AS of January 18, 2018, the State of Washington's Senate Bill 6175 was heard by the Senate Committee on Finance; and if the full Senate votes to approve it, the Bill will be forwarded to a similar House Committee to consider. This Bill is a major effort to clarify and add new provisions to RCW 64.38 that governs how homeowners' associations (HOAs) and condominium associations must be managed. This version of Senate Bill 6175 is 134 pages long and has over 300 sections that deal with different concerns. I have not covered all of it, but, a few things caught my attention because self-managed HOAs can misinterpret the governing documents after which it can be difficult or untimely for the members to object. Highlighting a few issues that may seem minor; but without adding them to current law in Washington, they can provide Boards of Directors of self-managed Associations enormous unintended powers over the Association's members.
For example, Section 102 (Definitions) defines "Association" as the members of the HOA. Anyone should know this is what the Association means because Association does not refer to an Association of Board Members. But, occasionally a Board will assume that the Board can vote on behalf of the Association by a majority vote of the Board. A vote by the Board, instead of the by the Association's members, is the worst possible situation when it deals with amending governing documents because the Board could decide to alter these documents in order to benefit a subset of members at the expense of all of the HOA's members. If this occurs, it should be a red flag because usually a Board's activities are restricted to the enforcement of the governing documents by handling the operational and administrative details that a professional management company would otherwise be expected to perform.
Subsection 310 (Meetings) Many HOAs' governing documents state that the meetings must be held in accordance
Roberts Parliamentary Rules. But, if this is not the case, then the President of the Board of Directors calls the shots which can be frustrating if a member would like to ask questions or offersremarks that he or she would like to have added to the record of the Minutes of a Meeting. Therefore, Subsection 310 (e) states that Board must provide opportunity for remarks on matters affecting community interest at meetings.
Subsection 310(f) states that unless an emergency meeting is called, members must be sent notice of a Board meeting that provides time, date, location and agenda. However, I have found that some Boards advertise meetings without agendas which makes it difficult for members to prepare in advance for meetings that are important to them.
Subsection Section 317 (Assessments and Capital Improvements)
Subsection (4) "The declaration may provide that any of the following expenses of the association must be assessed against the units on some basis other than common expense liability. "IF and to the extent the declaration so provides, the association must assess: (a) Expenses associated with the operation, maintenance, repair, or replacement of any specified limited common element against the units to which that limited common element is assigned, equally or in any other proportion that the declaration provides; (b) Expenses specified in the declaration as benefiting fewer than all of the units or their unit owners exclusively against the units benefited in proportion to their common expense liability or in any other proportion that the declaration provides;(c) The costs of insurance in proportion to risk; and (d) The costs of one or more specified utilities in proportion to respective usage or upon the same basis as such utility charges are made by the utility provider". The key sentences are underlined because a self-serving Board may adopt measures that will provide services to certain members (e.g., a new marina) for their benefit that the HOA's members will be asked to expense by charging every lot owner a special assessment and annual dues for the marina's construction and maintenance. In some cases, the new marina and services could adversely impact the condition and/or value of the non-users' property.
To follow the progress of SB6175 , you can find it at
app.leg.wa.gov/billsummary?BillNumber=6175&Year=2017
Considering the 134 page length of this bill, two homeowners testified against SB 6165 because it omits any protections against a Board's decisions that are unfair but costly for a homeowner to dispute because the members would have to pay thousands of dollars in legal fees to object these decisions, whereas insurance covers a Board's actions. The Courts in WA and Oregon usually rule in favor of the Boards based on "judicial deference" (a.k.a. the Business Judgment Rule) that favors a Board's decisions unless it can be proven that a Board's decisions were self-serving or that they were unreasonable. In Washington the Business Judgment Rule is covered by RCW 24.03.127; and in Oregon this Rule is covered by ORS 65.357). In WA, this Rule requires the Board to act in (1) good faith, (2) with care of an ordinarily prudent person in a like position would exercise under similar circumstances and (3) in a manner the directors reasonably believe to be in the best interests of the corporation" Obviously, a self-serving decision that benefits the Board or a subset of the HOA would not be acting in the best interests of the entire Association. But, the "reasonableness" of the Board's decisions is vague and could benefit from some guidance provided by an amendment to SB-6175.
For example, the two homeowners testified against SB 6175 because the penalties for challenging the Board's decisions, including legal fees and court costs have far outweighed the actual penalty cited by the Board; and the Boards know this will always be the case which gives the Boards an advantage. Therefore, an amendment to SB 6175 could require that a neutral arbitrator should decide on the reasonableness of a fee or penalty imposed for a violation committed by a member of the HOA.