.
A property that received a certificate of occupancy in 2013 becomes subject to the cap on rent increases for any notice served in 2025 or later. A property with a 2016 certificate of occupancy remains exempt until 2028.
If you are not certain of your exact certificate of occupancy date, do not assume exemption. Assuming you are exempt when you are not is one of the most common violations the Washington AG is pursuing.
The Misconceptions That Are Getting Exempt Landlords Into Trouble
Misconception 1: Exempt means no compliance obligations
| What the new construction exemption COVERS | What the exemption does NOT cover |
|---|---|
| Rent increases above the 9.683% annual cap during the 12-year exemption window | The 90-day advance written notice requirement, which applies to ALL landlords, exempt or not |
| Freedom to set rent increases based on market conditions rather than the CPI formula | The requirement to use the statutory Department of Commerce notice form. Exempt landlords must still use the correct form with exemption facts included |
| Protection from tenant claims under RCW 59.18.700 for increases above the cap during the exemption period | The rental parity requirement. Exempt properties cannot charge more than 5% difference between month-to-month and fixed-term leases for the same unit |
| Ability to price renewal rents aggressively during the exemption window to maximize income before the clock expires | Proper service under RCW 59.12.040. Exempt notices must still be personally served or substituted and mailed. |
| N/A, no additional exemption benefit beyond the rent cap relief | Any other provisions of HB 1217 not specifically listed as exemption-eligible, including tenant termination rights if a notice is served improperly |
The parity requirement deserves particular attention. Even if you are exempt from the cap, you cannot charge a tenant on a month-to-month lease more than 5 percent above what you would charge the same tenant on a fixed-term lease for the same unit. This applies to all landlords. According to Multifamily NW’s HB 1217 analysis, the parity requirement is one of the most frequently misunderstood provisions because landlords assume it does not apply to them if the rent cap does not apply.
Misconception 2: Exempt means the notice form does not matter
Every landlord, exempt or not, must use the standardized rent increase notice form published by the Washington Department of Commerce. The form is available from the HB 1217 Landlord Resource Center. For exempt landlords, the form must also include the specific facts supporting the exemption claim: the certificate of occupancy date, confirmation it falls within the 12-year window, and supporting documentation.
According to North City Law’s detailed HB 1217 analysis, incorrectly claiming an exemption is one of the most common sources of enforcement complaints. If you serve a notice claiming exemption and the tenant or the AG disputes it, you need to be able to produce the certificate of occupancy documentation immediately. Claiming exemption without documentation is treated the same as an unlawful rent increase.
Misconception 3: Renovations reset or extend the clock
They do not. The statute says “first” certificate of occupancy for a reason. If you purchased an older building, gutted it to the studs, and received a new permit completion sign-off in 2020, you are probably not exempt. The original certificate of occupancy date for the structure is what controls, not the date of your renovation permit closure.
There is some genuine legal uncertainty around major conversions where a new certificate of occupancy was actually issued for a different use class, such as a commercial-to-residential conversion that required a new CO for the residential use. Those situations may warrant attorney review before claiming exemption. But routine renovations and rehabs, even major ones, do not extend or reset the clock under the plain language of the statute.
Misconception 4: Exemption is permanent
It is not. The 12-year window runs from the certificate of occupancy date to the date of the rent increase notice. Once your property crosses that threshold, every future rent increase is subject to the 9.683 percent cap, or whatever the published annual cap is at the time. There is no grandfathering of rates above the cap. There is no transition period.
A landlord who owns a building with a 2014 certificate of occupancy has approximately two years of exemption remaining. A landlord with a 2016 certificate of occupancy has approximately four years. A landlord with a 2020 certificate of occupancy has approximately eight years. These are not abstract future concerns. For many Eastside landlords who bought into new construction after 2013, the clock is already running down.
Not sure exactly when your new construction exemption expires?
SJA reviews certificate of occupancy dates and exemption status for owner-clients across the Eastside. A free consultation is the right starting point before you serve your next rent increase notice.
Schedule a free exemption review with SJA Property Management
The Transition Moment: When Your Property Crosses the 12-Year Line
This is the part nobody is talking about, and it is where the real financial exposure lives for new construction landlords. The day your property crosses the 12-year threshold, the dynamics of your rental income change permanently. If your current rents are significantly below market because you have been pricing conservatively during the exempt period, you now have a constrained path to correction.
Understand the math. If your current rent is $2,800 per month and comparable properties are at $3,200, you have a $400 per month gap. Under the 9.683 percent cap, your maximum increase in 2026 is $271 per month. In year two, your base is $3,071 and the maximum increase (assuming the same cap) would be $297. It takes roughly three years of capped increases to close a $400 monthly gap, assuming the cap allows it. If the gap is larger, the recovery timeline is longer.
