Information about WUCIOA (#1)

October 21, 2019 Lost River Airport Association

This is the first in a series of communications intended to inform LRAA members about the results of the Board’s review of the new Washington Uniform Common Interest Ownership Act (WUCIOA).

Section I is a review of the information Ron Suter presented at the 2019 Annual Membership Meeting, describing the problem, how the new law could address that problem and why the Association is analyzing the new law. Section II describes parts of the new law that apply to every common interest community, regardless of the date it was created, and how the Board plans to comply. Finally, Section III describes steps taken to date, the ways in which results of this analysis will be communicated to the membership and how members can have their own questions answered.

INTRODUCTION
Section I below is a review of the information Ron Suter presented at the 2019 Annual Membership Meeting, describing the problem, how the new law could address that problem if we choose to have the new law govern operation of LRAA and why the Association is analyzing the new law. Section II describes parts of the new law that apply to every common interest community in Washington, whether we choose to have the new law apply or not and how the Board plans to comply. Finally, Section III describes steps taken to date, the ways in which results of this analysis will be communicated to the membership and how members can have their own questions answered.

I. REVIEW
During our May annual meeting, Ron presented a ‘Governance Report’. That report described the outcome of a recent court case brought about by a member’s refusal to pay dues and assessments. In that case the judge ruled that the member was required to pay for services provided by the Association that the member received and from which the member benefited. The judge made it clear that members must pay their share of the costs for association services and the maintenance of common areas. However, the judge had trouble establishing the Association’s ‘Lien and Foreclosure’ process, as applied to that member’s property.

Based on the judge’s decision and the advice of the Association’s attorney, the Board proposed to amend the Association’s Finance Policy to add personal legal actions, i.e., lawsuits, against members with delinquent accounts, to the already established lien and foreclosure process. Money awarded in such lawsuits could be collected by garnishing bank accounts or wages, or attaching property. At the May meeting, the membership voted on and approved the proposed amendment, and the amended Finance Policy may be found on the Association’s website at: (https://lostriverairport.com/governing-documents/finance-policy)

Please note that amending the Finance Policy was an important, short-term step toward ensuring members pay their fair share of dues and assessments. However, the judge’s comments suggest we need to do more. Ron went on to explain these comments and describe what the Board recommends we do in response.

The judge mentioned that LRAA does not have ‘Covenants, Conditions & Restrictions’ (CC&Rs) recorded in Okanogan County property records and the Board believes that was the main reason the judge questioned the lien and foreclosure process.

CC&Rs are a set of rules, usually established and recorded by the developer before any property is sold. They create an Owner Association, and establish the rights, obligations, rules and restrictions that govern the Association, and the properties and the members within that development. CC&Rs are part of each property’s chain of title and are binding on future purchasers. Because they are part of the property records, they can be easily found, reviewed and understood.

The Association’s attorney researched LRAA’s recorded documentary history and discovered 26 or so documents, starting in the mid-1960s and continuing into the 2000s that identify rights and obligations that “run with the land” (meaning they are binding on purchasers) and provide for shared costs. Obviously, these were not easily found, reviewed and understood. The problem is that it’s time consuming and costly to piece them together and apply them to a particular member. Some documents may apply to one Member but not to another. Also, this documentary history fails to clearly describe the Association’s authority to act in areas other than collecting dues and fees, e.g., speeding, fire risk suppression and noise.

Our attorney suggested we consider adopting more modern and easily identified governance approach and made several recommendations. The Board considered those recommendations and looked at the pros and cons of each, as noted below:

1. Draft and record new CC&Rs – This approach was dismissed because it would require 100% agreement among members;

2. Draft and sign contracts with each member - This approach was dismissed because some members either wouldn’t sign or would want to change some part of the contract and the overall situation would not significantly improve from where we are today;

3. Consider having the Washington Uniform Common Interest Ownership Act, a new law passed by the Washington legislature in 2018, apply to Lost River. This is the approach unanimously commended by the Board.

Before asking members to vote to have WUCIOA apply to Lost River, it’s necessary to better understand the law and what having the law apply to Lost River would mean to i) members, ii) the Board, iii) costs , and iv) how the Association is governed. Responding to those questions will require analyzing the law.

What is the Washington Uniform Common Interest Ownership Act?
WUCIOA is intended to provide uniformity in the governance of what are called “common interest communities” (CICs). A CIC is a community where each person who owns property (called a “unit” in the law) is obligated to pay a share of the costs of services or other expenses related to the management or maintenance of common areas within the community.

WUCIOA replaces the Washington Homeowner Association Act and the Condominium Act among others. LRAA has operated in compliance with the Washington Homeowner Association Act (RCW 64.38) since at least 2009, when our By-laws were amended in compliance with that Act.

