BILL REQ. #:  S-4368.1 

Read first time 01/22/08.   Referred to Committee on Consumer Protection & Housing.

     AN ACT Relating to homeowners' associations; amending RCW 64.38.005, 64.38.010, 64.38.015, 64.38.020, 64.38.025, 64.38.030, 64.38.035, and 64.38.040; adding new sections to chapter 64.38 RCW; and creating a new section.

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

Sec. 1   RCW 64.38.005 and 1995 c 283 s 1 are each amended to read as follows:
     The intent of this chapter is to provide consistent laws regarding the formation and legal administration of homeowners' associations. Unless otherwise provided in this chapter, this chapter applies to all homeowners' associations in the state.

NEW SECTION.  Sec. 2   A new section is added to chapter 64.38 RCW to read as follows:
     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 declarants, associations, and their members.
     For purposes of this section, "good faith" means honesty in fact and the observance of reasonable standards of fair dealing.

Sec. 3   RCW 64.38.010 and 1995 c 283 s 2 are each amended to read as follows:
     For purposes of this chapter:
     (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)), the owner 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)) assessments pursuant to the governing documents. "Homeowners' association" does not mean an association created under chapter 64.32 or 64.34 RCW.
     (2) "Governing documents" means the declaration, 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) "Assessment" means all sums chargeable by the association against a lot including, without limitation:
     (a) Regular and special assessments for common expenses, charges, and fines imposed by the association;
     (b) Interest and late charges on any delinquent account; and
     (c) Costs of collection, including reasonable attorneys' fees, incurred by the association in connection with the collection of an owner's delinquent account.
     (8) "Bylaws" means the code adopted for the regulation or management of the internal affairs of the association, irrespective of the designated name of that code. If an association is incorporated under Title 23 or 24 RCW, "bylaws" means the definition assigned to "bylaws" in the act pursuant to which the association is incorporated.
     (9) "Community" means residential real property that is subject to a declaration under which an association is established for governance of the community.
     (10) "Cooperative" means a community in which the residential real property is owned by an association where each of those members is entitled, by virtue of his or her ownership interest in the association, to exclusive possession of a portion of the property.
     (11) "Declarant" means any person who:
     (a) Executes as a declarant a declaration;
     (b) Reserves any special declarant right in the declaration;
     (c) Exercises special declarant rights or to whom special declarant rights are transferred;
     (d) Succeeds to the rights of a declarant pursuant to an instrument recorded in the real property records of every county in which any portion of the community is located; or
     (e) Is the owner of a fee interest in the real property that is subject to the declaration and who directly or through one or more affiliates is materially involved in the construction, marketing, or sale of residential real property located within the association's jurisdiction.
     (12) "Declaration" means the declaration of covenants, conditions, and restrictions or any other document, however denominated, that is recorded in every county in which any portion of the community is located and that provides for the establishment of an association to govern the community. In the case of a cooperative, "declaration" means the document or documents, however denominated, that create the cooperative housing association that owns the residential real property comprising the cooperative, whether or not the document or documents are recorded.
     (13) "Lot" means a physical portion of a community designated for separate ownership or occupancy and designated for residential use, the boundaries of which are described in the real property records of every county in which any portion of the community is located. Within a cooperative, "lot" means that portion of the community designated for exclusive possession by a member of the cooperative's association. "Lot" does not mean an apartment created under chapter 64.32 RCW or a unit created under chapter 64.34 RCW.
     (14) "Owner" means a declarant or other person who owns a lot, but does not include a person who has an interest in a lot solely as security for an obligation. Under a real estate contract, "owner" means the vendee, not the vendor.
     (15) "Person" means a natural person, corporation, partnership, limited partnership, trust, government subdivision or agency, or other legal entity.
     (16) "Rules" means the rules, regulations, and policies, irrespective of their designated name, that are adopted by the members of the board of an association in accordance with the governing documents and that supplement, but do not contradict or contravene, the governing documents.
     (17) "Special declarant rights" means rights reserved for the benefit of a declarant to: (a) Maintain sales offices, management offices, or signs advertising the community or cooperative; (b) use easements through the common elements for the purpose of making improvements within the community or cooperative or within real property that will be added to the community or cooperative; or (c) 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 declarant control.

Sec. 4   RCW 64.38.015 and 1995 c 283 s 3 are each amended to read as follows:
     The membership of an association at all times shall consist exclusively of the owners of all real property over which the association has jurisdiction, both developed and undeveloped or, in the case of a cooperative, the members of the association who by virtue of their ownership interest in the association have exclusive possession of a lot.

