BILL REQ. #:  S-4367.2 

Read first time 01/22/08.   Referred to Committee on Consumer Protection & Housing.

     AN ACT Relating to homeowners' associations; amending RCW 64.38.010 and 64.38.035; adding a new section to chapter 64.38 RCW; creating new sections; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 64.38.010 and 1995 c 283 s 2 are each amended to read as follows:
     For purposes of this chapter:
     (1) "Homeowners' association" or "association" means a corporation, unincorporated association, or other legal entity, each member of which is an owner of residential real property located within the association's jurisdiction, as described in the governing documents, and by virtue of membership or ownership of property is obligated to pay real property taxes, insurance premiums, maintenance costs, or for improvement of real property other than that which is owned by the member. "Homeowners' association" does not mean an association created under chapter 64.32 or 64.34 RCW.
     (2) "Governing documents" means the articles of incorporation, bylaws, plat, declaration of covenants, conditions, and restrictions, rules and regulations of the association, or other written instrument by which the association has the authority to exercise any of the powers provided for in this chapter or to manage, maintain, or otherwise affect the property under its jurisdiction.
     (3) "Board of directors" or "board" means the body, regardless of name, with primary authority to manage the affairs of the association.
     (4) "Common areas" means property owned, or otherwise maintained, repaired or administered by the association.
     (5) "Common expense" means the costs incurred by the association to exercise any of the powers provided for in this chapter.
     (6) "Residential real property" means any real property, the use of which is limited by law, covenant or otherwise to primarily residential or recreational purposes.
     (7) "Community" means residential real property that is subject to a declaration under which an association is established for governance of the community.
     (8) "Cooperative" means a community in which the residential real property is owned by an association where each of those members is entitled, by virtue of his or her ownership interest in the association, to exclusive possession of a portion of the property.
     (9) "Declarant" means any person who:
     (a) Executes as a declarant a declaration;
     (b) Reserves any special declarant right in the declaration;
     (c) Exercises special declarant rights or to whom special declarant rights are transferred;
     (d) Succeeds to the rights of a declarant pursuant to an instrument recorded in the real property records of every county in which any portion of the community is located; or
     (e) Is the owner of a fee interest in the real property that is subject to the declaration and who directly or through one or more affiliates is materially involved in the construction, marketing, or sale of residential real property located within the association's jurisdiction.
     (10) "Declaration" means the declaration of covenants, conditions, and restrictions or any other document, however denominated, that is recorded in every county in which any portion of the community is located and that provides for the establishment of an association to govern the community. In the case of a cooperative, "declaration" means the document or documents, however denominated, that create the cooperative housing association that owns the residential real property comprising the cooperative, whether or not the document or documents were recorded.
     (11) "Declarant control" means the right of the declarant or persons designated by the declarant to appoint and remove officers and members of the board of directors, or to veto or approve a proposed action of the board or association, under section 3 of this act.
     (12) "Lot" means a physical portion of a community designated for separate ownership or occupancy and designated for residential use, the boundaries of which are described in the real property records of every county in which any portion of the community is located. Within a cooperative, "lot" means that portion of the community designated for exclusive possession by a member of the cooperative's association. "Lot" does not mean an apartment or unit created under chapter 64.32 or 64.34 RCW.
     (13) "Owner" means a declarant or other person who owns a lot, but does not include a person who has an interest in a lot solely as security for an obligation. Under a real estate contract, "owner" means the vendee, not the vendor.
     (14) "Person" means a natural person, corporation, partnership, limited partnership, trust, government subdivision or agency, or other legal entity.
     (15) "Special declarant rights" means rights reserved for the benefit of a declarant to: (a) Maintain sales offices, management offices, or signs advertising the community or cooperative; (b) use easements through the common elements for the purpose of making improvements within the community or cooperative or within real property that will be added to the community or cooperative; or (c) appoint or remove any officer of the association or any master association or any member of the board of directors, or to veto or approve a proposed action of the board or association, during any period of declarant control under section 3 of this act.

