On March 27, 2018, Governor Inslee signed the Washington Uniform Common Interest Ownership Act (WUCIOA), which will take effect on July 1, 2018. The bill creates a new chapter in the Revised Code of Washington that governs the formation, management, and termination of condominiums, cooperatives, and planned communities (such as communities governed by homeowners' associations) created after July 1, 2018. The bill refers to these three types of communities as Common Interest Communities (CICs).
Background of WUCIOA
WUCIOA seeks to provide uniformity among these three forms of communities. Currently, the different forms of CICs are governed by separate statutes. This Legislative Alert provides an overview of WUCIOA and some of its major changes to existing law.
Implied Warranties
The implied warranties under the Condominium Act were preserved in WUCIOA. There was some discussion of extending these warranties to all forms of CICs. But the warranties included in WUCIOA apply only to condominiums and not other forms of CICs. Actions for breach of these warranties must be brought within four years.
Public Offering Statements
Prior to WUCIOA, only sellers of condominiums were required to provide purchasers with public offering statements and resale certificates for the sale, resale, and conversion of units. Under WUCIOA, these disclosure documents must now be provided for all sales, resales, and conversions of units within any type of CIC. Among other things, disclosure documents must contain a general description of the CIC, a schedule for completion of any incomplete improvements, a copy of the declaration, bylaws, any community rules, and an estimate of any assessments due at closing. WUCIOA does not discuss penalties for failing to deliver a public offering statement. But delivery of a public offering statement can trigger a purchaser’s seven-day right to cancel a purchase contract, so it is important to deliver a public offering statement before or shortly after a purchase contract is signed.
Applicability and Exemptions
CICs existing before July 1, 2018, generally are not subject to WUCIOA but may elect to opt in to its requirements. Small plat communities with no more than 12 units and no more than a $300 annual assessment per unit are exempt from most of WUCIOA’s provisions, so long as the declarant does not reserve any right to future alteration of the CIC.
Creation, Alteration, and Termination of Common Interest Communities
Creation of a CIC requires recording of a declaration and survey map. WUCIOA contains 14 requirements for the contents of the declaration. Generally, declaration amendments require a 67% vote, but certain amendments, like increasing the number of units or changing boundaries, require a 90% vote. WUCIOA also includes provisions governing alteration of units and common elements, rights of secured lenders, mergers of CICs, termination of CICs by agreement or judicial order, and development rights. Certain actions may be subject to approval by an association’s secured lenders or a percentage of the unit owners' secured lenders.
Management of the Common Interest Community
The CIC must have an association organized before the first unit is conveyed to a purchaser. An association requires a board and may be organized as a for-profit corporation, a non-profit corporation, or a limited liability company. WUCIOA contains detailed provisions governing an association’s duties, and those of its officers and board members. The elected board members and officers have the same duty of care and loyalty as their corporate counterparts. In situations where the declarant retains control of the association, WUCIOA provides deadlines for the subsequent transfer of that control to the elected board members. Additionally, WUCIOA contains provisions relating to:
- Annual and Special Meetings
- Notice and Opportunity to Comment
- Adoption, Amendment, and Repeal of Rules
- Adoption of Budgets, Assessments, and Special Assessments
- Financial Records of the Association
- Challenges to Board Actions
WUCIOA also provides associations with a statutory lien for unpaid assessments against units, with limited priority over most other liens and encumbrances.
Contact HCMP for More Information
The attorneys in HCMP’s Real Estate Group continue to monitor new legislation and regulations in this area as they arise. If you would like to learn more about WUCIOA, please contact members of our Real Estate Team, Chris Addicott, Kurt Kruckeberg, or Michelle Gail.