Sec. 5   RCW 64.38.020 and 1995 c 283 s 4 are each amended to read as follows:
     Unless otherwise provided in the ((governing documents)) declaration, an association may:
     (1) Adopt and amend bylaws, resolutions, policies, rules, and regulations that are consistent with the declaration or with this chapter;
     (2) Adopt and amend budgets for revenues, expenditures, and reserves, and impose and collect assessments for common expenses from owners;
     (3) Hire and discharge or contract with managing agents and other employees, agents, and independent contractors;
     (4) Institute, defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more owners on matters affecting the homeowners' association, but not on behalf of owners involved in disputes that are not the responsibility of the association;
     (5) Make contracts and incur liabilities;
     (6) Regulate the use, maintenance, repair, replacement, and modification of common areas;
     (7) Cause additional improvements to be made as a part of the common areas;
     (8) Acquire, hold, encumber, and convey in its own name any right, title, or interest to real or personal property;
     (9) Grant easements, leases, licenses, and concessions through or over the common areas and petition for or consent to the vacation of streets and alleys;
     (10) Impose and collect any payments, fees, or charges for the use, rental, or operation of the common areas;
     (11) Impose and collect charges for late payments of assessments ((and, after notice and an opportunity to be heard by the board of directors or by the representative designated by the board of directors and in accordance with the procedures as provided in the bylaws or rules and regulations adopted by the board of directors, levy reasonable fines in accordance with a previously established schedule adopted by the board of directors and furnished to the owners for violation of the bylaws, rules, and regulations of the association));
     (12) Take enforcement action with respect to any violation of the governing documents;
     (13) Exercise any other powers conferred by the declaration, articles, or bylaws;
     (((13))) (14) Exercise all other powers that may be exercised in this state by the same type of ((corporation)) legal entity as the association, provided those powers do not conflict with any duties imposed on an association in this chapter; and
     (((14))) (15) Exercise any other powers necessary and proper for the governance and operation of the association.

NEW SECTION.  Sec. 6   A new section is added to chapter 64.38 RCW to read as follows:
     (1) Unless otherwise provided in the homeowners' association's governing documents and subject to subsection (2) of this section, an association may levy reasonable fines. The fines must be in accordance with a previously established schedule adopted by the board of directors and furnished to the owners for a violation of the bylaws, rules, and regulations of the association.
     (2) A homeowners' association may not levy a fine against an owner unless the owner has received adequate notice and an opportunity to be heard.
     (3) A homeowners' association will be deemed to have provided adequate notice and an opportunity to be heard under this section if the association fulfills the following requirements:
     (a) The association must provide the owner with a notice of the violation that contains:
     (i) A reference to the rule or rules that the owner allegedly violated;
     (ii) A short statement of the evidence of the rule violation;
     (iii) The name of a person with firsthand knowledge of the facts that support the determination that the violation occurred;
     (iv) A short statement of the action that the association intends to take, including the amount of any fine, subject to the owner's right to request a hearing;
     (v) A statement that if the owner wishes to contest or explain the violation, he or she must submit a written request for a hearing to the association within fifteen days of delivery of the notice of violation;
     (vi) A statement of the owner's rights to a hearing, to attend the hearing, to be represented by counsel, and to review the evidence supporting the alleged violation;
     (b) Upon the timely request of a hearing from an owner, the association must set a hearing date between thirty and sixty days from the association's receipt of the request. The association must notify the owner of the hearing at least twenty days before the hearing and must include with the notification a copy of the association's rules of procedure for conducting a hearing;
     (c) Upon request by the owner who requested a hearing, the association must, at least ten days before the date of the hearing, either provide the owner with a copy of all its evidence concerning the alleged violation, including copies of the complaint signed by a witness with firsthand knowledge of the facts that support the determination that the violation occurred, or identify a reasonable time and place at which the owner may inspect such evidence;
     (d) The association must permit the owner to be represented by counsel at the hearing; and
     (e) The association must provide the owner with a written decision, including a statement of the reasons for the decision, within thirty days after the hearing.
     (4) The chair of the hearing may adjourn or continue the hearing, if necessary, to gather additional information that the association needs in order to make a decision.

Sec. 7   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 of the association 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.
     (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.))

NEW SECTION.  Sec. 8   A new section is added to chapter 64.38 RCW to read as follows:
     A board of directors may by majority vote incorporate an unincorporated homeowners' association as a nonprofit corporation.

NEW SECTION.  Sec. 9   A new section is added to chapter 64.38 RCW to read as follows:
     Any member of the board of directors may be removed with or without cause by a majority vote of the owners (1) entitled to elect the board member and present, in person or by proxy, and (2) entitled to vote at any regular or special meeting of the owners at which a quorum is present.

Sec. 10   RCW 64.38.030 and 1995 c 283 s 6 are each amended to read as follows:
     Unless provided for in the ((governing documents)) declaration, the bylaws of the association ((shall)) must contain provisions that are consistent with this chapter and provide for:
     (1) The number, qualifications, powers and duties, terms of office, and manner of electing and removing the board of directors and officers of the association and filling vacancies;
     (2) Election by the board of directors of the officers of the association as the bylaws specify;
     (3) Which, if any, of its powers the board of directors or officers of the association may delegate to other persons or to a managing agent;
     (4) Which of its officers may prepare, execute, certify, and record amendments to the governing documents on behalf of the association;
     (5) The method of amending the bylaws; and
     (6) ((Subject to the provisions of the governing documents,)) Any other matters the association deems necessary and appropriate.

