BILL REQ. #:  H-4278.4 

Read first time 01/28/2004.   Referred to Committee on Judiciary.

     AN ACT Relating to providing for insured warranty standards for condominiums; and adding a new chapter to Title 64 RCW.

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

NEW SECTION.  Sec. 101   DEFINITIONS. The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Affiliate" has the meaning in RCW 64.34.020.
     (2) "Association" has the meaning in RCW 64.34.020.
     (3) "Authorized insurer" means an entity which holds a certificate of authority under RCW 48.05.030, or an eligible insurer under chapter 48.15 RCW.
     (4) "Common element" has the meaning in RCW 64.34.020.
     (5) "Condominium" has the meaning in RCW 64.34.020.
     (6) "Construction professional" has the meaning in RCW 64.50.010.
     (7) "Declarant" has the meaning in RCW 64.34.020.
     (8) "Defect" means any defect in the design or construction of a condominium, and all physical damages arising from or in connection with the defect.
     (9) "Limited common element" has the meaning in RCW 64.34.020.
     (10) "Mediation" means a collaborative process in which two or more parties meet and attempt, with the assistance of a mediator, to resolve issues in dispute between them.
     (11) "Mediation session" means a meeting between two or more parties to a dispute during which they are engaged in mediation.
     (12) "Mediator" means a neutral and impartial facilitator with no decision-making power who assists parties in negotiating a mutually acceptable settlement of issues in dispute between them.
     (13) "Person" has the meaning in RCW 64.34.020.
     (14) "Public offering statement" has the meaning in RCW 64.34.410.
     (15) "Qualified warranty" means a warranty issued by a qualified insurer which complies with the requirements of this chapter.
     (16) "Resale certificate" means the statement to be delivered by the association under RCW 64.34.425.
     (17) "Transition date" means the date on which the declarant is required to deliver to the association the property of the association under RCW 64.34.312.
     (18) "Unit" has the meaning in RCW 64.34.020.
     (19) "Unit owner" has the meaning in RCW 64.34.020.

NEW SECTION.  Sec. 201   No declarant, affiliate of a declarant, or construction professional is liable to a unit owner or an association for breach of any implied warranty set forth in RCW 64.34.445, or otherwise with respect to a construction defect in the unit owner's unit, or in the common or limited common elements in the condominium if: (1) Every unit owned by a person other than a declarant has a qualified warranty issued to the unit purchaser; and (2) the association has been issued a qualified warranty with respect to the common elements for the condominium on or before the transition date. If a construction professional agrees on terms satisfactory to the qualified insurer to partially or fully indemnify the qualified insurer with respect to a construction defect caused by the construction professional, and agrees with the declarant and the qualified insurer to be joined in an arbitration under the terms of the qualified warranty, the liability of the construction professional for the construction defect caused by him or her is limited to damages recoverable under the terms of the qualified warranty for the construction defect.

NEW SECTION.  Sec. 301   (1) Every Public offering statement and resale certificate shall affirmatively state whether or not the unit and/or the common elements are covered by a qualified warranty, and shall provide to the best knowledge of the person preparing the public offering statement or resale certificate a history of claims under the warranty.
     (2) The history of claims must include, for each claim, not less than the following information for the unit and/or the common elements, as applicable, to the best knowledge of the person providing the information:
     (a) The type of claim that was made;
     (b) The resolution of the claim;
     (c) The type of repair performed;
     (d) The date of the repair;
     (e) The cost of the repair; and
     (f) The name of the person or entity who performed the repair.

NEW SECTION.  Sec. 401   TWO-YEAR MATERIALS AND LABOR WARRANTY. (1) The minimum coverage for the two-year materials and labor warranty is:
     (a) In the first twelve months, for other than the common elements, (i) coverage for any defect in materials and labor; and (ii) subject to subsection (2) of this section, coverage for a violation of the building code;
     (b) In the first fifteen months, for the common elements, (i) coverage for any defect in materials and labor; and (ii) subject to subsection (2) of this section, coverage for a violation of the building code;
     (c) In the first twenty-four months, (i) coverage for any defect in materials and labor supplied for the electrical, plumbing, heating, ventilation, and air conditioning delivery and distribution systems; (ii) coverage for any defect in materials and labor supplied for the exterior cladding, caulking, windows, and doors that may lead to detachment or material damage to the unit or common elements; (iii) coverage for any defect in materials and labor which renders the unit unfit to live in; and (iv) subject to subsection (2) of this section, coverage for a violation of the building code.
     (2) Noncompliance with the building code is considered a defect covered by a qualified warranty if the noncompliance:
     (a) Constitutes an unreasonable health or safety risk; or
     (b) Has resulted in, or is likely to result in, material damage to the unit or common elements.

