Starting January 1, 2026, when an owner becomes delinquent:

• Within 30 days of an assessment becoming due, the Association must do the following, even if no other collection action is taken:
  • Mail a written notice of delinquency to the Unit and any other mailing address provided by the Owner;
  • Email the same notice to the Owner if the Association has an email address for them (even if the Owner has not opted-in to receiving electronic notice);
  • Provide the notice in English and any other language that the Owner has indicated a preference for communicating in; and
  • Include the first Pre-Foreclosure Notice of Delinquency (per statute) that informs the Owner the delinquency could result in the loss of their home. This notice has specific language, telephone numbers, and websites that must be used.

• Until an association sends the above described notice, and waits until the 15th day after sending, delinquent owners may only be assessed the following:
  • Actual cost of printing and mailing the notice (must be reasonable);
  • Maximum $10 administrative fee to prepare the notice; and
  • A late fee of $50, or 5% of the late assessment, whichever is lower.

Once it complies with the delinquency notice described, and waits until the 15th day after sending, an association may continue with its collection policy as it exists prior to the statutory change. This means there is a waiting period before the Association may record a lien; charge interest or late fees; refer an account to its attorney; or make any other collection effort against a delinquent Owner. A prompt notice of delinquency is imperative to protect the Association’s interests. The assessment not being paid when due starts a 30-day window the Association must comply with. Sending the notice starts a 15-day window during which no other action can be taken by the Association. “Grace periods” within collection policies may be continued, so long as the notice is sent within the 30-day window.

A compliant delinquency/collections timeline would look like:

• Assessment DUE on the 1st of the month is NOT paid;
• Grace period in collection policy is 15th of the month;
• Delinquency notice sent no later than the 30th day of the month; and
• Association may continue with its available collection remedies on the 15th day after sending the notice, including charging interest and late fees.

The CTA requires all companies created through a secretary of state, including non-profit community associations, to file Beneficial Owner Information (BOI) reports, unless an exemption applies. Most community associations will not qualify for an exemption, but of course, you should consult with your own association attorney for any specific questions about your community.

We have been telling clients that the simplest way to comply with the CTA, once they are ready to do so, is for each board member (considered a beneficial owner) to apply for their own FinCen ID number, a process which should only take a handful of minutes. This allows individual board members to protect their personal identification information (reporting it only to the government, which already has it!). Then, board members provide their individual FinCen ID numbers to their association, which as the reporting company, can use those ID numbers in its own report.

A few other things to note: Document your association’s decisions and steps to comply with the CTA. If your compliance is ever at issue, having a clearly documented process and “chain” of decisions could be helpful.

Note also that you must report a “principal place of business,” which cannot be a P.O. Box – a street address is required.

If there is a change in BOI info – such as after board elections or when a board member resigns – the Association must update its CTA report within 30 days.

Finally, entities created in 2024 must file a CTA report within 90 days of the entity’s creation. Entities created before 2024 have until December 31, 2024 to file a report.

The bill is a 197-page PDF document. Sections 101-308 take effect June 6, 2024; Section 319 takes effect January 1, 2025; and Sections 401-432 (WUCIOA for all) take effect January 1, 2028.

For the last (almost) two years, we have had uniformity for all communities regarding meetings, voting, notice to owners, and records kept by associations. But that uniformity will end on June 6, because of the changes in WUCIOA. Again, these changes only affect communities currently governed by WUCIOA, which means those created on or after July 1, 2018 or any community that has chosen to opt-in since that date.

Keep your eyes peeled and we will post about some of the 2024 changes in the coming weeks.

