WUCIOA – What You Need to Know

Have you heard? The Washington Uniform Common Interest Ownership Act (WUCIOA) was adopted by the legislature and goes into effect on July 1, 2018.

The bill creates a new chapter in the Revised Code of Washington that governs the formation, management, and termination of condominiums, cooperatives, and planned communities (such as communities governed by homeowners' associations) created after July 1, 2018. The bill refers to these three types of communities as Common Interest Communities (CICs). It provides uniformity among these 3 types of communities, instead of being governed by separate statues.

The 135-page bill will replace both the Condo Act (RCW 64.34) and the HOA Act (RCW 64.38) for all CICs created after July 2018.  The WUCIOA was based on a Uniform Act that was revised by a committee of industry attorneys and other industry professionals over many years.

The WUCIOA represents a significant change in Washington community association law, especially for HOAs, including many default rules that may be different from what we are used to seeing with traditional communities. And, as with any bill this long, there are liable to be some tricky provisions or unintended consequences that we all will need to look out for.

Who Does it Affect?

• The WUCIOA in its entirety applies to ALL CICs created after July 1, 2018.
• An association may elect to opt in.
• Small communities with no more than 12 units and no more than $300 in annual assessments per unit are exempt from most of the provisions.
• Section 326 of the WUCIOA applies to ALL CICs, regardless of when they were created.

Section 326: Budgets and Special Assessments

The legislature states that Section 326 supersedes the governing documents of ANY association in order to "protect the public interest." It overrides any conflicting provisions in RCW 64.38 (the "Homeowners Association Act" or "HOAA"). Major changes include:

• Budget and assessments are ratified in the same vote. The board adopts a budget and presents it to membership for ratification. It is ratified unless a majority of votes reject it. If it's rejected, the prior budget is still in effect.
• The budget must include:
  1. The projected income to the association by category;
  2. The projected common expenses and those specially allocated expenses that are subject to being budgeted, both by category;
  3. The amount of the assessments per unit and the date the assessments are due;
  4. The current amount of regular assessments budgeted for contribution to the reserve account;
  5. A statement of whether the association has a reserve study that meets the requirements of section 331 of WCIOA and, if so, the extent to which the budget meets or deviates from the recommendations of that reserve study; and
  6. The current deficiency or surplus in reserve funding expressed on a per unit basis.
• The process for approving a special assessment is the same as ratifying a budget. The board can provide for installments to be made over a period of time, and discounts for early payments.

Section 201: Creation, Alteration, and Termination of CICs

Creation of a CIC requires recording of a declaration and survey map, with 14 requirements for the contents of the declaration. Generally, declaration amendments require a 67% vote, but certain amendments, like increasing the number of units or changing boundaries, require a 90% vote. WUCIOA also includes provisions governing alteration of units and common elements, rights of secured lenders, mergers of CICs, termination of CICs by agreement or judicial order, and development rights. Certain actions may be subject to approval by an association’s secured lenders or a percentage of the unit owners' secured lenders.

The CIC must have an association organized before the first unit is conveyed to a purchaser. An association requires a board and may be organized as a for-profit corporation, a non-profit corporation, or a limited liability company. WUCIOA contains detailed provisions governing an association’s duties, and those of its officers and board members. The elected board members and officers have the same duty of care and loyalty as their corporate counterparts. In situations where the declarant retains control of the association, WUCIOA provides deadlines for the subsequent transfer of that control to the elected board members.

Additional provisions

The WUCIOA is large and complex, and we have only scratched the surface with this article (which should not be considered legal advice). We strongly encourage you to become familiar with its provisions. Here are a few other highlights of the WUCIOA to be aware of:

• Annual and special meetings
• Notice and opportunity to comment
• Adoption, amendment, and repeal of rules
• Financial records of the association
• Challenges to board Actions
• Statutory liens for unpaid assessments

Action to take

Contact your Community Manager or your association's attorney to determine if your HOA is affected, and what the new law means specifically for your community. You can download a pdf of the entire WUCIOA by clicking the button below.