NEW SECTION.  Sec. 11   A new section is added to chapter 64.38 RCW to read as follows:
     (1) Except as provided under subsection (4) of this section, in a transaction for the sale of a lot that is subject to this chapter, the seller shall, unless the buyer has expressly waived the right to receive a resale certificate in writing, furnish to the buyer a resale certificate signed by an officer or authorized agent of the association and based on the books and records of the association and the actual knowledge of the person signing the certificate containing:
     (a) A statement setting forth the amount of the annual assessment due from the selling owner, and a statement of any special assessments that have been levied against the lot and have not been paid even though they are not yet due;
     (b) A statement, which must be current to within forty-five days, of whether the sum of assessments that are delinquent under the association's reasonable delinquency policy exceeds ten percent of the association's budgeted annual expenditures and, if so, the total number of units that are delinquent under the delinquency policy;
     (c) A statement, which must be current to within forty-five days, of whether any obligation or liability of the association in excess of the lesser of ten thousand dollars or five percent of the association's budgeted annual expenditures that is at least sixty days past due and, if so, the circumstances that account for this delinquency;
     (d) A statement of any anticipated repair or replacement cost in excess of five percent of the annual ratified budget;
     (e) A statement of the amount of any reserves for repair or replacement and of any portions of those reserves currently designated by the association for any specified projects;
     (f) The annual financial statement of the association, including the audit report if it has been prepared, for the year immediately preceding the current year;
     (g) A balance sheet and a revenue and expense statement of the association, which must be current to within one hundred twenty days;
     (h) The annual ratified budget of the association;
     (i) A statement of any unsatisfied judgments against the association and the status of any pending suits or legal proceedings in which the association is a plaintiff or defendant;
     (j) A statement describing any insurance coverage maintained by the association;
     (k) A statement as to whether there are any alterations or improvements to the lot that the association has determined violate any provision of the governing documents;
     (l) A statement of whether the association is under declarant control;
     (m) A statement as to whether there are any known and currently existing violations of applicable health or building codes with respect to any portions of the common areas or improvements of the common areas; and
     (n) A copy of the governing documents that include the following, if applicable:
     (i) The declaration of covenants or easements;
     (ii) The articles of incorporation;
     (iii) Bylaws, rules, regulations, and policies, if any, including architectural and construction standards and guidelines;
     (iv) The association's current fine schedule;
     (v) A copy of the minutes of the most recent meeting of the members of the association, minutes of the previous six meetings of the board of directors, except that minutes of a board meeting that occurred more than three years before the date of the resale certificate required under this section does not need to be provided; and
     (vi) Any other information reasonably requested by mortgagees of prospective buyers.
     The association may charge a fee for photocopying costs not to exceed fifteen cents per page for providing any of the documents required to be disclosed in this subsection. The duty to provide copies of documents that are recorded in the recording office of the county in which the lot is located is satisfied if the association identifies in the resale certificate a link to a web site in which copies of the recorded documents can be obtained. The duty to provide copies of the documents required to be disclosed in this subsection is satisfied if the association provides the documents via electronic transmission to the email address provided by the seller who requests the issuance of a resale certificate.
     (2) The association, within ten days after a request by a seller, and subject to payment of a reasonable fee not to exceed one hundred fifty dollars, shall furnish a resale certificate signed by an officer or authorized agent of the association and containing the information necessary to enable the seller to comply with this section. The association may charge a seller a nominal fee for updating a resale certificate within six months of the seller's request.
     (3) The seller shall sign the resale certificate, but the seller is not liable to the buyer for any erroneous information provided by the association and included in the resale certificate unless, and to the extent, the seller had actual knowledge of the erroneous information.
     (4) The resale certificate is not required in real property transfers that occur between commercial buyers and sellers or those transfers listed in RCW 64.06.010.
     (5) The resale certificate must be attached to the seller disclosure form required under RCW 64.06.020.
     (6) The resale certificate is subject to RCW 64.06.030 through 64.06.070.

NEW SECTION.  Sec. 12   A new section is added to chapter 64.38 RCW to read as follows:
     (1) Except as provided under subsection (2) of this section, and unless the notice has been waived by the buyer in writing, a seller must furnish to a purchaser before the execution of any contract for sale of residential real property in which the lot is subject to this chapter the following notice:

     "BY PURCHASING THE RESIDENTIAL PROPERTY THAT IS THE SUBJECT OF THIS AGREEMENT, YOU WILL BECOME A MEMBER OF A HOMEOWNERS' ASSOCIATION THAT GOVERNS THE COMMUNITY IN WHICH THE PROPERTY IS LOCATED. THE ASSOCIATION MAY MAINTAIN AND REPAIR COMMON AREAS, RESTRICT THE USE OF YOUR PROPERTY, COLLECT DUES, AND APPROVE OR DISAPPROVE BUILDING PLANS. UNLESS YOU WAIVE YOUR RIGHT IN WRITING, YOU ARE ENTITLED TO RECEIVE FROM THE SELLER AS PART OF THE DISCLOSURE STATEMENT REQUIRED UNDER CHAPTER 64.06 RCW A CERTIFICATE SIGNED BY AN OFFICER OR AUTHORIZED AGENT OF THE HOMEOWNERS' ASSOCIATION DISCLOSING CERTAIN FINANCIAL AND OTHER INFORMATION ABOUT THE ASSOCIATION."