Key Provisions:

1. You cannot start a foreclosure if less than 3 months of regular dues or $200 (whichever is larger) is delinquent. You cannot count fines, late fees, interest, or attorney fees to calculate the delinquent amount for this purpose.
2. No sooner than 90 days after the account becomes delinquent, the association must mail a Notice of Delinquency containing specific language detailed in HB 1482. The Notice must be mailed to the owner’s mailing address (as provided to the association) and to the unit or lot address. You cannot start a foreclosure if this notice is not mailed.
3. You cannot start a foreclosure until 180 days after the amount calculated in section 1 above is delinquent.
4. To start a foreclosure, the Board must specifically approve that action against each individual owner. (A policy or manager decision is not adequate.)

Recap:

1. The law sets a minimum balance due before you can begin a foreclosure lawsuit; 3 months of dues or $200, whichever is larger.
2. The law creates a new notice requirement to the owner before a foreclosure lawsuit can be started. But the account must be delinquent at least 90 days to send this notice. (This amount delinquent is not tied to the amount in step 1.)
3. The law creates a minimum period of time that the association must wait before a foreclosure lawsuit can be filed. For now that is 180 days after the minimum amount is delinquent.

What the law does NOT do:

1. Prevent you from sending normal delinquency notices after any missed payment.
2. Prohibit late fees or interest being assessed or collected.
3. Affect any other collection remedy in your governing documents, including personal lawsuits, utility termination, rent intercept, etc.

This memo contains general information, not legal advice. We cannot give legal advice without reviewing your governing documents and your specific circumstances. This summary is also not a substitute for reviewing the actual Proclamation by the Governor.

How does the Proclamation affect collection activities by Community Associations?

The Proclamation released on April 17, 2020 suspends the ability to assess fines, late fees, and interest from April 17 through midnight May 17, 2020. The Proclamation does not prevent an Association from taking other collection action. However, an earlier proclamation suspended all garnishments in Washington State for 30 days, from April 14 to May 14, 2020. The suspension of garnishments only affects Associations that have existing judgments against owners (or former owners) and who are collecting on those judgments via garnishment.

We believe these prohibitions may be extended beyond their current “expiration dates” to closely coincide with the duration of the “stay home” order.

Things you can and should do (or at least consider) for owners who miss payments:

• Send warning notices instead of fining owners who violate the governing documents.
• Be generous to delinquent owners and waive late fees and interest for all of April and May. This is easier to accomplish administratively than only waiving them between April 17 and May 17. It also eliminates the inequity created by different late fee dates, consistent with the intent of the Governor’s proclamation.
• Modify your late notices that are sent to owners who fall behind, in particular the first notice of delinquency.
  • Specifically, your notices should not say that late fees or interest will be assessed during the time of this order.
  • Notices should still advise owners that payment was not received as required.
  • Notices should invite owners to contact the manager or Association to discuss payment plan options so that late fees and interest will not accrue for an extended period of time.

Things you should avoid:

• Telling owners they don’t need to pay, or waiving assessments altogether.
• Charging fines, late fees, and interest for this time frame, or threatening to do so. (This applies even to accounts that were delinquent before the current crisis.)
• Waiting many months to refer a delinquent account to your attorney when the owner has not made contact with the Association.

When in doubt, consult with your association attorney on how to handle delinquencies in general, as well as in individual situations.

How does the Proclamation affect Board and Association Meetings?

The proclamation deletes portions of statutes that prohibit or restrict electronic meetings of the Board or the full Association.

It does not change notice provisions for meetings. Due to the time required for notice (typically a minimum of 10 or 14 days), it may not be possible to schedule and conduct a full association meeting within the one-month window provided.

If you have specific questions for how to handle delinquencies or conduct association meetings in light of COVID-19, we can probably help you.

Please contact us at info@condolaw.net with your questions, or call us at 206-633-1520.

This memo contains general information, not legal advice. We cannot give legal advice without review of your governing documents and your specific circumstances.

As with all decisions, your guiding principle is “what is reasonable?” The answer to that question looks different when conducting business as usual versus when in the midst of a pandemic.

