State of Washington | 62nd Legislature | 2011 Regular Session |
Read first time 01/21/11. Referred to Committee on Financial Institutions, Housing & Insurance.
AN ACT Relating to homeowners' associations; amending RCW 64.38.010 and 64.38.025; adding new sections to chapter 64.38 RCW; and providing an effective 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:)) The definitions in this section
apply throughout this chapter unless the context clearly requires
otherwise.
(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)(a) "Affiliate" means any person who controls, is controlled by,
or is under common control with the developer.
(b) For the purposes of this subsection:
(i) A person "controls" another person if the person: (A) Is a
general partner, officer, director, or employer of the developer; (B)
directly or indirectly or acting in concert with one or more other
persons, or through one or more subsidiaries, owns, controls, holds
with power to vote, or holds proxies representing more than twenty
percent of the voting interest in the developer; (C) controls in any
manner the election of a majority of the directors of the developer; or
(D) has contributed more than twenty percent of the capital of the
developer.
(ii) A person "is controlled by" another person if the other
person: (A) Is a general partner, officer, director, or employer of
the person; (B) directly or indirectly or acting in concert with one or
more other persons, or through one or more subsidiaries, owns,
controls, holds with power to vote, or holds proxies representing more
than twenty percent of the voting interest in the person; (C) controls
in any manner the election of a majority of the directors of the
person; or (D) has contributed more than twenty percent of the capital
of the person.
(iii) Control does not exist if the powers described in this
subsection are held solely as security for an obligation and are not
exercised.
(8) "Board of directors" means the body, regardless of name, with
primary authority to manage the affairs of the association.
(9) "Developer" means: (a) Any person who reserves any developer
control in the governing documents; or (b) any person who exercises
developer control or to whom developer control is transferred.
(10) "Developer control" means the right of the developer or
persons designated by the developer 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.
(11) "Homeowner" means any person who is an owner of real property
subject to the governing documents.
(12) "Person" means a natural person, corporation, partnership,
limited partnership, trust, governmental subdivision or agency, or
other legal entity.
(13) "Special developer rights" means rights reserved for the
benefit of a developer to: (a) Complete improvements indicated on
survey maps; (b) exercise any development right; (c) maintain sales
offices, management offices, and signs advertising the development; (d)
use easements through the common elements for the purpose of making
improvements to the development; (e) make the development part of a
larger development; or (f) 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 developer control.
Sec. 2 RCW 64.38.025 and 1995 c 283 s 5 are each amended to read
as follows:
(1) Except as provided in the association's governing documents or
this chapter, the board of directors shall act in all instances on
behalf of the association. In the performance of their duties, the
officers and members of the board of directors shall exercise the
degree of care and loyalty required of an officer or director of a
corporation organized under chapter 24.03 RCW. An obligation of good
faith is imposed in the performance and enforcement of all contracts
and duties governed by this chapter and in all other transactions
involving developers, the board of directors, associations, and their
members. For the purposes of this section, "good faith" means honesty
in fact and the observation of reasonable standards of fair dealing.
(2) The board of directors shall not act on behalf of the
association to amend the articles of incorporation, to take any action
that requires the vote or approval of the owners, to terminate the
association, to elect members of the board of directors, or to
determine the qualifications, powers, and duties, or terms of office of
members of the board of directors; but the board of directors may fill
vacancies in its membership of the unexpired portion of any term.
(3) Within thirty days after adoption by the board of directors of
any proposed regular or special budget of the association, the board
shall set a date for a meeting of the owners to consider ratification
of the budget not less than fourteen nor more than sixty days after
mailing of the summary. Unless at that meeting the owners of a
majority of the votes in the association are allocated or any larger
percentage specified in the governing documents reject the budget, in
person or by proxy, the budget is ratified, whether or not a quorum is
present. In the event the proposed budget is rejected or the required
notice is not given, the periodic budget last ratified by the owners
shall be continued until such time as the owners ratify a subsequent
budget proposed by the board of directors.
(4) ((The owners by a majority vote of the voting power in the
association present, in person or by proxy, and entitled to vote at any
meeting of the owners at which a quorum is present, may remove any
member of the board of directors with or without cause.)) Any meeting
by the board of directors must be held at a time and place that is
convenient for the homeowners of the association. A convenient time is
between five o'clock p.m. and nine o'clock p.m. on a weekday or between
nine o'clock a.m. and five o'clock p.m. on a Saturday or Sunday. A
convenient place means a location within twenty miles from any property
subject to the governing documents.
(5)(a) Subject to subsection (7) of this section, the governing
documents may provide for a period of developer control of the
association, during which period a developer, or persons designated by
the developer, may: (i) Appoint and remove the officers and members of
the board of directors; or (ii) veto or approve a proposed action of
the board or association. A developer has a fiduciary duty in
appointing and removing nonowner members of the board of directors. A
developer is responsible for actions of nonowner members of the board
of directors appointed by the developer under the doctrine of
respondeat superior. A developer's failure to veto or approve proposed
action in writing within thirty days after receipt of written notice of
the proposed action shall be deemed approval by the developer board of
directors.