NEW SECTION.  Sec. 402   FIVE-YEAR BUILDING ENVELOPE WARRANTY. The minimum coverage for the building envelope warranty is five years for defects in the building envelope of a condominium, including a defect which permits unintended water penetration so that it causes, or is likely to cause, material damage to the unit or common elements.

NEW SECTION.  Sec. 403   TEN-YEAR STRUCTURAL DEFECTS WARRANTY. The minimum coverage for the structural defects warranty is ten years for:
     (1) Any defect in materials and labor that results in the failure of a load-bearing part of the condominium; and
     (2) Any defect which causes structural damage that materially and adversely affects the use of the condominium for residential occupancy.

NEW SECTION.  Sec. 404   BEGINNING DATES FOR WARRANTY COVERAGE. (1) For the unit, the beginning date of the qualified warranty coverage is the earlier of:
     (a) Actual occupancy of the unit; or
     (b) Transfer of legal title to the unit.
     (2) For the common elements, the beginning date of a qualified warranty is the later of:
     (a) Actual occupancy of the last available unit in each separate multiunit building, comprised by the condominium;
     (b) Transfer of legal title to the last available unit in each separate multiunit building, comprised by the condominium; or
     (c) Final completion of all the common elements in each separate multiunit building, comprised by the condominium.

NEW SECTION.  Sec. 405   BEGINNING DATES FOR SPECIAL CASES. (1) If an unsold unit is occupied as a rental unit, the qualified warranty beginning date is the date the unit is first occupied.
     (2) If the declarant subsequently offers to sell a unit which is rented, the declarant must disclose, in writing, to each prospective purchaser, the date on which the qualified warranty expires.

NEW SECTION.  Sec. 406   LIVING EXPENSE ALLOWANCE. (1) If repairs are required under the qualified warranty and damage to the unit, or the extent of the repairs renders the unit uninhabitable, the qualified warranty must cover reasonable living expenses incurred by the owner to live elsewhere in an amount commensurate with the nature of the unit.
     (2) If a qualified insurer establishes a maximum amount per day for claims for living expenses, the limit must be the greater of one hundred dollars per day or a reasonable amount commensurate with the nature of the unit for the complete reimbursement of the actual accommodation expenses incurred by the owner at a hotel, motel, or other rental accommodation up to the day the unit is ready for occupancy, subject to the owner receiving twenty-four hours' advance notice.

NEW SECTION.  Sec. 407   WARRANTY ON REPAIRS AND REPLACEMENTS. (1) all repairs and replacements made under a qualified warranty must be warranted against defects in materials and labor until the later of:
     (a) The first anniversary of the date of completion of the repair or replacement; or
     (b) The expiration of the applicable qualified warranty coverage.
     (2) All repairs and replacements made under a qualified warranty must be completed in a reasonable manner using materials and labor conforming to the building code and industry standards.