     (2) The notice is not required in real property transfers that occur between commercial buyers and sellers or those transfers listed in RCW 64.06.010.
     (3) The notice must be attached to the seller disclosure form required under RCW 64.06.020.
     (4) The notice is subject to RCW 64.06.030 through 64.06.070.

NEW SECTION.  Sec. 13   A new section is added to chapter 64.38 RCW to read as follows:
     (1) 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 between ten and sixty days after the mailing of the summary of the proposed regular or special budget. Unless at that meeting the proposed budget is rejected, in person or by proxy, by a majority of all the votes in the association, or any larger percentage specified in the governing documents, the proposed budget is ratified and approved whether or not a quorum is present at the meeting. If the proposed budget is rejected or the required notice is not provided, the periodic budget last ratified by the owners shall be continued until the owners ratify a subsequent budget proposed by the board of directors.
     (2) To the extent authorized in the declaration, an association's lien rights may include liens to secure payment of fines validly imposed.
     (3) This section applies retroactively to any governing documents in effect on the effective date of this section.
     (4) This section supersedes any provisions of the governing documents that are inconsistent with this section. All such inconsistent provisions of the governing documents are void and unenforceable.

Sec. 14   RCW 64.38.035 and 1995 c 283 s 7 are each amended to read as follows:
     (1) A meeting of the association must be held at least once each year.
     (2) Special meetings of the association may be called by the president, a majority of the board of directors, or by owners having ((ten)) five percent of the votes in the association. This subsection supersedes any inconsistent provisions of the governing documents or applicable statute.
     (3) Not less than ((fourteen)) ten nor more than sixty days in advance of any meeting, the secretary or other officers specified in the bylaws shall cause notice to be hand-delivered or sent prepaid by first-class United States mail to the mailing address of each owner or to any other mailing address designated in writing by the owner. The notice of any meeting shall state the time and place of the meeting and the business to be placed on the agenda by the board of directors for a vote by the owners, including the general nature of any proposed amendment to the articles of incorporation, bylaws, any budget or changes in the previously approved budget that result in a change in assessment obligation, and any proposal to remove a director.
     (((2) Except as provided in this subsection, all meetings of the board of directors shall be open for observation by all owners of record and their authorized agents. The board of directors shall keep minutes of all actions taken by the board, which shall be available to all owners. Upon the affirmative vote in open meeting to assemble in closed session, the board of directors may convene in closed executive session to consider personnel matters; consult with legal counsel or consider communications with legal counsel; and discuss likely or pending litigation, matters involving possible violations of the governing documents of the association, and matters involving the possible liability of an owner to the association. The motion shall state specifically the purpose for the closed session. Reference to the motion and the stated purpose for the closed session shall be included in the minutes. The board of directors shall restrict the consideration of matters during the closed portions of meetings only to those purposes specifically exempted and stated in the motion. No motion, or other action adopted, passed, or agreed to in closed session may become effective unless the board of directors, following the closed session, reconvenes in open meeting and votes in the open meeting on such motion, or other action which is reasonably identified. The requirements of this subsection shall not require the disclosure of information in violation of law or which is otherwise exempt from disclosure.))

NEW SECTION.  Sec. 15   A new section is added to chapter 64.38 RCW to read as follows:
     Except as provided in this section, all meetings of the board of directors shall be open for observation by all owners of record and their authorized agents. The board of directors shall keep minutes of all actions taken by the board, which must be available to all owners. Upon the affirmative vote in open meeting to assemble in closed session, the board of directors may convene in closed executive session to consider personnel matters; consult with legal counsel or consider communications with legal counsel; and discuss likely or pending litigation, matters involving possible violations of the governing documents of the association, and matters involving the possible liability of an owner to the association. The motion must state specifically the purpose for the closed session. Reference to the motion and the stated purpose for the closed session must be included in the minutes. The board of directors shall restrict the consideration of matters during the closed portions of meetings only to those purposes specifically exempted and stated in the motion. A motion, or other action adopted, passed, or agreed to in closed session may not become effective unless the board of directors, following the closed session, reconvenes in open meeting and votes in the open meeting on such motion, or other action that is reasonably identified. This section does not require the disclosure of information in violation of law or that is otherwise exempt from disclosure.

Sec. 16   RCW 64.38.040 and 1995 c 283 s 8 are each amended to read as follows:
     Unless the governing documents specify a ((different)) smaller percentage, a quorum is present throughout any meeting of the association if the owners to which ((thirty-four)) twenty-five percent of the votes of the association are allocated are present in person or by proxy at the beginning of the meeting.