For all categories below, if you receive notice that any individual visitor or employee is confirmed to have the virus, you should shut down affected areas until they can be well cleaned. Given how contagious COVID-19 is and how long it can live on surfaces; this is anything but “business as usual.”

For gyms, saunas, and pools:

• Consider shutting them down altogether. Failing that, step up cleaning and sanitization efforts. (Clean daily or more often.) Stop all group activities.
• Post a notice sharing the cleaning schedule, and asking members to clean and sanitize all equipment and surfaces before and after use. (Provide supplies so users can do so.)

For cabana/clubhouse rentals:

• Given the ban on large gatherings, the best approach is probably to shut them down, although this might depend on the size of the space and the number of people gathering. As of March 16, 2020, all gatherings of 50 people or more are banned by the State of Washington, and the CDC is recommending against gatherings of 10 people or more.
• If you choose to allow rentals or common use to continue, we recommend against allowing owners to do the cleanup (as many associations do) and instead arrange for cleaning by the Association. Pass the cost on to the owner renting the space as appropriate.
• Stop all group activities, whether organized by the Association or individual owners.

For laundry and other “necessary” facilities:

• Clean more often and provide supplies for owners to clean before and after use.
• Suggest people do not wait in the laundry room during the wash/dry cycles.
• Prohibit folding and ironing laundry in the common areas.
• Consider limiting the number of users in the laundry room at any given time.

If your Association has an outdoor shooting range or golf course, keeping that open is probably okay. These types of outdoor facilities do not pose the same kind of risk, nor the same cleaning obligations, as an indoor space.

For Associations with restaurants and bars, your decision should balance the potential lost revenue, the employees’ need for work, the size of the facility, the type of gatherings, etc. At a minimum, plan for increased cleaning and sanitization. That said, on March 16, 2020, the governor restricted all such facilities to “take-out” only, so this may be mostly a decision about when to resume normal operation.

If you have specific questions for how to manage your common facilities in light of COVID-19, we can probably help you. Please contact us at info@condolaw.net with your questions.

Before discussing some options, remember that the general information below is just that; general information. We cannot give legal advice to non-clients, and in order to do so, we would need to review your governing documents. If you have questions specific to your community, feel free to contact our office. This is not legal advice specific to your circumstances.

For most associations, conducting annual meetings by phone, videoconference (i.e., Zoom), or other electronic means is probably fine. Even if your documents do not specifically authorize “virtual” meetings, the risk in conducting one is low. If all members of the community can hear all of the meeting, and have a way to participate (comment and vote), you have met the primary goal of the meeting. The primary measure of any board decision is whether it is reasonable and made in good faith. Given the unprecedented health crisis, postponing meetings and conducting them virtually are reasonable decisions.

Some associations have a requirement in their governing documents that the annual meeting must occur within the first quarter of the calendar year, but postponing in response to a public crisis such as the one we are experiencing now is unlikely to result in significant risk to the Association.

If you meet by conference call, or delay your meeting, the risk is likely limited to a few owners being upset over the failure to “follow proper procedures.” In both cases, there is no “injury” to the association or the owners from the failure to comply, and the remedy is to hold a meeting. Owners can call for a special meeting as provided in their governing documents. If you miss your scheduled date, the board members continue to serve until you can have the meeting or an election by mail. You can distribute financials and reports by mail or electronically. If you conduct a meeting electronically and that decision is challenged, you simply hold another meeting to ratify or “redo” all of the business.

Although most of the Washington State Uniform Common Interest Ownership Act (WUCIOA) is not binding on pre-existing Associations, it specifically provides for annual meetings to be conducted by phone or video conference, and can guide us on what a court would consider reasonable if an owner were to challenge the board’s decision.

WUCIOA provides that a “virtual” meeting must be conducted in real time and must offer members an opportunity to participate fully (i.e., vote if you are holding an election, make a motion from the floor, etc.). It isn’t enough for owners to be able to hear; they need to be able to comment, too.