The landlords who manage this transition well are the ones who planned for it. Here is the practical framework:
| When to act | Action | Why it matters |
|---|---|---|
| 3 years before expiry | Verify your exact certificate of occupancy date from county records. Mark the calendar date when the 12-year clock ends for each unit. | Precision matters. Many landlords do not know the exact date, only the approximate year. |
| 2 years before expiry | Audit current rents against market comparables. Identify the gap between what you are charging and what comparable non-exempt properties are charging. | The cap locks in once exemption expires. Knowing the gap tells you how urgently you need to move before that date. |
| 18 months before expiry | Begin strategic rent increases while still exempt. Serve 90-day notices for any increases you want to implement before the cap applies. | Once the clock expires mid-tenancy, you are immediately subject to the 9.683% cap on any increases from that day forward. |
| 12 months before expiry | Review all lease terms and renewal windows. Stagger expirations where possible to avoid a single large rent correction need after the cap applies. | Staggered expirations spread the adjustment across multiple renewal cycles rather than forcing it all at once. |
| 6 months before expiry | Update your rent increase notice forms and procedures to reflect non-exempt landlord requirements. You can no longer claim exemption in your notices after the date passes. | Serving a notice that claims exemption after the date has passed is an unlawful increase. |
| At expiry date | The cap applies from this point forward. All future increases are limited to the published annual cap (9.683% for 2026) regardless of what you were doing before. | No transition period. The day the 12-year window closes, you are a capped landlord. |
What Happens If You Claim Exemption When You Should Not
Penalties for falsely claiming the new construction exemption:
- Refund of all excess rent collected above the lawful capped amount from the date you lost exemption status
- Damages up to 3 months of unlawful rent as additional penalties beyond the excess collected
- Attorney fees and costs paid to the prevailing tenant, which can easily exceed the value of any rent increase
- Civil penalties up to $7,500 per violation imposed directly by the Washington Attorney General under the Consumer Protection Act
The AG’s enforcement record since HB 1217 took effect in May 2025 shows active pursuit of exemption-related violations. Fining eight landlords in the first three months of enforcement sends a clear signal about the seriousness of exemption compliance. The Washington AG’s landlord-tenant enforcement page includes guidance on how to file complaints and what the AG investigates.
Does Being Exempt Affect Your Notice Service Requirements?
No. This is worth stating clearly because it comes up constantly. The 90-day advance notice requirement applies to every rent increase, for every landlord, regardless of exemption status. If you are serving a rent increase notice above the cap on an exempt property, you still need to provide 90 days advance written notice using the correct statutory form, served in compliance with RCW 59.12.040.
After HB 2664 took effect on June 11, 2026, the notice service method changed from certified mail to first-class mail with proper substitute service procedures. This applies to exempt-property notices exactly as it does to non-exempt notices. For the full current notice service requirements, see our Washington landlord notice requirements guide.
The notice must also include:
- The current rent amount
- The proposed new rent amount and percentage increase
- The effective date of the increase
- The specific exemption being claimed, including the certificate of occupancy date and confirmation it falls within the 12-year window
- Supporting documentation for the exemption claim (attach the certificate of occupancy or county record showing the date)
Serving a rent increase notice on an exempt property and want to make sure it is done correctly?
A defective notice on an exempt property carries the same penalties as a defective notice on a capped property. SJA prepares and serves rent increase notices for exempt and non-exempt properties across the Eastside, with full documentation of exemption status.
Get a free consultation with SJA Property Management
The Other Exemptions: A Quick Reference for Landlords Who May Qualify
New construction is the most widely applicable exemption, but it is not the only one.
The full list under RCW 59.18.710 includes:
- Owner-occupied duplexes, triplexes, and fourplexes: The owner must live in one unit as their primary residence at the beginning of the tenancy and must continue to live there. The exemption is lost if the owner moves out. This exemption does not apply if the property is owned by a corporation, REIT, or LLC with at least one corporate member.
- Single-family owner-occupied residence with up to two rental units: Owner-occupants who rent no more than two rooms or units including an ADU qualify. Structural owner-occupancy is required.
- Shared living with owner: If a tenant shares a bathroom or kitchen directly with an owner who maintains their primary residence at the property, the tenancy is exempt.
- LIHTC and affordable housing: Properties currently subject to Low Income Housing Tax Credit regulatory agreements or owned by qualifying nonprofit or public housing organizations are exempt. These exemptions do not apply simply because a unit is priced affordably. There must be an active regulatory agreement or qualifying ownership structure.
How SJA Manages Exempt Properties Across the Eastside
SJA manages new construction rentals across Bellevue, Redmond, Kirkland, Sammamish, and the broader Eastside. For every property we manage, including those currently exempt from the rent cap, our process includes:
- Verification and documentation of the exact certificate of occupancy date at onboarding
- Calendar tracking of each unit’s exemption expiration across the portfolio
- Annual review of exemption status before any rent increase notice is prepared
- Preparation of rent increase notices that include correct exemption documentation on the statutory form
- Proactive transition planning for properties approaching the 12-year threshold
- Market rent analysis to close pricing gaps while exemption still allows it
Own a newer construction property on the Eastside and want to understand exactly where your exemption stands?
SJA offers a free, no-obligation consultation and rental estimate for Seattle and Eastside property owners. We can review your certificate of occupancy date, current rents versus market, and what your pricing strategy should look like before the cap applies.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. References to RCW 59.18.710 and HB 1217 reflect the law as of May 2026. The interpretation of “first certificate of occupancy” for renovated or converted buildings remains an area of legal uncertainty. Consult a qualified Washington landlord-tenant attorney before claiming an exemption or serving a rent increase notice above the published cap
