HOUSE BILL REPORT

SSB 6776

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

Revising the Washington condominium act.

House Committe on Judiciary

Majority Report:  Do pass.  (16)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Belcher, Brough, Forner, Hargrove, Inslee, P. King, R. Meyers, Moyer, H. Myers, Schmidt, Scott, D. Sommers, Tate and Wineberry.

Minority Report:  Do not pass.  (1)

      Signed by Representative Padden, Ranking Republican Member.

House Staff:Pat Shelledy (786-7149)

AS PASSED HOUSE MARCH 1, 1990

BACKGROUND:

The Washington Condominium Act (WCA) was adopted in 1989 to become effective July 1, 1990.  The WCA is a comprehensive revision of the law governing condominiums. The WCA required the Condominium Task Force to review the WCA, prepare comments to the WCA and submit recommendations to the Legislature for revisions of the WCA prior to its effective date.  The proposed revisions cover a number of topics including the areas that the governor vetoed last year. The areas of concern last year focused on protection of the consumer including issues concerning the statute of limitations to bring causes of action for breaches of warranties, whether the units had to be substantially completed before conveyance, what information should be contained in the disclosure documents and financial statements. Another issue concerns insurance requirements and notice of nonrenewal, modification, and cancellation. Additionally, concern was raised about the impact upon low and middle income tenants who may be forced to move out of an apartment building that is being converted into a condominium.  Other concerns were raised about the association's ability to obtain liens for assessments, fees, late charges, and interest, and the association's lien priority over other lienholders and mortgagees.

SUMMARY:

 SUBSTANTIAL COMPLETION BEFORE RECORDING DECLARATION REQUIRED:  All structural components, mechanical systems, and horizontal and vertical boundaries of the condominium must be substantially completed before the declaration may be recorded.

A purchaser and seller of a condominium unit may contract for sale of a unit but no interest in the unit may be conveyed until 1) the declaration, survey map, and plans are recorded, and 2) the unit is substantially completed and ready for occupancy, unless the parties have specifically agreed otherwise in writing.

INSURANCE POLICY REQUIREMENTS:  If the condominiums insurance policy is modified, canceled, or not renewed, the association must promptly notify all unit owners. The insurer issuing the policy may not modify the amount or the extent of the coverage of the policy or cancel or refuse to renew the policy unless the insurer complies with all applicable provisions of the laws governing cancellation or nonrenewal of insurance contracts. When a unit is conveyed to a new owner, the new owner must notify the association of the date of the conveyance and the name and address of the new owner.  The association must then notify the insurance company and request that the new owner be added to the policy.

ASSESSMENTS:  Common expense assessments must be made against all units.  The requirement that the assessments must be made at least annually is stricken.

ASSOCIATION LIENS: ENFORCEMENT AND PRIORITY: Several provisions governing the association's lien, enforcement, and priority over other liens are amended as follows:

Enforcement.  The provision is stricken that allows the association to obtain a lien for fees, late charges, fines, and interest charged and to enforce payment through foreclosure in the same manner as enforcement of assessments. A provision is also stricken that allows the association to file a lien for the full amount of the assessment if the assessment is payable in installments and future installments are not yet due. A lien for unpaid assessments and personal liability for payment of assessments is extinguished unless enforcement proceedings to collect the debt or enforce the lien are commenced within three years after the due date.

A lien for assessments may be enforced nonjudicially but only if the declaration contains a grant of the condominium in trust to a qualified trustee to secure the obligations of the unit owners to the association, contains a power of sale, provides that the units may not be principally used for farming purposes, and provides that the power of sale is operative in case of defaults.

In addition to the assessments being the joint and several obligation of the unit owners, in a voluntary conveyance, the new purchaser shall be jointly and severally liable for all unpaid assessments against the seller up to the time of the conveyance.

Priority.  An association's lien for assessments is prior to a unit's mortgage that was recorded before the date on which the assessment sought to be enforced became delinquent to the extent of assessments for common expenses that become due during the six months preceding the date of the foreclosure sale. The association's priority over mortgages will be reduced to three months if the mortgage holder requests notice of delinquent assessments, the delinquent assessments accrued after the request was received, and the association failed to provide notice of the delinquency as requested. The association does not have lien priority in nonjudicial foreclosures.

The list of information a unit owner must furnish to a purchaser is expanded to include a) a statement of any special assessments levied against the unit but that are not yet due, b) assessments against any unit in the condominium that are past due over 30 days; c) obligations of the association that are past due over 30 days; d) repair and replacement reserves and anticipated expenditures; e) the association's financial statement of the preceding year; and f) any other information reasonably requested by mortgagees.

STATUTE OF LIMITATIONS:  The statute of limitations for commencing a civil action for violations of express and implied warranties is four years after the cause of action accrues, except that actions for breaches of implied warranties of quality regarding each common element will not expire prior to one year after termination of declarant control even if the period exceeds four years.

A cause of action for a breach of an implied warranty of quality accrues regardless of the actual knowledge of the purchaser a) as to the unit, the date the of possession of the purchaser to whom the first warranty is made (presumably the first purchaser) and b) as to each common element, the latest of the date the first unit was conveyed to a purchaser, the date the common element was completed, or the date the common element was added. If the warranty explicitly extends into the future the cause of action accrues when the warranty terminates or the breach is discovered, whichever is earlier.

DISCLOSURE AND FINANCIAL STATEMENTS:  The association must prepare a financial statement in accordance with generally accepted accounting principles at least annually.

When a unit is offered for sale, the declarant may provide a single public disclosure document if the document conforms to the public disclosure requirements of the Washington Condominium Act and any other requirements that may be imposed by law.

The act applies to all units except to units that are restricted to nonresidential units if the seller and purchaser agree otherwise in writing.

CONVERSION CONDOMINIUMS: DEFINITIONS; INSPECTIONS; RELOCATION OF TENANTS:  A "conversion condominium" is defined as a condominium that 1) was lawfully occupied by a tenant under a rental agreement before the creation of the condominium or 2) that prior to the conveyance or agreement to convey a unit, the unit was lawfully occupied by a tenant of the declarant and the declarant did not notify the tenant that the unit was a condominium and subject to sale.

A city or county may, by local ordinance, require that the public offering statement relating to conversion condominiums contain a copy of an inspection report listing any violations of housing or other codes; require that all violations of the inspection be repaired prior to the conveyance of any unit; require the declarant to warrant the repairs against defects for one year and maintain an account during the one year warranty period for paying for repairs; and require relocation assistance for low income households up to $500 per unit for tenants who do not purchase the unit.

Fiscal Note:      Not Requested.

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

House Committee ‑ Testified For:    No one.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    None.

House Committee - Testimony Against:      None.