On July 1, 2018, the Washington Common Interest Ownership Act (WCIOA/RCW 64.90 et seq.) became effective for new associations brought into existence after that date. It also provided a way for existing associations to move some matters forward that, to date, the associations had been unable to accomplish. This is particularly applicable to homeowners’ associations currently governed by the Homeowners Association Act, RCW 64.38, et seq. Here are some of the considerations associations should discuss in deciding whether to opt into WCIOA.
Communities May Opt Into RCW 64.90
RCW 64.94.095 states that the Declaration of any preexisting homeowners association (“HOA”) may be amended to provide that RCW 64.90 will apply regardless of what law applied before RCW 64.90 was enacted. This is accomplished by amending the HOA’s Declaration of Covenants, Conditions, and Restrictions (the “Declaration”). Amending the Declaration may be achieved by the following:
- The Board may propose the amendment, or Owners of at least 20% of the votes may request the amendment in writing to the Board;
- The Board shall prepare the proposed amendment and provide the Owners notice with the proposed amendment at least thirty (30) days before a meeting to discuss the proposed amendment;
- Following the meeting, the Board shall provide the Owners notice with the proposed amendment and a ballot to approve or reject the amendment; and
- The amendment shall be approved if Owners holding at least 30% of the votes in the Association participate, AND at least 67% of the votes cast by participating Owners are in favor of the amendment.
What are the Effects of Opting into WCIOA?
RCW 64.90.405 states:
- An Association may exercise certain powers directly against Owner’s tenants:
The Association can enforce the Association’s governing documents and, after notice and an opportunity to be heard, impose and collect reasonable fines for violations of the governing documents in accordance with a previously established schedule of fines adopted by the Board of Directors and furnished to the Owners (RCW 64.90.405(5)(a) and (2)(l));
- An Association may require nonbinding alternative dispute resolution as a prerequisite to judicial proceedings:
The Association can require that disputes between the Association and homeowners or between two or more homeowners regarding the common interest community, other than those governed by RCW 64.50 (actions claiming damages, indemnity, or contribution in connection with an alleged construction defect), be submitted to nonbinding alternative dispute resolution as a prerequisite to commencement of a judicial proceeding (RCW 64.90.405(2)(w)).
How Can the Board Take Action?
RCW 64.90.410 states:
“Committees authorized to exercise any power reserved to the board must include at least two board members who have exclusive voting power for that committee.” So, besides the board making decisions in the normal course of its meetings, the board can delegate its power to an appropriately comprised committee.
What Is Difference Related to Assessments and Initial Capital Contributions?
RCW 64.90.480 states:
The Declaration may provide that, upon closing of the first conveyance of each unit to a purchaser or first occupancy of a unit, whichever occurs first, the association may assess and collect a working capital contribution for such unit. This is the condominium model, which is extended to HOAs under WCIOA.
Loss or damage to a home that would be covered by the association’s insurance policy may be assessed to the homeowner up to the amount of the deductible, excluding policies of earthquake, flood, or similar losses with higher than standard deductibles. This is the model of seeking payment from owners who cause the damages that the association’s insurance must cover. This model is regularly adopted by condominiums modernizing their Declarations through amendments.
Can the Association Lien Property for Unpaid Assessments?
RCW 64.90.485 states:
Yes, but there are some new limits:
Limits priority of attorneys’ fees and costs related to these liens to the lesser of $2,000 or six months common expense assessments; Enforcement must be conducted within six (6) years; Allows for nonjudicial foreclosure procedures; and No foreclosure can be undertaken for less than three (3) months unpaid dues or an equal amount.
Which Records of the Association Can Be Reviewed?
RCW 64.90.495 speaks to this issue:
- Associations must retain ballots for one (1) year and other documents for seven (7) years;
- Certain records held by the Association may be withheld from inspection and copying including: personal and medical records of specific individuals; contracts currently being negotiated; existing or potential litigation arbitration, administrative, or other formal proceedings; unlisted telephone numbers of unit owner or resident; etc.
- Association may charge a reasonable fee for producing and providing copies of records and for supervising a unit owner’s inspection; and
- Information provided may not be used for commercial purposes
How is the Regulatory Authority of the Association Affected?
RCW 64.90.510 states:
An association may adopt rules that affect the use or occupancy of or behavior in units that may be used for residential purposes, only to:
Implement a provision of the declaration;
Regulate any behavior in or occupancy of a unit that violates the declaration or adversely affects the use and enjoyment of other units or the common elements by other occupants; and
Restrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders that regularly make loans secured by first mortgages on units in comparable common interest communities or that regularly purchase those mortgages.
How are the Owners Involved in Decisions About the Annual Budgets and Special Assessments?
Within thirty days after adoption of any proposed budget for the Association, the Board must provide a copy of the budget to all the owners and set a date for a meeting of the owners to consider ratification of the budget not less than 14 nor more than 50 days after providing the budget.
Unless at that meeting the owners of properties to which a majority of the votes in the Association are allocated or any larger percentage specified in the Declaration reject the budget, the budget and the assessments against the units included in the budget are ratified, whether or not a quorum is present.
The budget must include:
A statement of whether the association has a reserve study that meets the requirements of RCW 64.90.550 and, if so, the extent to which the budget meets or deviates from the recommendations of that reserve study; and
The current deficiency or surplus in reserve funding expressed on a per unit basis.
The Board, at any time, may propose a special assessment. The assessment is effective only if the Board follows the procedures for ratification of a budget described in subsection (1) of this section and the owners do not reject the proposed assessment.