In February of 2018, the State of Washington enacted a version of the Uniform Common Interest Ownership Act (UCIOA), which became effective on July 1, 2018. That act was intended to replace the previously enacted Washington Condominium Act and Washington Homeowner’s Association Act.
Under UCIOA, “common interest community” is defined to include condominiums and homeowner’s associations. It applies in full to any condos or HOAs created after July 1, 2018 (with an exemption for very small communities, defined as 12 or less units and less than $300 per year in assessments). Two subsections of the Act apply to condos and HOAs created prior to July 1, 2018. Board members should be aware of each of these two subsections.
RCW 64.90.525: Budgets—Assessments—Special assessments
Subsection 90.525 governs the procedure for adopting annual budgets, annual assessments, and special assessments. This provision applies to all residential common interest communities (exempting smaller communities as noted above), and overrides any contrary provisions in the governing documents or previous statutes. Because setting budgets and assessing the owners is a primary function of the Board, it behooves Board members to understand these procedures in detail. The text of this provision is relatively straightforward, so I’ve simply included it here for reference:
(1) (a) Within thirty days after adoption of any proposed budget for the common interest community, the board must provide a copy of the budget to all the unit owners and set a date for a meeting of the unit owners to consider ratification of the budget not less than fourteen nor more than fifty days after providing the budget. Unless at that meeting the unit owners of units 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.
(b) If the proposed budget is rejected or the required notice is not given, the periodic budget last ratified by the unit owners continues until the unit owners ratify a subsequent budget proposed by the board.
(2) The budget must include:
(a) The projected income to the association by category;
(b) The projected common expenses and those specially allocated expenses that are subject to being budgeted, both by category;
(c) The amount of the assessments per unit and the date the assessments are due;
(d) The current amount of regular assessments budgeted for contribution to the reserve account;
(e) 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
(f) The current deficiency or surplus in reserve funding expressed on a per unit basis.
(3) 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 unit owners do not reject the proposed assessment. The board may provide that the special assessment may be due and payable in installments over any period it determines and may provide a discount for early payment.
RCW 64.90.095: Election of Preexisting Common Interest Communities
Subsection 90.095 also applies to all common interest communities, and provides a procedure by which communities created before July 1, 2018 may “opt in” to UCIOA. Under this subsection, the process of opting in is considered an amendment to the governing documents, but the voting threshold is reduced from the usual threshold required for amendment. This reduced threshold overrides any conflicting provisions in previous statutes or the governing documents themselves.
In short, the legislature adopted a mechanism that makes it relatively easy for communities to operate under UCIOA instead of the previously enacted Washington Condominium Act or Washington Homeowner’s Association Act. But, before explaining the procedure for opting in, I’ll first discuss some of the benefits of UCIOA over previous statutory schemes.
There are a number of benefits to opting in to UCIOA, particularly for pre-existing homeowner's associations. The previously enacted Homeowners’ Association Act (RCW 64.38) is relatively sparse and, frankly, inadequate. UCIOA, by contrast, is fairly robust and comprehensive. To see the difference, simply compare side by side the provisions governing the powers and duties of a homeowners’ association (RCW 64.38.020 vs. RCW 64.90.405). The new law adds a few useful powers that were previously absent, such as the power to provide for indemnification of directors and officers or the power to suspend rights and privileges of delinquent owners. The new law also places some important limits on board authority to convey common property or borrow money. It also clarifies the circumstances under which a board has an affirmative duty to enforce covenants, and when the board may decline to do so (which is a topic for an upcoming blog post).
In addition to being generally more robust and comprehensive, UCIOA has the benefit of applying equally to HOAs and condominiums. This makes it much simpler to understand the governing law (particularly for the association’s lawyers). UCIOA also provides for the option of conducting votes of the membership in lieu of a meeting (RCW 64.90.455). This is a particularly useful provision for associations where it is difficult to get the required number of owners to attend a meeting. In addition, UCIOA provided associations a right to enter the privately owned lots in order to maintain common property or inspect for violations of the governing documents.
The procedure for opting in to the UCIOA is rather simple, despite the convoluted wording of RCW 64.90.095. Under subsection (3), regardless of what amendment provisions are included in an Association’s governing documents, the following procedure may be used to opt in to UCIOA:
(1) The amendment to opt in to UCIOA may be proposed to the Association in one of two ways. Either the Board may propose the amendment or owners holding 20% of the total votes in the Association may bring a petition proposing the amendment.
(2) The Board then prepares a proposed amendment document, along with a notice of a “town hall” meeting to be called to discuss the amendment. The notice of the town hall meeting and the proposed amendment must be delivered to all owners at least 30 days prior to the meeting. The statute does not include any quorum requirement for this meeting.
(3) Once the meeting has been held, the Board prepares a ballot and notice of a vote. The ballot and notice must be delivered to each owner.
(4) At least 30% of the total voting power must participate in the vote, and 67% of those participating must vote to approve the amendment.
In essence, this means that only 21% of the total voting power must actually approve the opt in amendment for it to be valid. This is a relatively low threshold and one that can probably be obtained even in the most apathetic or disinterested communities. Although the process for opting in to UCIOA does involve some initial effort and expense, as noted above, this new law should make things easier for common interest communities in the long run.