Condominium associations are encouraged to establish reserve fund accounts to pay for major repairs or replacement of common elements. The purpose of a reserve account is to fund components that are in need of repair or replacement within 30 years.
On March 8, 2008, the Washington legislature passed a new law regarding reserve studies for condominiums. The law falls short of what many industry professionals sought, including mandatory reserve funding and studies, but is a step in the right direction. The new law also is silent on maintenance plans, as required in neighboring Oregon and California.
The law, which becomes effective June 12, 2008:
- Requires a residential condominium association, unless doing so, would impose an unreasonable hardship, to (1) prepare an initial reserve study based upon a visual site inspection conducted by a reserve study professional; (2) update the study annually; and (3) arrange for a visual site inspection every three years by a reserve study professional.
- Reserve studies must include detailed information on projected expenditures and current reserve account information and must be conducted by a reserve study professional.
- Encourages, but does not require, a residential condominium association to establish a reserve account, supplemental to the association’s annual operating budget, to fund major maintenance, repair, and replacement of common elements.
- Requires a condominium Public Offering Statement or Resale Certificate to include a copy of the current reserve study; or (2) a disclosure to the potential buyer stating that the association does not have a reserve study.
The statute does not define "unreasonable hardship." The law also allows an association to withdraw funds from the reserve account for unforeseen expenses, as long as notice is given to unit owners, and a repayment schedule is set up.
There are other provisions in the statute not covered here. For a complete description of the law, see SB 6215.