NEW SECTION.  Sec. 501   A qualified insurer may include any of the following provisions in a qualified warranty:
     (1) If the qualified insurer makes a payment or assumes liability for any payment or repair under a qualified warranty:
     (a) The qualified insurer is subrogated to all rights of recovery of an owner or association against the declarant;
     (b) The qualified insurer may bring an action at its own expense, in the name of the owner or of the qualified insurer, to enforce the rights; and
     (c) The owner and association must fully support and assist the qualified insurer in pursuing subrogated rights if the qualified insurer pursues them.
     (2) Warranties or representations made by a declarant which are in addition to the implied warranties set forth in this chapter are not binding on the qualified insurer unless and to the extent specifically provided in the text of the warranty; and disclaimers of specific defects made by agreement between the declarant and the unit purchaser under RCW 64.34.450 act as an exclusion of the specified defect from the warranty coverage.
     (3) An owner and the association must permit the qualified insurer or declarant, or both, to enter the unit at all reasonable times, after reasonable notice to the owner and the association:
     (a) To monitor the unit or its components;
     (b) To inspect for required maintenance;
     (c) To investigate complaints or claims; or
     (d) To undertake repairs under the qualified warranty.
     If any reports are produced as a result of any of the activities referred to in (a) through (d) of this subsection, the reports must be provided to the owner and the association on request.
     (4) An owner and the association must provide to the qualified insurer all information and documentation that the owner and the association have available, as reasonably required by the qualified insurer to investigate a claim or maintenance requirement, or to undertake repairs under the qualified warranty.
     (5) If damage to a unit is caused by the unreasonable refusal of the association, or an owner or occupant to permit the qualified insurer or declarant access to the unit for the reasons in subsection (3) of this section, or to provide the information required by subsection (4) of this section, that damage is excluded from the qualified warranty.
     (6) In any claim under a qualified warranty issued to the association, the association shall have the sole right to prosecute and settle any claim with respect to the common elements.

NEW SECTION.  Sec. 601   (1) A qualified insurer may exclude from a qualified warranty:
     (a) Landscaping, both hard and soft, including plants, fencing, detached patios, planters, gazebos, and similar structures;
     (b) Any commercial use area and any construction associated with a commercial use area;
     (c) Roads, curbs, and lanes;
     (d) Subject to subsection (2) of this section, site grading and surface drainage except as required by the building code;
     (e) Municipal services operation, including sanitary and storm sewer;
     (f) Septic tanks or septic fields;
     (g) The quality or quantity of water, from either a piped municipal water supply or a well;
     (h) A water well, but excluding equipment installed for the operation of a water well used exclusively for a unit, which equipment is part of the plumbing system for that unit for the purposes of the qualified warranty.
     (2) The exclusions permitted by subsection (1) of this section do not include any of the following:
     (a) A driveway or walkway;
     (b) Recreational and amenity facilities situated in, or included as the common property of, a unit;
     (c) A parking structure in a multiunit building;
     (d) A retaining wall that:
     (i) An authority with jurisdiction requires to be designed by a professional engineer; or
     (ii) Is reasonably required for the direct support of, or retaining soil away from, a unit, driveway, or walkway.

NEW SECTION.  Sec. 701   A qualified insurer may exclude any or all of the following items from a qualified warranty:
     (1) Weathering, normal wear and tear, deterioration, or deflection consistent with normal industry standards;
     (2) Normal shrinkage of materials caused by drying after construction;
     (3) Any loss or damage which arises while a unit is being used primarily or substantially for nonresidential purposes;
     (4) Materials, labor, or design supplied by an owner;
     (5) Any damage caused by an owner or third party, including:
     (a) Negligent or improper maintenance or improper operation by anyone other than the declarant or its employees, agents, or subcontractors;
     (b) Failure of anyone, other than the declarant or its employees, agents, or subcontractors, to comply with the warranty requirements of the manufacturers of appliances, equipment, or fixtures;
     (c) Alterations to the unit, including converting nonliving space into living space or converting a unit into two or more units, by anyone other than the declarant or its employees, agents, or subcontractors while undertaking their obligations under the sales contract; and
     (d) Changes to the grading of the ground by anyone other than the declarant or its employees, agents, or subcontractors;
     (6) An owner failing to take timely action to prevent or minimize loss or damage, including failing to give prompt notice to the qualified insurer of a defect or discovered loss, or a potential defect or loss;
     (7) Any damage caused by insects, rodents, or other animals, unless the damage results from noncompliance with the building code by the declarant or its employees, agents, or subcontractors;
     (8) Accidental loss or damage from acts of nature including, but not limited to, fire, explosion, smoke, water escape, glass breakage, windstorm, hail, lightning, falling trees, aircraft, vehicles, flood, earthquake, avalanche, landslide, and changes in the level of the underground water table which are not reasonably foreseeable by the declarant;
     (9) Bodily injury or damage to personal property or real property which is not part of a unit;
     (10) Any defect in, or caused by, materials or work supplied by anyone other than the declarant, an affiliate of a declarant, or their respective contractors, employees, agents, or subcontractors;
     (11) Changes, alterations, or additions made to a unit by anyone after initial occupancy, except those performed by the declarant or its employees, agents, or subcontractors as required by the qualified warranty or under the construction contract or sales agreement;
     (12) Contaminated soil;
     (13) Subsidence of the land around a unit or along utility lines, other than subsidence beneath footings of a unit or under driveways or walkways;
     (14) Diminution in the value of the unit.