Sec. 2   RCW 64.38.035 and 1995 c 283 s 7 are each amended to read as follows:
     (1) A meeting of the association must be held at least once each year. Special meetings of the association may be called by the president, a majority of the board of directors, or by owners having ten percent of the votes in the association. Not less than fourteen nor more than sixty days in advance of any meeting, the secretary or other officers specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by first-class United States mail to the mailing address of each owner or to any other mailing address designated in writing by the owner. The notice of any meeting shall state the time and place of the meeting and the business to be placed on the agenda by the board of directors for a vote by the owners, including the general nature of any proposed amendment to the articles of incorporation, bylaws, any budget or changes in the previously approved budget that result in a change in assessment obligation, and any proposal to remove a director. The business to be placed on the agenda for a special meeting is determined by whoever calls the special meeting.
     (2) Except as provided in this subsection, all meetings of the board of directors shall be open for observation by all owners of record and their authorized agents. The board of directors shall keep minutes of all actions taken by the board, which shall be available to all owners. Upon the affirmative vote in open meeting to assemble in closed session, the board of directors may convene in closed executive session to consider personnel matters; consult with legal counsel or consider communications with legal counsel; and discuss likely or pending litigation, matters involving possible violations of the governing documents of the association, and matters involving the possible liability of an owner to the association. The motion shall state specifically the purpose for the closed session. Reference to the motion and the stated purpose for the closed session shall be included in the minutes. The board of directors shall restrict the consideration of matters during the closed portions of meetings only to those purposes specifically exempted and stated in the motion. No motion, or other action adopted, passed, or agreed to in closed session may become effective unless the board of directors, following the closed session, reconvenes in open meeting and votes in the open meeting on such motion, or other action which is reasonably identified. The requirements of this subsection shall not require the disclosure of information in violation of law or which is otherwise exempt from disclosure.
     (3) This section applies to all homeowners' associations and supersedes any conflicting provisions in chapter 23B.07 or 23B.16 RCW or RCW 24.03.075, 24.03.080, or 24.03.135.

NEW SECTION.  Sec. 3   A new section is added to chapter 64.38 RCW to read as follows:
     (1) Subject to subsection (2) of this section, the declaration may provide for a period of declarant control of the association, during which period a declarant or persons designated by the declarant may (a) appoint and remove the officers and members of the board of directors or (b) veto or approve a proposed action of the board or association. A declarant's failure to veto or approve the proposed action in writing within thirty days of written notice of the proposed action shall be deemed an approval of the proposed action by the declarant.
     (2) Regardless of any period provided in the declaration, a period of declarant control terminates within thirty days after two-thirds of the lots are transferred to owners other than the declarant.

NEW SECTION.  Sec. 4   By December 10, 2008, the department of community, trade, and economic development shall conduct a study to determine the efficacy of creating a state agency run homeowners' association ombudsman office, which would provide dispute resolution services and information to homeowners about their rights and duties under chapter 64.38 RCW. The study must include:
     (1) The estimated number of Washington residents that live in communities or cooperatives subject to chapter 64.38 RCW;
     (2) The estimated number of owners who would take advantage of the ombudsman office;
     (3) The estimated expense of creating and running the ombudsman office; and
     (4) A determination based on a cost-benefit analysis of whether the ombudsman office should be created.
     If the department determines that an ombudsman office should be created, the study must also include recommendations for procedures that the ombudsman office should follow when providing dispute resolution services.

NEW SECTION.  Sec. 5   (1) The homeowners' association declarations task force is created with ten members as provided in this subsection.
     (a) The majority leader of the senate shall appoint one member from the senate.
     (b) The speaker of the house of representatives shall appoint one member from the house of representatives.
     (c) The majority leader of the senate and the speaker of the house of representatives jointly shall appoint eight nonlegislative members of the task force, which shall include two board members representing two different homeowners' associations, three homeowners who own a home that is their primary residence in a community or cooperative that is governed by chapter 64.38 RCW, two attorneys with expertise in homeowners' association formation, and a representative from the department of community, trade, and economic development.
     (2) The task force shall convene as soon as possible upon the appointment of its members. The task force shall elect a chair and adopt rules for conducting the business of the task force. Administrative and clerical support shall be provided by the department of community, trade, and economic development.
     (3) Legislative members of the task force must be reimbursed for travel expenses in accordance with RCW 44.04.120.
     (4) The task force shall conduct a review of declarations that have been used to form homeowners' associations in Washington state and other states.
     (5) The task force shall draft model declarations, which declarants may appropriate to form homeowners' associations.
     (6) By December 10, 2008, the task force shall provide a report of the model declarations to the department of community, trade, and economic development and to the legislature.

NEW SECTION.  Sec. 6   The code reviser shall alphabetize and renumber the definitions in RCW 64.38.010.

NEW SECTION.  Sec. 7   Sections 4 and 5 of this act expire December 31, 2008.