NEW SECTION.  Sec. 17   A new section is added to chapter 64.38 RCW to read as follows:
     For declarations that exist before the effective date of this section:
     (1) If a declaration requires more than seventy-five percent of the votes in the association to approve any amendment to the declaration, the association shall, if so directed by owners holding at least sixty-seven percent of the votes in the association, bring an action in superior court for the county, which any portion of the real property subject to the declaration is located, to reduce the percentage of votes required to amend the declaration. The owners' decision to bring an action may, notwithstanding any provision to the contrary in the declaration, be made by votes cast at a meeting of the association duly called or by written consent, or by both. The action shall be an in rem declaratory judgment action whose title shall be the description of the property subject to the declaration.
     (2) If the court finds that the percentage of votes set forth in the declaration is an unreasonable burden on the ability of the owners to amend the declaration and of the association to administer the property under its jurisdiction, the court shall enter an order striking the percentage of votes from the declaration and substituting the percentage of votes that the court determines to be appropriate in the circumstances. The court shall not mandate approval of less than sixty-seven percent of the votes in the association to amend any provision of the declaration.

NEW SECTION.  Sec. 18   A new section is added to chapter 64.38 RCW to read as follows:
     (1) Except as provided in subsection (2) of this section, declarations recorded after the effective date of this section can be amended with the approval of sixty-seven percent of the total votes in the association, or any larger percentage specified in the declaration.
     (2) To the extent provided in the declaration, the declarant may unilaterally amend the declaration, but only if the amendment:
     (a) Subjects additional property to the declaration pursuant to a plan of expansion set forth in the declaration;
     (b) Withdraws property from the declaration, if the withdrawal is allowed under the terms of the declaration and if the property to be withdrawn is not owned by any third party;
     (c) Brings any provision of the declaration into compliance with any applicable statute, rule, regulation, or judicial determination;
     (d) Enables any title insurance company to issue title insurance coverage for the lots;
     (e) Enables any institutional or governmental lender, purchaser, insurer, or guarantor of mortgage loans, to make, purchase, insure, or guarantee mortgage loans for the lots; or
     (f) Satisfies the requirements of any local, state, or federal governmental agency.
     The amendment shall not adversely affect the title to any lot unless the owner of the affected lot consents to it in writing.
     (3) The declaration may require all or a specified number or percentage of the eligible mortgagees who hold first lien security interests encumbering lots to approve specified actions of the owners or association as a condition to the effectiveness of those actions, but a requirement for approval may not operate to:
     (a) Deny or delegate control of the general administrative affairs of the association by the owners or board of directors;
     (b) Prevent the association or board of directors from commencing, intervening in, or settling any litigation or proceeding; or
     (c) Prevent any insurance trustee or the association from receiving and distributing any insurance proceeds.
     For purposes of this subsection, "eligible mortgagee" means the holder of a mortgage on a lot that has filed with the secretary of the association a written request for copies of notices of any action by the association that requires the consent of mortgagees that includes the lot number and address of the property subject to the mortgage. If an eligible mortgagee fails to respond to a request for approval within thirty days following the association's issuance of a notice requesting such approval, the eligible mortgagee's approval is deemed granted.
     (4) The declaration may permit the association's members to approve an amendment through a combination of votes conducted during meetings or through a written consent process.
     (5) The declaration may require that to be effective all declaration amendments must be signed by an officer of the association, or if applicable, by the declarant, acknowledged, and recorded in each county in which any portion of the property is located.

NEW SECTION.  Sec. 19   A new section is added to chapter 64.38 RCW to read as follows:
     (1) This section applies to associations in which the declaration or the bylaws authorize only the board of directors to adopt, amend, or rescind bylaws and to do so without a vote of the members and, with respect to those associations, to all bylaws adopted or amended by the board of directors after the effective date of this section.
     (2) A bylaw adopted, amended, or rescinded by the board of directors shall not be valid or enforceable until it is ratified by the association's members as set forth in this subsection:
     (a) The board of directors shall submit all bylaws adopted, amended, or rescinded by the board to a vote of the members. The vote must be held at the next regularly scheduled annual meeting of the association, or at a special meeting held before the next annual meeting.
     (b) The notice of the annual or special meeting must include the text of any existing bylaw that the board has approved for amendment.
     (c) Unless the governing documents specify a longer advance notice period for a meeting, notice of the meeting, at which the proposed bylaw change will be voted upon, must be provided at least ten days in advance of the meeting and shall not be given more than sixty days in advance of the meeting.
     (d) The proposed bylaw change is deemed approved and ratified by the members, unless a majority of all the votes in the association at the meeting, in person or by proxy, reject the bylaw change approved by the board.
     (3) All bylaw changes ratified by the members in accordance with this section take effect the day after the annual or special meeting at which they were ratified.