(b) Regardless of the period provided in the governing documents,
a period of developer control terminates no later than the earlier of:
(i) Sixty days after conveyance of seventy-five percent of the lots
that may be created to owners other than the developer; or (ii) the
date on which the developer records an amendment to the declaration
pursuant to which the developer voluntarily surrenders the right to
further appoint and remove officers and members of the board of
directors. A developer may voluntarily surrender the right to appoint
and remove officers and members of the board of directors before
termination of that period in accordance with (b)(i) of this
subsection, but in that event the developer may require, for the
duration of the period of developer control, that specified actions of
the association or board of directors, as described in a recorded
instrument executed by the developer, be approved by the developer
before they become effective.
(6) Not later than sixty days after conveyance of twenty-five
percent of the lots that may be created to owners other than a
developer, at least one member and not less than twenty-five percent of
the members of the board of directors must be elected by owners other
than the developer. Not later than sixty days after conveyance of
fifty percent of the units that may be created to owners other than a
developer, not less than thirty-three and one-third percent of the
members of the board of directors must be elected by owners other than
the developer.
(7) Within thirty days after the termination of any period of
developer control, the owners must elect a board of directors of at
least three members, at least a majority of whom must be owners. The
number of directors need not exceed the number of lots subject to the
governing documents. The board of directors must elect the officers.
These members of the board of directors and officers take office upon
election.
(8) Notwithstanding any provision of the governing documents to the
contrary, the owners, by a two-thirds vote at any meeting of the owners
at which a quorum is present, may remove any member of the board of
directors with or without cause, other than a member appointed by the
developer. The developer may not remove any member of the board of
directors elected by the owners.
NEW SECTION. Sec. 3 A new section is added to chapter 64.38 RCW
to read as follows:
Within sixty days after the termination of the period of developer
control, or in the absence of a period of developer control, within
sixty days after the first conveyance of a lot subject to the governing
documents, the developer must deliver to the association all property
of the owners and of the association held or controlled by the
developer including, but not limited to:
(1) The original or a photocopy of all the governing documents;
(2) The minute books, including all minutes, and other books and
records of the association;
(3) Resignations of officers and members of the board who are
required to resign because the developer is required to relinquish
control of the association;
(4) The financial records, including canceled checks, bank
statements, and financial statements of the association, and source
documents from the time of incorporation of the association through the
date of transfer of control to the unit owners;
(5) Association funds or the control of the funds of the
association;
(6) All tangible personal property of the association, represented
by the developer to be the property of the association or ostensibly
the property of the association, and an inventory of the property;
(7) Insurance policies or copies thereof for the association;
(8) Any other permits issued by governmental bodies applicable to
the real estate subject to the governing documents in force or issued
within one year before the date of transfer of control to the unit
owners;
(9) All written warranties that are still in effect for the common
elements, or any other areas or facilities which the association has
the responsibility to maintain and repair, from the contractor,
subcontractors, suppliers, and manufacturers and all owners' manuals or
instructions furnished to the developer with respect to installed
equipment or building systems;
(10) A roster of owners and their addresses and telephone numbers,
if known, as shown on the developer's records;
(11) Any leases of the common elements or areas and other leases to
which the association is a party;
(l2) Any employment contracts or service contracts in which the
association is one of the contracting parties or service contracts in
which the association or the owners have an obligation or a
responsibility, directly or indirectly, to pay some or all of the fee
or charge of the person performing the service; and
(13) All other contracts to which the association is a party.
NEW SECTION. Sec. 4 A new section is added to chapter 64.38 RCW
to read as follows:
(1) No special developer right created or reserved under the
governing documents may be transferred except by an instrument
evidencing the transfer executed by the developer or the developer's
successor. The name of the transferee must be recorded in every county
in which any portion of the real property subject to the governing
documents is located. Each owner must receive a copy of the recorded
instrument, but the failure to furnish the copy does not invalidate the
transfer.
(2)(a) Upon transfer of any special developer right, a transferor
developer is not relieved of any obligation or liability arising before
the transfer. Lack of privity does not deprive any unit owner of
standing to maintain an action to enforce any obligation of the
transferor.
(b) If a successor to any special developer right is an affiliate
of a developer, the transferor is jointly and severally liable with the
successor for any obligations or liabilities of the successor relating
to the real property subject to the governing documents.
(3)(a) A successor to any special developer right who is an
affiliate of a developer is subject to all obligations and liabilities
imposed on the transferor by this chapter or by the governing
documents.
(b) A successor to any special developer right who is not an
affiliate of a developer is subject to all obligations and liabilities
imposed by this chapter or the governing documents. The successor is
not liable for any:
(i) Misrepresentations by any previous developer;
(ii) Warranty obligations on improvements made by any previous
developer;
(iii) Breach of any fiduciary obligation by any previous developer
or the developer's appointees to the board of directors; or
(iv) Any liability or obligation imposed on the transferor as a
result of the transferor's acts or omissions after the transfer.
NEW SECTION. Sec. 5 This act takes effect August 1, 2011.