Attention: Real estate developers, associations and real estate buyers: Did you know there are new rules in the game? This is the first article in a series to help bring you up to speed.
As of July 1, 2018, for the first time in Washington history, all common interest communities (CICs) fall under one common, uniform set of laws.
CICs include any and all real estate described in a declaration that requires property owners to pay for a share of real estate taxes, insurance premiums, maintenance or improvement of common elements — for example, condominiums, cooperatives, planned communities, subdivisions, plat communities, etc. The laws that apply to these developments are now consolidated into one, uniform chapter. Prior to July 2018, each type of CIC had a separate set of laws; some (such as cooperatives) had virtually no laws or regulations at all.
All residential CICs created after July 1, 2018, now fall under Washington’s Uniform Common Interest Ownership Act (WUCIOA) common or “uniform” set of laws and requirements. In most instances, nonresidential CICs are excluded. (There are some rare instances where the WUCIOA applies to nonresidential CICs, but we’ll explore that in a later article.) Existing residential CICs are not governed by the WUCIOA as a matter of law but may elect to be governed by it. To make such an election, owners representing at least 30 percent of the potential votes in an existing CIC must participate in the vote (to provide a quorum) and at least 67 percent of the votes cast must favor adopting the WUCIOA. If such a vote is cast, then the existing CIC amends its declaration to adopt WUCIOA.
For new developments after July 1, 2018, no election is necessary. WUCIOA automatically applies. Developers looking to help solve the lack of inventory of houses for sale in Washington , now have a clearer, simplified choice about the organizational structure of their development. The laws are essentially the same for all types of CICs, so the organizational structure turns on preference and economic forces, not law. There is, however, one notable exception: The condominium organizational structure imposes express and implied warranties of liability on the declarant/developer. No other structure imposes these liabilities/consumer protections.
Warranties in Condominiums
The express and implied warranties imposed on condominium CICs require that condominium units and common elements be suitable for their intended purpose. This means, for example, a residential unit must be habitable and reasonably safe. Floors must not present tripping hazards. Residential units and common elements must be free from defective materials and constructed in accordance with applicable safety, building, construction and engineering standards.
If a unit owner/purchaser believes these warranties have not been met, the owner may file a breach of warranty claim in court. Damages are limited to the reasonable cost of repair, unless repair costs clearly exceed the loss of market value caused by the breach. Successful claimants can be awarded reasonable attorneys’ fees and costs.
While these condominium-unique provisions may seem onerous, they are not much different than previous, pre-July 2018 condominium law in Washington. Developers and owners experienced with condominium developments in Washington, therefore, won’t notice much of a difference.
Declarant Rights & Requirements
In all other respects, the WUCIOA applies to all CIC types in virtually the same way. Declarants (often developers) must issue a public offering statement that complies with the WUCIOA requirements. (A public offering statement is essentially a document that explains the declarant’s vision. It describes what is to be built, identifies the amenities and describes how the units and owners will relate to each other.) The declarant is liable for any misrepresentations in or omissions of material fact from the public offering statement. The declarant is also empowered to appoint specific positions on the board during and after the period of declarant control. The appointees, though, must not be affiliated with the declarant.
Under WUCIOA, declarants have additional special rights, including:
- Maintain sales and management offices and post advertising signs;
- Make the CIC subject to a master association;
- Appoint or remove any officer or board member;
- Veto any board action; and
Association Rights & Responsibilities
Like declarants, associations have specified rights and responsibilities under the WUCIOA. All associations of all types of CICs are required to prepare, pass and execute detailed budgets. Associations may withdraw reserve funds for unbudgeted costs unrelated to replacement costs of reserve components, if the board provides notice to owners and adopts a repayment schedule not to exceed 24 months. Associations also have super lien priorities as security for collection of delinquent association assessments.
Because consumer protection is a fundamental attribute of WUCIOA, CIC unit owners have significant protections — most notably the condominium warranties described above. Tenants of buildings that are converted to a CIC (of any type) after the units were built and occupied must be given 120 days’ notice before the conversion begins. Tenants must be given an opportunity to vacate without penalty and an opportunity to buy the unit in which they live. The declarant must also inform tenants if the county or city offers a relocation assistance program and provide the program contact information.
Any declarant, association, unit owner, or other person subject to the WUCIOA may bring an action to enforce rights granted or obligations imposed by the law. The parties to such a dispute may agree at any time to participate in binding or nonbinding mediation, arbitration or other forms of alternative dispute resolution.
This short article provides only a brief introduction to WUCIOA. There are many more details to explore. Contact Horenstein Law Group if you have immediate or specific questions. This blog will also provide updates and short, more detailed, deep dives into the details of the WUCIOA and how it may affect you.
To contact the author of this post, Maren Calvert, visit the Horenstein Law Group website.
 “A lack of inventory of houses for sale (and strong demand) continue to be the biggest factors in local, residential real estate. As a result, home prices continue to rise (the median home sale price is now $345,000),” Scott Hogan, “How long can this hot real estate market last?” Vancouver Business Journal, May 4, 2018, accessed on September 13, 2018. Hogan also writes that demand is being “fed by first-time homebuyers, new residents and renters who have discovered that homeownership is a buffer against rising rents” and “empty nesters” who “want to ‘move down’ into smaller or less- expensive homes once their kids move out on their own.”