NEW SECTION.  Sec. 801   (1) A qualified insurer may establish a monetary limit on the amount of the warranty. Any limit must not be less than:
     (a) For a unit, the lesser of (i) the original purchase price paid by the owner, or (ii) one hundred thousand dollars;
     (b) For common elements, the lesser of (i) the total original purchase price for all components of the multiunit building, or (ii) one hundred thousand dollars times the number of units of the condominium.
     (2) If a condominium consists of a number of buildings, the limit under subsection (1)(b) of this section applies to each building.
     (3) When calculating the cost of warranty claims under the standard limits under a qualified warranty, a qualified insurer may include:
     (a) The cost of repairs;
     (b) The cost of any investigation, engineering, and design required for the repairs; and
     (c) The cost of supervision of repairs, including professional review, but excluding legal costs.
     (4) The minimum amounts in subsections (1) through (3) of this section shall be adjusted at the end of each calendar year after the effective date by an amount equal to the percentage change in the consumer price index for all urban consumers, all items, as published from time to time by the United States department of labor. The adjustment does not affect any qualified warranty issued before the adjustment date.

NEW SECTION.  Sec. 901   (1) A qualified insurer must not include in a qualified warranty any provision that requires an owner:
     (a) To sign a release before repairs are performed under the qualified warranty; or
     (b) To pay a deductible for the repair of any defect covered by the qualified warranty.
     (2) All exclusions must be permitted by this chapter and stated in the qualified warranty.

NEW SECTION.  Sec. 1001   (1) If coverage under a qualified warranty is conditional on an owner undertaking proper maintenance, or if coverage is excluded for damage caused by negligence by the owner or association with respect to maintenance or repair by the owner or association, the conditions or exclusions apply only to maintenance requirements or procedures: (a) Provided to the original owner or association by the declarant or qualified insurer, including an estimation of dues as provided in the budget; (b) recommended to the association by its professional management, if any; or (c) which would be obvious to a reasonable and prudent layperson. Recommended maintenance requirements and procedures are sufficient for purposes of this subsection if consistent with knowledge generally available in the construction industry at the time the qualified warranty is issued.
     (2) If an original owner has not been provided with the manufacturer's documentation or warranty information, or both, or with recommended maintenance and repair procedures for any component of a unit, the relevant exclusion does not apply.

NEW SECTION.  Sec. 1101   (1) A qualified insurer must, as soon as reasonably possible after the beginning date for the qualified warranty, provide an owner and association with a schedule of the expiration dates for coverages under the qualified warranty as applicable to the unit and the common elements, respectively.
     (2) The expiration date schedule for a unit must set out all the required dates on an adhesive label that is a minimum size of four inches by four inches and is suitable for affixing by the owner in a conspicuous location in the unit.

NEW SECTION.  Sec. 1201   (1) The qualified insurer may require an owner or association to mitigate any damage to a unit or the common elements, including damage caused by defects or water penetration, as set out in the qualified warranty.
     (2) Subject to subsection (3) of this section, for defects covered by the qualified warranty, the duty to mitigate is met through timely notice in writing to the qualified insurer.
     (3) The owner must take all reasonable steps to restrict damage to the unit if the defect requires immediate attention.
     (4) The owner's duty to mitigate survives even if:
     (a) The unit is unoccupied;
     (b) The unit is occupied by someone other than the owner;
     (c) Water penetration does not appear to be causing damage; or
     (d) The owner advises the homeowners' association corporation about the defect.
     (5) If damage to a unit is caused or made worse by the failure of an owner to take reasonable steps to mitigate as set out in this section, the damage may, at the option of the qualified insurer, be excluded from qualified warranty coverage.

