Washington & Oregon Construction Defect Lawyer & Attorney : Barker Martin Law Firm : HOA's, Condos : Seattle, Portland

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. 

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Friday, March 7 was the last day to consider opposite house bills in the legislature, so any bills that have been voted on by both houses will not pass this year.  Of the numerous condo and HOA-related legislation introduced this year, only two bills passed both houses and now await signature by the governor.  The governor has five days, excluding Sundays, to take action on bills passed by the Legislature unless adjournment occurs within those five days, in which case the governor has 20 days to sign or veto (excluding Sundays.)

HB 2014, relating to protection of tenants of conversion condos, passed both houses and awaits signature.  HB 2014 was revived from last session, but amended with a substitute bill in the Senate on January 18.  The bill passed both the senate and the house in this form. 

The second bill to pass this year is SB 6215 relating to reserve accounts for condominium associations.  After passing the senate, SB 6215 was amended by the House Committee on Judiciary to include a few clarifying terms and to require disclosure of the lack of reserve study if none has been undertaken.

The bill creating a cause of action for negligent construction, SSB 6385, amended in the Senate committee to exclude condominiums, passed the senate in that form and was passed out of the House Judiciary Committee on February 28.  On February 29, it was passed to Rules for a second reading, but never made it to the House floor. 

ESB 6745, which was the bill recommended by the HOA task force, was substantially amended on the floor of the senate, including amendments to make its application retroactive, to add numerous clarifying definitions, to remove the “open meetings” provision for board meetings, and to reduce the quorum requirement for association meetings.  Another amendment disallowed the use of liens against a person’s homes for failure to pay fines as opposed to assessments.  The engrossed bill passed the Senate unanimously.  It was then referred to the House Judiciary Committee on February 20, but inexplicably never made it out of committee.

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As the Washington legislature begins its work this session, Senate Bill 6215, relating to reserve accounts and studies for condominium associations has been sponsored by Senators Rodney Tom, Jim Honeyford and Bob McCaslin. The bill would encourage condominium associations to have reserve studies conducted by reserve study professionals and establish reserve accounts to fund major maintenance, repair and replacement of common elements. However, the bill provides no penalties for an association’s failure to do so unless an association has failed to do so for three years and 20% of the homeowners demand that a reserve study be completed.   

The bill was set for hearing before the Senate Consumer Protection and Housing Committee on January 18, 2007. Check out the current iteration of the bill and its status here. 

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