Super Priority Lien Gives Washington Condo Associations Leverage Over Lenders

The Washington Condominium Act grants condominium associations a super priority lien over mortgage holders. This super priority lien ensures that some delinquent assessments (those that are due during the six months immediately preceding the foreclosure) will be paid by lenders if foreclosures occur. It can also be a powerful weapon if lenders do not respond to associations’ foreclosure actions. In the recent decision of Summerhill Village Homeowners Association v. Roughley, the Washington Court of Appeals held that a mortgage on a unit can be completely eliminated by a condominium association’s foreclosure action if an association has a super priority lien and the lender does not respond.

If a Washington condominium’s declaration was recorded after July 1, 1990, then it automatically has the right to claim the super priority lien contained in the Washington Condominium Act. If a Washington condominium’s declaration was recorded on or before July 1, 1990, then its association can probably not take advantage of the super priority lien until its declaration is amended to include it. All Washington condominium associations that cannot currently claim the super priority lien should strongly consider amending their declarations to give themselves the ability to do so.

A condominium board that wants to amend its declaration should consult with an experienced real estate attorney to ensure that all applicable legal requirements are met. Failing to obtain such legal advice can have dire consequences. In a recent unpublished decision, the Washington Court of Appeals affirmed a trial court’s ruling that an amended set of covenants for a homeowners association was void and unenforceable because it was not properly executed.

Individual Owners Can Benefit From Bar Association Resources

Since my legal practice focuses on condominium and homeowners associations, I do not typically represent individual owners with grievances against those associations. When such owners contact me, I let them know that the King County Bar Association’s free legal consultations (http://www.kcba.org/pbs/legalhelp.aspx) and Lawyer Referral Service (206-267-7010; LRS@KCBA.org) are excellent resources. I also indicate to those owners that political processes like calling meetings, holding elections, and approving amendments can also be used to effect change in their communities.

My Office Is Moving to the Laurelhurst Professional Center!

I am pleased to announce that the Law Office of Kevin L. Britt, P.S. is moving to the Laurelhurst Professional Center on February 1, 2012. The office’s mailing address will change on that date to 3626 NE 45^th Street, Suite 300, Seattle, WA 98105. The office’s phone number will change on that date to (206) 420-0021. The office’s website, my email address, and this blog will not be affected by this relocation. The new office spaces are larger and have windows(!), so this is a happy occasion indeed.

I am also pleased to note that this is my 100^th blog post. But that is just the beginning! I look forward to providing information of interest and importance to Washington condominium and homeowners associations in 2012 and beyond.

Washington Community Associations Are Subject to New Reserve Study Laws

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.