NEW SECTION.  Sec. 20   A new section is added to chapter 64.38 RCW to read as follows:
      For purposes of this section, a "rule" means any new rule or policy, or an amendment to an existing rule or policy. For rules, or amendments to rules, adopted after the effective date of this section:
     (1) A rule adopted by the board is valid and enforceable if all the following requirements are satisfied:
     (a) The rule is in writing;
     (b) The rule is required by law or, within the authority of the board, conferred by law or by the declaration;
     (c) The rule is consistent with the governing documents; and
     (d) The rule is adopted or amended in substantial compliance with the requirements of this chapter.
     (2) Except for emergency rules, the board of directors must provide the association's members with notice and an opportunity to comment on any proposed new or amended rule before the board is authorized to adopt or enforce that rule. For purposes of this section, an "emergency rule" is one that is necessary for the immediate preservation of health and safety. Emergency rules become effective immediately, subject to the members' right to request a ratification vote under subsection (3) of this section.
     (3) Except for emergency rules, rules adopted by the board of directors following notice and an opportunity for comment become effective thirty days after notice of the rules is provided to the members in the manner authorized by the governing documents, unless a written petition signed by twenty percent of the total votes in the association is submitted to the board within that thirty-day period requesting a ratification vote on the proposed rule. If a ratification vote is requested, the association shall use the following process for the ratification vote:
     (a) The board of directors must submit the rules on which a ratification vote has been requested to a vote of the members. The vote must be conducted at the next regularly scheduled annual meeting of the association, or at a special meeting held before the next annual meeting.
     (b) The notice of the meeting, at which the ratification vote will be conducted, must include the text of the proposed rules.
     (c) Unless the governing documents specify a longer advance notice period for an association meeting, notice of the meeting, at which the ratification vote will be conducted, must be provided at least fourteen days in advance of the meeting and shall not be provided more than sixty days in advance of the meeting.
     (d) The proposed rule change is deemed approved and ratified by the members, unless a majority of all the votes in the association at the meeting, in person or by proxy, reject the rule change approved by the board.
     (e) All rule changes ratified by the members in accordance with this section take effect on the original effective date or later effective date established by the board.
     (4) The board of directors is not required to use the following optional rule-making process. However, use of this process establishes compliance with the requirements of subsection (1) of this section. For purposes of this section, "rule change" means the adoption or amendment of a rule by the board.
     (a) The board shall give notice of a proposed rule change to the owners. The notice must include the following information: (i) The text of the proposed rule change; (ii) a description of the purpose and effect of the proposed rule change; and (iii) the deadline for submission of a comment on the proposed rule change.
     (b) For a period of at least thirty days following actual or constructive delivery of a notice of a proposed rule change, the board shall accept written comments from owners on the proposed rule change.
     (c) The board shall consider any comments it receives and make a decision on a proposed rule change at a board meeting. Except for emergency rules, a decision on a rule may not be made until after the comment submission deadline.
     (d) The board shall give notice of a rule change to the owners. The notice must set out the text of the rule change and state the date the rule change takes effect. Except for emergency rules, the date the rule change takes effect must not be less than thirty days after notice of the rule change is provided in the manner authorized in the governing documents.