The way to establish quorum at a “virtual” meeting is much the same as you would do in person if you didn’t use a sign-in sheet: track those “present” by proxies received, and do a roll call to establish who else is there (using their unit or address or whatever means you generally use to track owners). Once you determine whether you have a quorum you can determine whether to proceed.

If your only business is ratifying the budget, you don’t need a quorum, and we recommend that you have a combined physical meeting and conference call, so that a delinquent owner cannot use that technicality to avoid payment. You can inform owners that they can object by using proxies or by participating by phone, but if they accept the board’s budget, they need not attend.

If you have other business to vote on at the meeting, such as approval of prior year’s minutes, board elections, etc., you can handle voting by first calling for a verbal vote (all in favor say “yes,” all opposed say “no”). If the verbal vote leaves you unsure of the outcome, then you do a roll call vote.

Many communities allow for elections by mail. If you believe that would be better for any reason than a roll call vote, you can opt not to hold the election at the meeting and vote by mail after the meeting (using the prescribed process in your governing documents).

Some communities are also choosing to proceed with meetings as scheduled if they don’t have huge numbers expected to attend and/or their meeting rooms are large enough to provide for social distancing in a group setting. Some are moving their meetings to outdoor venues where the virus is less likely to spread.

If you would like us to draft a memo covering what your community’s governing documents and governing statutes require, and your specific options for handling annual meetings in light of COVID-19, we can probably help you. Please contact us at info@condolaw.net with your questions.

WUCIOA § 326 applies to all existing Homeowner Associations. It establishes the process for ratifying a budget and the accompanying assessments. Section 326 provides that a proposed budget is approved unless a majority of owners (or a larger number if required by the declaration) reject the budget. A restriction on dues increases conflicts with the provision as drafted by the Washington State legislature. The statute allows the current owners to serve as the arbiters of whether the proposed budget and assessments are reasonable.

Section 326 represents an evolution of the budget approval process found in the HOA Act. Like WUCIOA, the HOA Act allows a majority of owners to block the budget proposed by the board, and allows for the approval of the budget without the participation of a quorum of the owners. In most respects, WUCIOA proscribes the same budgeting process as the HOA Act, except with respect to Special Assessments. The HOA Act does not directly address the board’s power to pass a special assessment. WUCIOA changes this and expressly gives the board the right to levy a special assessment if ratified by the owners. This change indicates that the legislature wanted to protect the power of the board to raise funds for the community.

WUCIOA § 326 overrides the CC&Rs of an HOA because of § 117 of WUCIOA. To protect the public interest, the legislature chose to supersede the existing provision of an HOA’s governing documents with § 326. Where provisions within the HOA’s governing documents conflict with § 326, they will be wiped out and § 326 will replace the inconsistent provision. This particular section does not apply to condominiums and is not contained within the model legislation that served as the inspiration for WUCIOA. These facts suggest that the legislature was particularly concerned with an HOA’s ability to adopt a realistic budget.

The argument is strongest when the board seeks to raise funds through a special assessment. Section 326 specifically empowers the board to propose a special assessment and ratify it through the statutory budget process. Any provisions that limit the board’s power to levy a special assessment would necessarily conflict with § 326. As a result, the provisions would be eliminated under § 117 of WUCIOA, to ensure the board could propose a special assessment as it saw fit, subject only to the obligation to hold a meeting to allow owners to vote it down.

1. The first step is to switch the community’s governing statute to WUCIOA. This process is outlined in section 120 of the act. To make this change:

a) The board must prepare an amendment to the declaration and send it to all of the owners. This is a short document.
b) The board must wait 30 or more days and then hold an association meeting on the amendment.
c) Next, the board must set a deadline for the owners to complete voting, and send the owners the final proposed amendment with a ballot for their vote.
d) The amendment will pass if at least 30% of the owners vote and 67% of votes approve.
e) The amendment is effective when recorded.