NEW SECTION.  Sec. 1301   (1) Within a reasonable time after the discovery of a defect and before the expiration of the applicable qualified warranty coverage, a claimant must give to the qualified insurer and the declarant written notice in reasonable detail that provides particulars of any specific defects covered by the qualified warranty.
     (2) The qualified insurer may require the notice under subsection (1) of this section to include:
     (a) The qualified warranty number; and
     (b) Copies of any relevant documentation and correspondence between the claimant and the declarant.

NEW SECTION.  Sec. 1401   (1) A qualified insurer must, on receipt of a notice of a claim under a qualified warranty, promptly make reasonable attempts to contact the claimant to arrange an evaluation of the claim.
     (2) The qualified insurer must make all reasonable efforts to avoid delays in responding to a claim under a qualified warranty, evaluating the claim, and scheduling any required repairs.
     (3) If, after evaluating a claim under a qualified warranty, the qualified insurer determines that the claim is not valid, or not covered under the qualified warranty, the qualified insurer must: (a) Notify the claimant of the decision in writing; (b) set out the reasons for the decision; and (c) set out the rights of the parties under the third-party dispute resolution process for the warranty.
     (4) Repairs must be undertaken in a timely manner, with reasonable consideration given to weather conditions and the availability of materials and labor.
     (5) On completing any repairs, the qualified insurer must deliver a copy of the repair specifications to the claimant along with a letter confirming the date the repairs were completed and referencing the repair warranty provided for in section 407 of this act.

NEW SECTION.  Sec. 1501   (1) If a dispute between a qualified insurer and a claimant arising under a qualified warranty cannot be resolved by informal negotiation within a reasonable time, the claimant or qualified insurer may require that the dispute be referred to mediation by delivering written notice to the other to mediate.
     (2) If a party delivers a request to mediate under subsection (1) of this section, the qualified insurer and the party must attend a mediation session in relation to the dispute and may invite to participate in the mediation any other party to the dispute who may be liable.
     (3) Within twenty-one days after the party has delivered a request to mediate under subsection (1) of this section, the parties must, directly or with the assistance of an independent, neutral person or organization, jointly appoint a mutually acceptable mediator.
     (4) If the parties do not jointly appoint a mutually acceptable mediator within the time required by subsection (3) of this section, the party may apply to the superior court of the county where the project is located, which must appoint a mediator taking into account:
     (a) The need for the mediator to be neutral and independent;
     (b) The qualifications of the mediator;
     (c) The mediator's fees;
     (d) The mediator's availability; and
     (e) Any other consideration likely to result in the selection of an impartial, competent, and effective mediator.
     (5) After selecting the mediator under subsection (4) of this section, the superior court must promptly notify the parties in writing of that selection.
     (6) The mediator selected by the superior court is deemed to be appointed by the parties effective the date of the notice sent under subsection (5) of this section.
     (7) The first mediation session must occur within twenty-one days of the appointment of the mediator at the date, time, and place selected by the mediator.
     (8) A party may attend a mediation session by representative if:
     (a) The party is under a legal disability and the representative is that party's guardian ad litem;
     (b) The party is not an individual; or
     (c) The party is a resident of a jurisdiction other than Washington and will not be in Washington at the time of the mediation session.
     (9) A representative who attends a mediation session in the place of a party as permitted by subsection (8) of this section:
     (a) Must be familiar with all relevant facts on which the party, on whose behalf the representative attends, intends to rely; and
     (b) Must have full authority to settle, or have immediate access to a person who has full authority to settle, on behalf of the party on whose behalf the representative attends.
     (10) A party or a representative who attends the mediation session may be accompanied by counsel.
     (11) Any other person may attend a mediation session on consent of all parties or their representatives.
     (12) At least seven days before the first mediation session is to be held, each party must deliver to the mediator a statement briefly setting out:
     (a) The facts on which the party intends to rely; and
     (b) The matters in dispute.
     (13) The mediator must promptly send each party's statement to each of the other parties.
     (14) Before the first mediation session, the parties must enter into a retainer with the mediator which must:
     (a) Disclose the cost of the mediation services; and
     (b) Provide that the cost of the mediation will be paid:
     (i) Equally by the parties; or
     (ii) On any other specified basis agreed by the parties.
     (15) The mediator may conduct the mediation in any manner he or she considers appropriate to assist the parties to reach a resolution that is timely, fair, and cost-effective.
     (16) A person may not disclose, or be compelled to disclose, in any proceeding, oral or written information acquired or an opinion formed, including, without limitation, any offer or admission made in anticipation of or during a mediation session.
     (17) Nothing in subsection (16) of this section precludes a party from introducing into evidence in a proceeding any information or records produced in the course of the mediation that are otherwise producible or compellable in those proceedings.
     (18) A mediation session is concluded when:
     (a) All issues are resolved;
     (b) The mediator determines that the process will not be productive and so advises the parties or their representatives; or
     (c) The mediation session is completed and there is no agreement to continue.
     (19) If the mediation resolves some but not all issues, the mediator may, at the request of all parties, complete a report setting out any agreements made as a result of the mediation, including, without limitation, any agreements made by the parties on any of the following:
     (a) Facts;
     (b) Issues; and
     (c) Future procedural steps.

