On January 1, 2012, the state laws that govern Washington condominium and homeowners associations (RCW 64.34 and 64.38) were amended in significant respects with regard to reserve studies. For condominium associations, the most important change is a new legal obligation placed upon their boards to disclose the following to the owners when providing the budget summary each year:
(1) The current amount of regular assessments budgeted for contribution to the reserve account, the recommended contribution rate from the reserve study, and the funding plan upon which the recommended contribution rate is based;
(2) If additional regular or special assessments are scheduled to be imposed, the date the assessments are due, the amount of the assessments per each unit per month or year, and the purpose of the assessments;
(3) Based upon the most recent reserve study and other information, whether currently projected reserve account balances will be sufficient at the end of each year to meet the association's obligation for major maintenance, repair, or replacement of reserve components during the next thirty years;
(4) If reserve account balances are not projected to be sufficient, what additional assessments may be necessary to ensure that sufficient reserve account funds will be available each year during the next thirty years, the approximate dates assessments may be due, and the amount of the assessments per unit per month or year;
(5) The estimated amount recommended in the reserve account at the end of the current fiscal year based on the most recent reserve study, the projected reserve account cash balance at the end of the current fiscal year, and the percent funded at the date of the latest reserve study;
(6) The estimated amount recommended in the reserve account based upon the most recent reserve study at the end of each of the next five budget years, the projected reserve account cash balance in each of those years, and the projected percent funded for each of those years; and
(7) If the funding plan approved by the association is implemented, the projected reserve account cash balance in each of the next five budget years and the percent funded for each of those years.
For homeowners associations, the 2012 changes are more far-reaching. A legal obligation (subject to exemptions) to obtain a reserve study that meets certain criteria and periodically update it is placed upon those associations for the first time. The annual disclosure obligation placed upon condominium associations discussed above is placed upon homeowners association boards as well.
Washington community associations face an ever-changing and increasingly complex set of federal, state, and local laws that regulate their actions. Boards of such associations should consider establishing a relationship with an attorney to help them comply with those laws.
