HOUSE BILL REPORT

SSB 5208

BYSenate Committee on Law & Justice (originally sponsored by Senators Nelson and Talmadge)

Creating the Washington condominium act.

House Committe on Judiciary

Majority Report:  Do pass.  (17)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Belcher, Brough, Dellwo, Hargrove, Inslee, Locke, R. Meyers, Moyer, H. Myers, Patrick, Schmidt, Scott, D. Sommers and Tate.

House Staff:Pat Shelledy (786-7149)

AS PASSED HOUSE APRIL 3, 1989

BACKGROUND:

The Horizontal Property Regimes Act governs the construction, ownership, and management of condominiums in Washington State.  The National Conference of Commissioners on Uniform State Laws approved the Uniform Condominium Act (UCA) in 1977.  In 1987, the Legislature created a statutory committee, the Condominium Task Force, to revise the UCA to meet the needs of this state. The committee has met consistently since June 1987 to consider written comments from all interested parties.  The committee represents a variety of concerns and is comprised of representatives of unit owners, condominium associations, developers, mortgage bankers, title companies, realtors, consumers, attorneys and county assessors.

The committee recommends that a new condominium act be adopted to address the deficiencies of the existing Horizontal Property Regimes Act.

SUMMARY:

The proposed Washington Condominium Act substantially revises current law regarding condominium construction, ownership, and management.  Most provisions of the act apply to condominiums created after July 1, l989.  Some provisions of the act may apply to existing condominiums.  Further, existing condominiums can amend their declarations to conform to the provisions of the act.

A condominium is created by recording a declaration, a survey map, and plans.  The units of a condominium must be substantially completed when the documents are recorded but do not have to be enclosed spaces.

Unanimous consent of the owners is no longer necessary to amend a declaration or to terminate the condominium.  Most amendments require the approval of owners who control 67 percent of the votes.  Other amendments require 90 percent of the votes. Eighty percent of the votes can terminate a condominium. Upon termination of the condominium, the owners receive their relative appraised value of their units from the sale's proceeds.

A declarant may reserve the right to add real property or improvements to the condominium, create units on property that will be added to the condominium, subdivide units, and withdraw real property from the condominium.  The rights and obligations of the successors to the declarant are clarified.

A declarant has a limited right to establish a period of declarant control of an association.  An association must be formed as a corporation.  A higher standard of care is imposed upon officers and directors appointed by the declarant.  The declarant is liable for any tort or contract losses suffered by an association during the period of declarant control.

An association must be incorporated when the first unit is conveyed. The association's and board's powers are listed.  The association's budget must be submitted annually to the owners for ratification. The documents and records that the declarant must give to the association are listed.  Upon transfer of control, the association's financial records must be audited unless waived by 60 percent of the owners other than the declarant.  Annual audits are mandatory for condominiums with more than 50 units; the owners of smaller condominiums may waive annual audits.  An association may collect ground lease payments on a leasehold condominium through assessments.

Assessments are charged against all units.  Assessments may be allocated on the basis of usage or benefit. A declarant who has development rights in land pays for expenses relating to that land. The declarant may pay all expenses and defer commencement of any assessments.  The association may assess owners for the cost of maintaining limited common areas. Each unit's interest in the common elements for assessment and voting purposes may vary.

The assessments of an association have a six month priority over first mortgages and complete priority over other mortgages.  The association may foreclose its lien judicially or nonjudicially.  No priority exists over first mortgages in a nonjudicial foreclosure.  In a judicial proceeding, the association may appoint a receiver to collect the rents on units which are not occupied by the owner.  The association may establish late charges and interest on delinquent assessments.  The association may also recover attorneys fees and costs incurred to collect assessments.

The declarant must provide a public offering statement (POS) to all purchasers of residential condominium units.  This requirement also applies to existing condominium units in which the declarant owns at least 10 units comprising at least 20 percent of the units in the condominium. Copies of material documents are to be furnished with the POS. The POS must contain certain specific disclosures and a purchaser may cancel his or her purchase within seven days of receipt of the POS. The failure to deliver a POS will result in a damage award and the prevailing party may recover attorney's fees.

If a POS is not required, the seller must deliver the purchaser copies of the declaration, bylaws, rules and regulations of the association and a certificate of the association containing updated financial information.

Tenants must be given notice of any proposed conversion and a right of first refusal to purchase their respective units.

An implied warranty of quality exists that the unit and the common elements are free from defective materials and constructed in compliance with applicable law. Disclaimers of the warranty are effective only for specified defects.  The statute of limitations is four years, respecting a unit, accruing from the time of possession of the unit, and respecting the common elements, from completion of the common element or from the first conveyance of a unit, whichever is later.

The Condominium Task Force is recreated to review the act, draft revisions, and prepare written comments for inclusion in the Senate or House journals.  The task force is required to report to the Senate Law and Justice Committee and the House Judiciary Committee before March 1, 1990.

Fiscal Note:      Not Requested.

Effective Date:The bill takes effect July 1, 1990.

House Committee ‑ Testified For:    Prime Sponsor; David Rockwell, James Middlebrooks, Jim Strickartz, Gary Ackerman, Condominium Task Force.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The act is a major improvement of the condominium laws, providing greater flexibility, guidance and protection to parties and represents a compromise of all affected parties.

House Committee - Testimony Against:      None Presented.