NEW SECTION.  Sec. 1601   A qualified warranty may include mandatory binding arbitration of all disputes arising out of or in connection with a qualified warranty. The provision may provide that all claims for a single condominium be heard by the same arbitrator, and may permit the joinder of any other person or entity which has agreed by contract to be joined in arbitration. The arbitration shall comply with the following minimum procedural standards:
     (1) Any demand for arbitration shall be delivered by certified mail return receipt requested, and by ordinary first class mail. The party initiating the arbitration shall address the notice to the address last known to the initiating party in the exercise of reasonable diligence, and also, for any entity which is required to have a registered agent in the state of Washington, to the address of the registered agent. Demand for arbitration is deemed effective three days after the date deposited in the mail;
     (2) All disputes shall be heard by one qualified arbitrator, unless the parties agree to use three arbitrators. If three arbitrators are used, one shall be appointed by each of the disputing parties and the first two arbitrators shall appoint the third, who will chair the panel. The parties shall select the identity and number of the arbitrator or arbitrators after the demand for arbitration is made. If, within thirty days after the effective date of the demand for arbitration, the parties fail to agree on an arbitrator or the agreed number of arbitrators fail to be appointed, then an arbitrator or arbitrators shall be appointed under RCW 7.04.050 by the presiding judge of the superior court of the county in which the condominium is located;
     (3) In any arbitration, at least one arbitrator must be a lawyer or retired judge. Any additional arbitrator must be either a lawyer or retired judge or a person who has experience with construction and engineering standards and practices, written construction warranties, or construction dispute resolution. No person may serve as an arbitrator in any arbitration in which that person has any past or present financial or personal interest;
     (4) The arbitration hearing must be conducted in a manner that permits full, fair, and expeditious presentation of the case by both parties. The arbitrator is bound by the law of Washington state. Parties may be, but are not required to be, represented by attorneys. The arbitrator may permit discovery to ensure a fair hearing, but may limit the scope or manner of discovery for good cause to avoid excessive delay and costs to the parties. The parties and the arbitrator shall use all reasonable efforts to complete the arbitration within six months of the effective date of the demand for arbitration or, when applicable, the service of the list of defects in accordance with RCW 64.50.030;
     (5) Except as otherwise set forth in this section, arbitration shall be conducted under chapter 7.04 RCW, unless the parties elect to use the construction industry arbitration rules of the American arbitration association, which are permitted to the extent not inconsistent with this section. The expenses of witnesses including expert witnesses shall be paid by the party producing the witnesses. Each party shall pay its own attorneys' fees unless the arbitrator awards reasonable attorneys' fees or any part thereof to any specified party or parties. No contingent fee may be awarded or charged in any such arbitration. All other expenses of arbitration shall be borne equally by the parties, unless all parties agree otherwise or unless the arbitrator awards expenses or any part thereof to any specified party or parties. The parties shall pay the fees of the arbitrator as and when specified by the arbitrator;
     (6) Service of a request, notice, or petition to arbitrate commences an arbitration for purposes of RCW 64.34.452;
     (7) The arbitration decision shall be in writing and must set forth findings of fact and conclusions of law that support the decision.