NEW SECTION.  Sec. 21   A new section is added to chapter 64.38 RCW to read as follows:
     (1) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
     (a) "Requestor" means the party requesting mediation.
     (b) "Request" means a request for mediation.
     (c) "Recipient" means the party that receives the request for mediation.
     (2) For disputes that arise after the effective date of this section and do not apply to any judicial or other legal proceedings pending before the effective date of this section:
     (a) With the exception of the claims listed in (b) of this subsection, disputes between owners or between owners and their association that involve the governing documents must be submitted to mediation before any party may pursue the claim through court proceedings.
     (b) The following categories of claims are exempt from the prelitigation mediation requirement under (a) of this subsection:
     (i) Claims in which the statute of limitations will soon expire, except that any party to the lawsuit may file a motion with the court requesting that the judge order the parties to mediate before allowing them to proceed with the lawsuit and temporarily stay the litigation proceedings pending the outcome of mediation;
     (ii) Claims for injunctive relief, except that any party to the lawsuit may file a motion with the court requesting that the judge order the parties to mediate before allowing them to proceed with the lawsuit and temporarily stay the litigation proceedings pending the outcome of mediation;
     (iii) Claims for declaratory judgment;
     (iv) Assessment collection and foreclosure claims;
     (v) Claims for defects in construction of homes and other improvements, whether individually owned or part of the common areas;
     (vi) Claims that involve parties who are not subject to the association's governing documents;
     (vii) Claims between members of the association that are unrelated to the association's governing documents;
     (viii) Claims or issues that have been the subject of a previous mediation request, response, or mediation conference under this section within twelve months of the date of the most recent request, response, or mediation conference.
     (c) Unless another reasonable alternative dispute resolution process is set forth in the declaration or adopted by a majority vote of the nondeclarant members of the association, the following procedures in this subsection govern the mediation of disputes under this chapter:
     (i) The party requesting mediation must submit a request for mediation to the other parties;
     (ii) The request may be made in any medium, provided that the requestor can prove the request was received by the recipient;
     (iii) Mediation must be conducted by one mediator, unless the parties agree otherwise;
     (iv) Unless all parties to the mediation agree otherwise, the mediation conference must be held within ninety days of the date the request is received by all recipients;
     (v) The request for mediation must: State the issues that the requestor wishes to mediate; certify that the requestor is willing to meet in good faith; and propose a mediator and provide full contact information (name, address, telephone and fax numbers, and e-mail address) for the proposed mediator;
     (vi) The recipients must respond to the requestor no later than thirty days after the request is received by all recipients. The response may be made in any medium as long as the recipient can prove that the response was received by the requestor;
     (vii) If the recipient agrees to mediate, the response must include a statement of any additional issues that the recipient wishes to mediate, a statement of whether the mediator proposed by the requestor is acceptable to the recipient and, if not, a proposed alternative mediator and that mediator's contact information. If the recipient declines to mediate, the response must indicate this decision and include a statement of the reasons that the recipient declines to mediate;
     (viii) The requestor must reply to the recipient's response within fifteen days of receipt. If the response identifies additional issues that the recipient wishes to address at mediation, the reply must state whether the requestor agrees to mediate those issues. If the requestor does not agree to mediate those issues, the reply must indicate this decision and include a statement of the reasons that the requestor declines to mediate the issues identified by the recipient. A requestor's refusal to mediate the issues identified in the reply is subject to (e) of this subsection;
     (ix) If the recipient has proposed an alternative mediator, the reply must state whether the alternative mediator is acceptable to the requestor. If the alternative mediator is not acceptable, the requestor must contact the two proposed mediators within fifteen days of delivering the reply requesting the mediators to choose a third person who is available within the time frame required in this section to act as mediator;
     (x) The mediator may be an attorney or judge. The mediator's primary function is to assist the parties in communicating with one another and to find ways to resolve the disputed issues by agreement.
     (d) Either the recipient or the requestor can decline mediation. If mediation is declined, or a party fails to participate in a scheduled mediation conference, the other party may proceed with filing a legal action. In such a case, the court may:
     (i) Enter an order compelling the parties to participate in a mediation conference if the court determines that mediation would be productive or useful; and
     (ii) Impose appropriate remedies for a party's unjustified failure to mediate claims subject to mandatory mediation requirements imposed under this section including, without limitation, requiring that party to pay all mediation fees and costs charged by the mediator, reimburse the plaintiff for the costs of filing suit, reimburse the plaintiff for process of service costs, and reimburse the plaintiff for some or all of the plaintiffs' attorneys' fees and costs.
     This subsection (2)(d) supersedes any inconsistent provisions in an association's governing documents. The standard of review of a trial court's decision under this section is abuse of discretion.
     (e) Unless the parties agree otherwise, the fees and costs of mediation must be shared equally by all parties to the mediation. If the mediator requires prepayment of all or a portion of the anticipated fees and costs, all parties to the mediation must comply with this requirement. An association may not condition mediation on a member's payment of any charges, costs, or fees.
     (3) This section does not limit any party's right to seek relief in a court of competent jurisdiction after the mediation requirements in this section have been met.

NEW SECTION.  Sec. 22   A new section is added to chapter 64.38 RCW to read as follows:
     All notices required under this chapter or the governing documents must be delivered or sent pursuant to the requirements under RCW 64.38.035, unless the governing documents set forth an alternative provision for providing notice, but not for a shorter time period for giving notice than is required under RCW 64.38.035.

NEW SECTION.  Sec. 23   A new section is added to chapter 64.38 RCW to read as follows:
     (1) Except as provided under subsection (2) of this section, in a transaction for the sale of a lot that is subject to this chapter, the seller shall, unless the buyer has expressly waived the right to the pamphlet, furnish to a buyer a homeowners' association information pamphlet that is identical, in form and substance, to the following:

Washington law defines an HOA as a legal entity in which each member is an owner of residential property that is subject to the HOA's jurisdiction as a result of certain recorded governing documents. The law governing homeowners' associations, chapter 64.38 RCW, provides more information in this regard.

The principal governing document of an HOA is often known as the Declaration of Covenants, Conditions, and Restrictions and Easements (CCRs). Other important HOA documents may include Articles of Incorporation, Bylaws, Rules, and Policies.

The services and amenities provided by HOAs vary greatly from community to community. These may include common areas such as a swimming pool, tennis court, playground, trails, community center, or even a golf course. Some HOAs provide landscaping services for homeowners, and some even paint and maintain the exterior of homes.

Each HOA is different, but the most common HOA roles include maintaining common areas and amenities, administering and enforcing use and architectural restrictions, adopting budgets, and collecting assessments.

Generally, the governing documents for an HOA make membership mandatory for all owners within the community. The HOA's governing documents are essentially a legally binding contract between the owner/members and the association. If you have questions about your legal rights and obligations as a member of the HOA, you should consult an attorney.