WUCIOA governs the operation of the CIC, and describes the rights and obligations of an Association and of its members that are subject to the Association’s governing documents. LRAA’s “governing documents” are our original recorded Plats, other recorded documents, Articles of Incorporation, By-laws and various policies.

CICs created after July 1, 2018, are required to comply with all of the provisions of WUCIOA. CICs created before that date, such as LRAA, are required to comply with only two provisions of WUCIOA. More on these two provisions below.

In the opinion of our attorney, LRAA is a common interest community and is eligible to opt in to WUCIOA. In his opinion, operating under WUCIOA could standardize and modernize LRAA’s governance. Additionally, the law could serve as a flexible and predictable framework for the operation of the Association and for the ownership and sale of property in the community.

After describing the situation and our options and responding to a number of questions, Ron asked for a show of hands to give the Board a sense of whether the membership felt further inquiry into the new law was worth the time and effort it will take to do that. Based on this straw poll, the vast majority of attending members felt it was worth the Board’s time to analyze and report to the membership about the impact of the new law.

As a result, the Board created a WUCIOA subcommittee to analyze the new law and report back to the Board on how it would impact Lost River and report the results of that analysis to the membership.

II. WHAT DOES WUCIOA REQUIRE LRAA DO TODAY?
As a CIC that was in existence before the effective date of WUCIOA, July 1, 2018, LRAA has the option to agree to be covered by all of the provisions of WUCIOA, but it is only obligated to comply with two provisions of the law.

The first mandatory provision (RCW 64.90.095) makes it clear that all CICs must be allowed to “opt in” to WUCIOA, using the voting procedures specified in that provision, regardless of what their governing documents say. While this provision takes precedence over contrary language in the LRAA Articles of Incorporation and Bylaws, no language changes to those documents is required. The law just nullifies contrary language for purposes of “opting in” to the new law.

The second mandatory provision, RCW 64.90.525 provides the required contents and handling of CIC budgets. The full text of RCW 64.90.525 is included at the end of this communication. This provision of the law will require changes to LRAA Bylaws and perhaps other governing documents. A draft of proposed changes is being prepared by the WUCIOA subcommittee (see below) and it will be presented to the Board for review and approval in the near future. Those changes will be confirmed by the membership at the 2020 Annual Meeting.

III. STEPS TAKEN TO DATE
The Board has formed a sub-committee to undertake the following:

i) Analyze WUCIOA and report to the Board on how compliance might impact LRAA’s operations and its members. The Board has authorized the sub-committee to consult with the Association’s attorney, as needed, on procedures and the costs and benefits of compliance.

ii) Prepare and submit to the Board for review and approval, periodic informational communications to members on how compliance might impact LRAA’s operations, members and Board.

iii) If necessary, draft and recommend language changes to Lost River’s governing documents so they comply with the two WUCIOA provisions with which the Association must comply, whether we decide to be governed by all the provisions of WUCIOA or not.

iii) Recommend to the Board whether LRAA should opt in to WUCIOA.

iv) Work with Communications and the LRAA webmaster to post information on the website regarding our latest WUCIOA efforts and information, solicit questions from members, and post the questions regarding WUCIOA with answers/responses.

Watch your mailbox and the LRAA website for more information!

RCW 64.90.525 Budgets - Assessments - Special Assessments
(1)(a) Within thirty days after adoption of any proposed budget for the common interest community, the board must provide a copy of the budget to all the unit owners and set a date for a meeting of the unit owners to consider ratification of the budget not less than fourteen nor more than fifty days after providing the budget. Unless at that meeting the unit owners of units to which a majority of the votes in the association are allocated or any larger percentage specified in the declaration reject the budget, the budget and the assessments against the units included in the budget are ratified, whether or not a quorum is present.
(b) If the proposed budget is rejected or the required notice is not given, the periodic budget last ratified by the unit owners continues until the unit owners ratify a subsequent budget proposed by the board.

(2) The budget must include:
(a) The projected income to the association by category;
(b) The projected common expenses and those specially allocated expenses that are subject to being budgeted, both by category;
(c) The amount of the assessments per unit and the date the assessments are due;
(d) The current amount of regular assessments budgeted for contribution to the reserve account;
(e) A statement of whether the association has a reserve study that meets the requirements of RCW 64.90.550 and, if so, the extent to which the budget meets or deviates from the recommendations of that reserve study; and
(f) The current deficiency or surplus in reserve funding expressed on a per unit basis.

(3) The board, at any time, may propose a special assessment. The assessment is effective only if the board follows the procedures for ratification of a budget described in subsection (1) of this section and the unit owners do not reject the proposed assessment. The board may provide that the special assessment may be due and payable in installments over any period it determines and may provide a discount for early payment.

Interested in looking at the law itself?
Visit https://app.leg.wa.gov/RCW/default.aspx?cite=64.90 to read the full text.