NEW SECTION.  Sec. 1701   (1) A qualified warranty pertains solely to the unit and common elements for which it provides coverage and no notice to the qualified insurer is required on a change of ownership.
     (2) All of the applicable unused benefits under a qualified warranty with respect to a unit are automatically transferred to any subsequent owner on a change of ownership.

NEW SECTION.  Sec. 1801   (1) No insurer is bound to offer a qualified warranty to any person. Except as specifically set forth in this section, the terms of any qualified warranty are set in the sole discretion of the qualified insurer. Without limiting the generality of this subsection, a qualified insurer may make inquiries about the applicant as follows:
     (a) Does the applicant have the financial resources to undertake the construction of the number of units being proposed by the applicant's business plan for the following twelve months;
     (b) Does the applicant and its directors, officers, employees, and consultants possess the necessary technical expertise to adequately perform their individual functions with respect to their proposed role in the construction and sale of units;
     (c) Does the applicant and its directors and officers have sufficient experience in business management to properly manage the unit construction process;
     (d) Does the applicant and its directors, officers, and employees have sufficient practical experience to undertake the proposed unit construction;
     (e) Does the past conduct of the applicant and its directors, officers, employees, and consultants provide a reasonable indication of good business practices, and reasonable grounds for belief that its undertakings will be carried on in accordance with all legal requirements; and
     (f) Is the applicant reasonably able to provide, or to cause to be provided, after-sale customer service for the units to be constructed.
     (2) A qualified insurer may charge a fee to make the inquiries permitted by subsection (1) of this section.
     (3) Before approving a qualified warranty for a condominium, a qualified insurer may make such inquiries and impose such conditions as it deems appropriate in its sole discretion, including without limitation the following:
     (a) To determine if the applicant has the necessary capitalization or financing in place, including any reasonable contingency reserves, to undertake construction of the proposed unit;
     (b) To determine if the applicant or, in the case of a corporation, its directors, officers, employees, and consultants possess reasonable technical expertise to construct the proposed unit, including specific technical knowledge or expertise in any building systems, construction methods, products, treatments, technologies, and testing and inspection methods proposed to be employed;
     (c) To determine if the applicant or, in the case of a corporation, its directors, officers, employees, and consultants have sufficient practical experience in the specific types of construction to undertake construction of the proposed unit;
     (d) To determine if the applicant has sufficient personnel and other resources to adequately undertake the construction of the proposed unit in addition to other units which the applicant may have under construction or is currently marketing;
     (e) To determine if:
     (i) The applicant is proposing to engage a general contractor to undertake all or a significant portion of the construction of the proposed unit; and
     (ii) The general contractor meets the criteria set out in this section;
     (f) Requiring that a declarant provide security in a form suitable to the qualified insurer;
     (g) Establishing or requiring compliance with specific construction standards for the unit;
     (h) Restricting the applicant from constructing some types of units or using some types of construction or systems;
     (i) Requiring the use of specific types of systems, consultants, or personnel for the construction;
     (j) Requiring an independent review of the unit building plans or consultants' reports or any part thereof;
     (k) Requiring third-party verification or certification of the construction of the unit or any part thereof;
     (l) Providing for inspection of the unit or any part thereof during construction;
     (m) Requiring ongoing monitoring of the unit, or one or more of its components, following completion of construction;
     (n) Requiring that the declarant or any of the design professionals, engineering professionals, consultants, general contractors, or subcontractors maintain minimum levels of insurance, bonding, or other security naming the potential owners and qualified insurer as loss payees or beneficiaries of the insurance, bonding, or security to the extent possible;
     (o) Requiring that the declarant provide a list of all design professionals and other consultants who are involved in the design or construction inspection, or both, of the unit;
     (p) Requiring that the declarant provide a list of trades employed in the construction of the unit, and requiring evidence of their current trade's certification, if applicable.

NEW SECTION.  Sec. 1901   Captions and part headings used in this act are not any part of the law.

NEW SECTION.  Sec. 1902   Sections 101 through 1901 of this act constitute a new chapter in Title 64 RCW.