New Medical Marijuana Laws Force Seattle Condominiums to Choose Sides

In 1998, Washington state voters approved a law permitting the use of medical marijuana by patients with certain terminal and debilitating medical conditions. On July 22, 2011, that law was amended to expand state-sanctioned patient protections, permit the formation of collective gardens managed by up to ten qualifying medical marijuana patients, and authorize cities to regulate medical marijuana.

Seattle City Ordinance 123611 went into effect on August 21, 2011. It seeks to regulate the possession, production, and distribution of medical marijuana in light of the fact that there are currently a number of medical marijuana dispensaries operating in Seattle. However, that ordinance also notes that local licensing of medical marijuana does not change the fact that possession, production, and distribution of marijuana (medical or otherwise) violate federal law. Washington Governor Christine Gregoire recently warned that medical marijuana patients and their providers remain subject to federal prosecution and should carefully evaluate the risks associated with their conduct.

Medical marijuana gardens and dispensaries are illegal. Seattle condominium associations confronted with requests to operate marijuana-related enterprises can just say no. Associations that are inclined to grant such requests should first seek the advice of an attorney in order to understand the possible ramifications of that course of action.

Court Rules that Washington Apartment Complex Is Not Liable for Dog Attack

The Washington Court of Appeals held last month in an unpublished opinion that a woman injured at an apartment complex by a tenant’s dog could not recover from the owner or manager of the apartment complex. The Court based its decision on the well-settled rule in Washington that only the owner, keeper, or harborer of an animal is liable for injuries that it inflicts on others. Liability flows exclusively from ownership or direct control of an animal.

The injured woman argued that the owner and manager of the apartment complex should be held liable because they breached their affirmative duty to maintain the common area in which the incident occurred in a reasonably safe condition. The Court rejected that argument in a telling footnote, pointing out that it ruled in that manner in a similar case fifteen years ago and was overruled in unequivocal fashion by the Washington Supreme Court.

Washington condominium and homeowners associations are sometimes sued in connection with injuries that occur in common areas. Sometimes the owner will have a case, but in other instances (such as those involving dog-inflicted injuries) the owner will have no legal right to recover damages from the association. An attorney who is experienced in community association law can help your board know which lawsuits are all bark and no bite.

New FHA Condominium Guidelines Allow for Higher Delinquency Rates

The Federal Housing Administration (FHA) Condominium Project Guidelines were recently revised in various respects. One significant change takes account of the financial difficulties that condominium associations and their owners have been facing over the past several years. The previous guidelines stated that associations would not be approved if more than 15% of units were more than 30 days delinquent. Under the new guidelines, condominium associations that exceed that 15% threshold can still qualify for FHA approval if they:

1) Have no more 20% of units that are more than 30 days delinquent;

2) Provide a report showing the past 6 months of assessments charged and collected;

3) Provide a report showing current reserve fund balances and operating accounts that exceed the amount of outstanding delinquencies;

4) Provide a showing that the association has budgeted for delinquencies;

5) Provide a reserve study less than 24 months old demonstrating that the association can meet replacement needs; and

6) Provide evidence of collection efforts, including legal actions and payment plans.

If your association is interested in obtaining FHA approval, it should contact an experienced professional that works in that area to determine whether it meets the many criteria that are involved in that process.

Seattle Condominium Flood Demonstrates Importance of Insurance

An overflowing bathtub caused by a sleepy owner recently plunged the Seattle condominium known as Mosler Lofts into a nightmare. Property damage was extensive, and many of the units had to be vacated for repairs. An unfortunate incident like this should remind condominium associations and their owners that purchasing adequate insurance coverage is advisable even when it is not legally required. It should also cause condominium boards to evaluate their governing documents to determine who pays their association’s insurance deductible in these types of situations. Ben Kakimoto’s discussion of condominium insurance on the Seattle Condo Blog earlier this month is well worth reading. For an overview of Washington condominium associations’ legal duty to purchase insurance, please review my previous post on that subject.

New Washington Laws Affect Private Transfer Fees, Resale Certificate Charges, and Reserve Study Obligations

Effective April 13, 2011, a new section restricting private transfer fee obligations (“PTFOs”) was added to Title 64 of the Revised Code of Washington. A PTFO is a provision in a declaration or covenant that requires money to be paid to the association when a unit or lot is sold. The new law states that PTFOs recorded on or after April 13, 2011 are not binding or enforceable. It goes on to state that PTFOs recorded before April 13, 2011 are not presumed to be valid and that they will become unenforceable on December 31, 2011 unless the associations that benefit from them record documents containing certain notices before that date. Fortunately, transfer-related assessments payable to community associations in accordance with the state laws that govern them (such as resale certificate preparation fees and priority liens for delinquent assessments) are exempt from this new law and can still be collected in connection with transfers of ownership.

Effective July 22, 2011, the Washington Condominium Act will allow condominium associations to charge up to $275 to prepare resale certificates. The previous limit for this service was $150. To learn more about the obligation to provide resale certificates, please review my previous post on that subject.

Effective January 1, 2012, the Washington Condominium Act and Washington Homeowners’ Associations Act will contain a number of new provisions relating to reserve studies and accounts. Two of the changes affecting condominium associations deserve special mention. First, those associations are now only required to prepare and update reserve studies if this does not pose an unreasonable hardship and if the current total cost of major maintenance, repair, and replacement of reserve components is fifty percent or more of the gross budget of the association, excluding reserve account funds. Second, condominium associations are now required to make certain disclosures about reserve studies and accounts as part of the budget summaries they provide to owners.

This third law also imposes new requirements on Washington homeowners associations to prepare and update reserve studies and to make certain disclosures about reserve studies and accounts as part of the budget summaries they provide to owners. However, such associations are exempt from those requirements if: 1) the cost of the reserve study exceeds five percent of the association’s annual budget, 2) the current replacement value of the major reserve components is less than seventy-five percent of the gross budget of the association, excluding reserve account funds, or 3) there are ten or fewer homes in the association. To learn more about reserve-related obligations, please review my previous post on that subject.

Community association boards should keep in mind that the laws governing them will change from time to time. Establishing a relationship with a lawyer who focuses on representing Washington condominium and homeowners associations can help to ensure that your association fulfills its legal duties.