For all friends and other members of HOAs, strong foundations build strong HOAs. Therefore, for members of HOAs who do not understand their rights and obligations, the State of WA adopted amendments in 2018 in the form of SB6175 that replaced, clarified or added new provisions to RCW64.38 that governs HOAs in Washington for all new HOAs created as of July 1, 2018. The provisions of SB6175 can be adopted also by members of preexisting HOAs if they choose to do so.
In order to adopt SB6175, a preexisting HOA's Board must either volunteer to propose the adoption of SC6175 to their members, or if the Board objects to doing so, 20 percent of the HOA’s members can sign a petition that will require the Board to schedule a Special Meeting to discuss the provisions of SB6175 after which without knowing of asking how members will vote, the Board must mail ballots to members who will vote on it. I have not read every section of SB6175 and compared it to relevant counterparts in RCW if a counterpart exists. Therefore, focusing on two issues only, you may be able to understand why my gut feeling is that SB6175 provides members with more control over important decisions that create and maintain strong HOAs.
For anyone who reads this article and is a member of an HOA in the State of WA, Section 120 of SB6175 states that after the Special Meeting ends, the Board must mail ballots to the “participating” members so that these members can decide whether to adopt SB6715 by a vote of 67 percent. I placed the “ “ around the word, participating, for emphasis because Section 120 does not include “ “. Normally, I would assume that the Board would mail ballots to 100 percent of the members; but the Legislature may have wanted voters to actually be aware of what they are voting to adopt or reject. Therefore, assuming that the Legislature intended that only certain members, who attended the Special Meeting, would be allowed to vote on SB6175, then the Legislature is making a Statement that if members who do not do not want to vote in favor of SB6175, then they will have to attend the Special Meeting so that their negative votes will be counted.
Understandably, reading legislation is not very exciting, and SB6175 is no exception because it is several hundred pages long. Therefore, occasionally it takes an experienced reader of legislation to actually realize that some changes that appear to be trivial, are actually quite significant.
1. For example SB6175, takes the time to define an HOA as “an Association of the Association’s members” which I think is obvious, but I know for a fact that some Boards will amend governing documents based on the authority granted to the Association; but, they assume that if no one objects then they can amend the governing documents on behalf of the Association’s members.
2. Aside from protecting members’ voting rights, the other major problem for members is the possibility of a gradual loss of control over their HOA’s expenditures. A self-serving or incompetent Board can destroy an HOA faster than anything else because the reserves that should be set aside for repairs and maintenance that restore infrastructure to their original condition can be too tempting for these Boards to not use them instead for special "pet"projects. Usually, a self-serving Board will become indignant if members ask questions about reserve balances and reserve shortages; and this is the most significant “tell”, meaning it is time to have a professional audit prepared because normally a person who can handle the HOA's financial statements and accounting records can find an invoice and payment faster that it takes to dial 911.
3.Your HOA should also be a strong candidate for major financial audit if your Board cannot make it convenient for you to review its financial statements or disbursements. I have experienced this situation when a Board’s President informed me that the Board adopted a “Rule” that limited a member to 1 hour per year to review the HOA's financial records that were safeguarded by the HOA’s attorney ,who I would have to pay in order to cover his time while he supervised me in his office that was 60 miles and a ferry away from the HOA. AS stupid as this Rule sounds because the HOA’s Treasurer is required to maintain and safeguard the HOA’s financial records, the important thing about this "tell" is that Boards do not usually get this ridiculous unless they are self-serving. An incompetent Board will usually be embarrassed if its records do not satisfy basic Generally Accepted Accounting Principles.”
Since I believe that the worst situation for an HOA is the loss of members' voting authority and the erosion of the HOA's funds, I was delighted to see that SB6175 eliminated the Board's authority to amend any governing document except for the Bylaws that can only be changed in specifically defined ways. SB6175 also added requirements to the Annual Budget Approval Process in Section 326 which state that the budget must include: (a) The projected income to the association by category,(b) the projected common expenses and those specially allocated expenses,(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 section of this act 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. Subsections (d), (e) and (f) are “killers” for either a self-serving or incompetent Board; and I am not suggesting that both types of Boards are equally equally “Bad” in terms of intent because they are not. Current RCW does require some of the disclosures; but if the Board's fail to provide this information during the year or during Annual Meeting, the members can still approve the Board's proposed Budget for the forthcoming year. This allows these Boards to run circles around members who would like some financial facts that they are entitled to have.
Therefore, although I have read criticisms of SB6175, I am not going to dismiss that major improvements to RCW that benefit members if other issues were overlooked because such matters can be addressed if the HOAs are financially sound and reflect the members' policies. Please comment if you find particular issues with SB6175 that could be improved. The SB 6175 can be found at https://app.leg.wa.gov/billinfo/
Then, by selecting "bill information" on the left panel of the this website, at the top of the screen with a yellow background, type 6175 in the white box labeled bill number. Finally, use the drop down arrow in the box labeled 2019-2020 and select 2017-2018.