(6) HOW DOES MEMBERSHIP IN AN HOA AFFECT THE OWNERSHIP OF MY HOME?

By virtue of your membership in an HOA, you will have various rights and obligations as described in the governing documents. These may include restrictions on the use of your property, architectural controls on future improvements of your property, and the obligation to pay assessments, also known as dues, to the HOA.

HOAs are typically governed by a board of directors or board of trustees elected by the homeowners. The board's responsibilities and power depend upon the HOA's governing documents.

The governing documents of an HOA typically give it wide-ranging powers to enforce its covenants, rules, and policies. This may include the power to file a lawsuit for damages or injunctive relief or fine an owner who does not comply with the restrictions.

The governing documents likely give your HOA the power to place a lien on your home or take other legal action if you fail to pay properly levied assessments. If you do not pay your assessments on time, this might result in the foreclosure of your home by the HOA.

(10) WHAT IS THE DIFFERENCE BETWEEN AN HOA AND A CONDOMINIUM ASSOCIATION?

A condominium association is a specialized type of homeowners' association. A condominium association is created under different statutes than those that apply to HOAs. Unless your governing documents state that your community is a condominium created pursuant to the Washington Condominium Act, chapter 64.34 RCW, or the Horizontal Property Regimes Act, chapter 64.32 RCW, it is not a condominium.

(11) WHAT HAPPENS IF ONE OF THE COMMON AREAS OF MY HOA MUST BE REPAIRED OR REPLACED?

Well-managed HOAs will normally include an amount for reserves in their annual budgets. In this way, a portion of the assessments you pay is set aside and builds up over time to pay for expensive repairs or replacements. You should review the HOA's financial statements to determine if this is true for your HOA.

(12) WHAT IS THE AMOUNT OF THE ASSESSMENTS THAT CAN BE CHARGED BY MY HOA?

If you are a new buyer, you are entitled to a resale certificate that will provide this information. Otherwise, this information should be provided to you as part of the HOA's annual budget process. If you have questions, you should consult the HOA's manager or a member of its board of directors.

Typically, the governing documents allow for assessments to be adjusted based on the HOA's annual budget. The law governing homeowners' associations requires that an HOA's annual budget be ratified by its members. This is a good opportunity to ask questions as to how budget changes will affect your assessments.

(14) CAN MY HOA RESTRICT THE TYPES OF IMPROVEMENTS I CAN MAKE TO MY HOME?

Depending on your governing documents, your HOA may have certain architectural or design guidelines and restrictions. If it does, there may be restrictions on the exterior appearance of your home, and you may be required to submit plans and specifications for approval before you make any changes to the exterior or build any additions or other structures.

The HOA's governing documents may contain rules relating to trees, landscaping, pets, satellite dishes, clotheslines, fences, parking, home businesses, rental of homes, and other issues. You should carefully read the governing documents to understand the nature of these restrictions.

The answer to this question depends on the governing documents for the particular community. Some governing documents prohibit all rentals, some limit the number of homes that can be rented at any time, while others have no restrictions on leasing.

In Washington state, HOAs must hold a meeting of the membership at least once each year. Notice of the date and time of the meeting must be provided to you by the officers of the association. Your HOA's board will likely meet more often. If you would like information concerning the board's meeting schedule, you should consult the HOA's manager or a member of the board.

(18) CAN I ATTEND THE REGULAR MEETINGS OF MY HOA's BOARD OF DIRECTORS?

Board meetings are generally open to members of the HOA to observe, but not to participate in. The law governing homeowners' associations permits a board to consider certain sensitive topics in private (executive session), and to exclude HOA members from that part of the board's meeting. Review the HOA's governing documents, particularly its bylaws, to determine your rights.

(19) AS A MEMBER OF AN ASSOCIATION, CAN I OBTAIN COPIES OF THE HOA's RECORDS?

The law governing homeowners' associations provides that the records of the HOA must be made available for review by owners during normal business hours at the office of the HOA or its managing agent.

(20) HOW CAN I DETERMINE WHETHER THE HOA OF WHICH I AM CONSIDERING BECOMING A MEMBER FACES ANY SERIOUS FINANCIAL PROBLEMS?

As a purchaser of a home within an HOA, you are entitled to receive a resale certificate that will provide you with information regarding the financial condition of the HOA and whether it is involved in any litigation.

However, you should also ask the seller questions to get a clear picture of the HOA's financial condition.

(21) DO THE BENEFITS OF BELONGING TO AN HOA OUTWEIGH THE BURDENS?

This is a question you should consider when the home you want to buy is part of an HOA. Some of the typical benefits and burdens are described above. Studying the governing documents for the community in which you are considering purchasing a home is an important step. Consider exploring this question with your seller, real estate professional, attorney, and other advisors. You may also wish to speak with neighboring homeowners about the community and the HOA."

NEW SECTION.  Sec. 24   The code reviser shall alphabetize and renumber the definitions in RCW 64.38.010.