2. The second step is to bring the declaration in line with the provisions of WUCIOA as instructed by section 218(11)(d). To do so the board must:

a) Draft a declaration amendment to delete and replace provisions which conflict with WUCIOA.
b) Send the amendment to the owners along with notice that in 30 or more days an association meeting will be held.
c) The owners must have an opportunity to comment on the amendment at this meeting.
d) The amendment may then be approved by two-thirds of the board. No vote of the owners is required to adopt this amendment.
e) The amendment is effective when recorded.

3. The final step is to adopt the optional WUCIOA provisions and remove old declaration provisions not in conflict with WUCIOA. This step is not mandatory but allows the association to:

i. Remove declarant rights, and declarant control references;
ii. Consolidate governance issues in the bylaws;
iii. Allocate expenses against the units which benefit from those expenses;
iv. Assess the HOA insurance deductible to unit owners; and
v. Assess expenses to a unit for their or their guest’s ordinary negligence.

To make these changes, the association must amend the declaration by following the steps in the statute. These changes will be effective when recorded.

Please contact us if you have any questions about whether adopting WUCIOA is the right choice for your community, or if you need assistance with the steps detailed in this article.

Two recent cases from other states illustrate the different conclusions a court might come to in answering the question of what “residential use” means. Cases outside of our jurisdiction are not binding on Washington courts, but they can be persuasive and also shed light on the reasoning courts use in coming to their conclusions.

In February 2018, the Louisiana Court of Appeals found that using a home for short-term rentals was a commercial use that was in violation of the CC&Rs for the community in question. Edwards v. Landry Chalet Rentals, LLC, No. 51,883-CA (La. Ct. App. Feb. 28, 2018). In Edwards, the owner advertised its home/lot as a vacation rental with a two-night minimum. The CC&Rs for the community only permitted the lots to be used for residential purposes, and specifically prohibited commercial use.

The appeals court noted that Black’s Law Dictionary defines the term “commercial” as “conducting an activity for profit or for a use that furthers and ongoing profit-making business activity.” The court determined that the LLC earned rental income. The court also highlighted the fact that the LLC insured the property with a commercial insurance policy. The policy provided coverage for lost rents and business liability, in addition to standard property insurance. Finally, the court characterized the “tenants'” use of the property as transient in nature, rather than residential. Based upon all of these factors, the Edwards court held that the short-term rental of the property was a commercial use in violation of the CC&Rs.

Conversely, also in February 2018, the Supreme Court of Arkansas held that using a home for short-term rentals did not constitute a commercial use, and therefore did not violate the CC&Rs. Vera Lee Angel Revocable Trust v. O’Bryant, No. CV-16-1041, 2018 Ark. 38 (Ark. Feb. 8, 2018). In the Vera Lee case, the CC&Rs prohibited using the lots for commercial purposes, including use as motels or hotels.

The Arkansas Supreme Court noted that Black’s Law Dictionary defined a “residence” as a place where someone actually lives, and opined that renting a home out on a short-term basis did not change the nature of the home as a residence. It also noted that the commercial use examples in the CC&Rs – such as a hotel or motel – have a manner of operation and outward appearance that is very different than a single-family home being rented out on a short-term basis. Finally, the Court found that the drafters of the CC&Rs could have included a prohibition on rentals but did not do so. For these reasons, the Court  held that short-term rentals do not constitute a commercial use in violation of the CC&Rs.

Once again, these cases are not binding in Washington but they serve as a good reminder that our courts could rule either way once a decision on this issue is rendered in Washington. Certainly, one obvious and risk-averse approach is to record an amendment to the declaration for your community that specifically prohibits short-term rentals altogether, defining for your community what “residential use” means. Another approach would be to cap or even ban all forms of rentals or otherwise regulate them to prevent short-term stays (i.e., minimum lease requirements).

If you have questions about how to deal with short-term rentals in your community, please feel free to contact us directly.