SENATE BILL REPORT

SSB 5208

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

Creating the Washington condominium act.

Senate Committee on Law & Justice

Senate Hearing Date(s):January 24, 1989; February 6, 1989

Majority Report:  That Substitute Senate Bill No. 5208 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Pullen, Chairman; McCaslin, Vice Chairman; Hayner, Nelson, Newhouse, Niemi, Rasmussen, Rinehart, Talmadge, Thorsness.

Senate Staff:Ben Barnes (786-7465)

                  February 17, 1989

AS PASSED SENATE, FEBRUARY 15, 1989

BACKGROUND:

The Horizontal Property Regimes Act (RCW 64.32) 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 and modify the UCA to meet the needs of this state.  The statutory committee has met consistently since June of 1987 to consider written comments from all interested parties as well as the input of the committee members.  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.

It is recommended 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 with respect to condominium construction, ownership, and management.  The act only applies to condominiums created after July 1, 1989.  Some provisions of the act, however, may apply to existing condominiums.  Also, an existing condominium can utilize provisions of the act by amending its declaration.

A condominium is created by recording a declaration, a survey map, and plans.  The units of a condominium must be substantially completed at the time of the recording, but need not be an enclosed space.

Unanimous consent of the owners is no longer required to amend a declaration or to terminate the condominium.  Most amendments require the approval of the owners of units to which at least 67 percent of the votes are allocated.  Other amendments require approval by at least 90 percent of the allocated votes.  A condominium is terminated by at least 80 percent of the allocated votes.  Upon termination of the condominium, the proceeds of sale are divided in accordance with relative appraised values at the time of termination.

A declarant may reserve the right to add real property or improvements to the condominium, create units on property in or to be added to the condominium, subdivide units, and withdraw real property from the condominium.  The rights and obligations of 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.  There is a higher standard of care for officers and directors appointed by the declarant.  The declarant is also liable for any tort or contract losses which are suffered by an association during the period of declarant control.

An association must be incorporated at the time the first unit is conveyed.  The powers of the association and its board of directors are listed.  The budget for the association must be submitted annually to the owners for ratification.  The documents and information that the declarant is required to turn over to the association are listed.  Upon transfer of control, the financial records of the association must be audited unless waived by 60 percent of the owners other than the declarant.  Annual audits are mandatory only for condominiums with more than 50 units; the owners in 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.  Expenses relating to land in which the declarant has development rights are paid by the declarant.  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.  The interest of each unit in the common elements for assessment and voting purposes may be different.

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; there is no priority over first mortgages in a nonjudicial foreclosure, however.  In a judicial proceeding, the association may appoint a receiver to collect 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 costs and reasonable attorneys' fees incurred in connection with the collection of assessments.

The declarant must provide a public offering statement (POS) to all purchasers of residential condominium units.  This requirement also applies to existing condominiums 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 attorneys' fees are recoverable by the prevailing party.

In connection with any sale of a unit for which the delivery of 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.

There is an implied warranty of quality 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, accruing with respect to a unit, from the time of possession by a purchaser and, with respect to the common elements, from completion of the common element or from first conveyance of a unit, whichever is later.

The Condominium Task Force is recreated to review the act, draft recommended 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.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Effective Date:July 1, 1990

Senate Committee - Testified: Gary Ackerman, Condo Task Force (pro); David Rockwell, Condo Task Force (pro); Pete Middlebrooks Condo Task Force (pro); Stephan Miller, Washington Mortgage Bankers Association; Jim Strichartz, Condo Task Force (pro); Ray Pedersen, Allenmore Ridge Condo (pro)