Legal Hotline: WUCIOA — What Is It & Why Do I Care?
The Washington Uniform Common Interest Ownership Act, chap. 64.90 RCW, is a relatively new state law that already regulates some residential communities where homeowners are obligated to financially contribute to the maintenance of common area. On January 1, 2028, WUCIOA will replace other state laws (RCW 64.32, 64.34 and 64.38) currently governing owner associations.
On that day, WUCIOA will be the controlling authority for all owner associations where homeowners are obligated to financially contribute to the maintenance of common area. Homeowner associations will have to change the way they handle some day-to-day operations and many that have never had professional management will likely need to hire professional managers. Many will also need to hire legal counsel to redraft their Covenants, Conditions and Restrictions (CCRs) to be consistent with WUCIOA. So why does a residential real estate broker care about WUCIOA? Because sellers in communities subject to WUCIOA must deliver a resale certificate to their buyer (with a narrow exception explained below) and buyers have a statutory right of rescission for five days following receipt of the resale certificate, even in single family, plat communities.
There is a statutory reference created by WUCIOA and the reader must be familiar with the term before attempting to understand WUCIOA’s resale requirements. The term “Common Interest Communities” is defined by WUCIOA to include every community where homeowners are obligated to financially contribute to the maintenance of common area. The contribution may be used to pay for taxes, insurance or physical upkeep. While the term “Common Interest Communities” is generically descriptive of every community that includes common area, the reference to “Common Interest Communities” or “CICs” is reserved for use as a reference to only those communities that are subject to WUCIOA. Thus, in Washington, between now and 2028, some communities that include common area are CICs while others are not.
If the community is a CIC, WUCIOA requires delivery of a specific resale certificate. If the community is not a CIC, then a different resale certificate is required or no resale certificate is required. Residential real estate brokers should be able to determine if seller’s property is in a “Common Interest Community” and then, determine if the resale certificate provided by the owner association is the correct resale certificate. In this regard, 2028 simplifies the broker’s job. In 2028, all communities that include common area, financially supported by the members, will be “CICs” and will require delivery of the same resale certificate. Until then, brokers must do the work, in each transaction, to determine if a property is or is not in a “Common Interest Community”.
So what must a broker do to determine if a property is or is not in a "Common Interest Community”? The answer to the question is different depending upon whether the home is a condominium unit or a single-family residence. Both analyses, however, begin with the knowledge that WUCIOA took effect on July 1, 2018. All communities with member-supported common area that were originally created after July 1, 2018, as evidenced by the recording date of the CCRs, are “CICs” (with one exception explained below). However, some condominiums that were created prior to July 1, 2018 are also CICs and some plat communities created after July 1, 2018 are not.
How to Determine If A Condo Is A CIC Between Now and January 1, 2028
The analysis always begins with a preliminary commitment for title. If a listing broker has not pulled a preliminary commitment for title, it will be impossible for broker to conduct this analysis.
Broker should examine the list of “exceptions” in the title report and locate reference to the first recording of the association’s “Covenants, Conditions and Restrictions”. If the first CCRs were recorded after July 1, 2018, the condo is a CIC.
If the first CCRs were recorded before July 1, 2018, the condo may or may not be a CIC. Further examination of the preliminary commitment is required. It is possible that the condominium association opted into WUCIOA even if it pre-existed July 1, 2018. To make that determination, brokers must look further in the list of exceptions on the title commitment to determine if the CCRs were amended after July 1, 2018. If so, broker must click the link, open the amendment and read the amendment to determine if the association opted into WUCIOA. It is possible that a post July 1, 2018 amendment to the CCRs was recorded solely for the purpose of opting the association into WUCIOA. It is also possible that the CCRs were amended to make some other change to the CCRs that had nothing to do with WUCIOA. It is also possible that the amendment opted the association into WUICOA and also accomplished other changes. Thus, broker must read the amendment to determine if the association opted into WUCIOA. If the association opted into WUCIOA, the association is a CIC.
How to Determine If A Single-Family Residence Is In A CIC Between Now and January 1, 2028
This analysis also begins with a preliminary commitment for title. If the CCRs for the plat community were first recorded prior to July 1, 2018, the association is almost certainly not a CIC. It is possible that a plat community opted into WUCIOA so that possibility cannot be completely ignored but it would be extremely unusual for a plat community to have opted into WUCIOA. To make that determination, a review of any CCR amendments recorded after July 1, 2018 would have to be conducted as described in the “condo” section above.
What will be more common is that a plat community has CCRs that were first recorded after July 1, 2018, meaning that the community is a CIC, except that the association qualifies for the “small plat community exemption”. If a plat community meets the criteria for a “small plat community” the community is not a CIC even if the CCRs were recorded after July 1, 2028. A single-family residential plat community meets the criteria for the small plat community exemption if all of the following are true: 1) the community contains no more than 50 units; 2) the annual HOA assessment does not exceed $1,000; and 3) the developer did not retain the right to add additional lots to the community. (RCW 64.90.360.) [It should be noted that after January 1, 2028, the sale of a single family residence in a “small plat community” will trigger the requirements for delivery of a resale certificate.]
Title companies will not identify, on a preliminary commitment for title, whether the property is or is not a CIC. Brokers will have to conduct their own examination.
Why Does It Matter If the Community Is a CIC?
If the property that is the subject of sale is part of a CIC, the seller must deliver a resale certificate to the buyer and the buyer retains a five-day right of rescission following receipt of the resale certificate or until closing, whichever comes first. Moreover, the topics that must be addressed in the resale certificate are dictated by WUCIOA. If a resale certificate that fails to address all of the required topics is delivered, the buyer’s right of rescission will not begin to run. Buyer’s five-day right of rescission will not begin to run until the correct form of resale certificate is delivered. The difficulty with this basic statement lies in the fact that there are currently two different forms of resale certificates required by two different statutes.
Condos that are not CICs but that require delivery of a resale certificate are subject to the Condominium Act. The Condominium Act requires delivery of a resale certificate consistent with statewide Form 27. Single family residences and condos that are in a CIC require delivery of a resale certificate consistent with statewide Form 27CIC. The two forms are different. Delivery of the wrong form of resale certificate means that buyer’s rescission rights do not run.
Complicating this scenario is the fact that neither brokers nor sellers complete the resale certificate but rather, the resale certificate is completed by the owners association. While most owner associations know the correct form of resale certificate to use, not all do. Moreover, there are some plat communities that are CICs and the owner association seems to have no knowledge that a resale certificate is required. This means that brokers should play an active role in determining if a resale certificate is required and if so, which form of resale certificate is required. In other words, brokers should not rely solely on a seller’s owner association to provide accurate information regarding the requirement for a resale certificate or the form of required resale certificate.
Brokers should conduct the analysis described in a prior section of this article to determine if the property is in a CIC. If the property is in a CIC, broker should confirm that any delivered resale certificate is consistent with statewide Form 27CIC. If the property is a condo that is not a CIC, then the resale certificate should be consistent with statewide Form 27.
What if a CIC is Unavailable?
If seller’s property is in a CIC and the resale certificate is “unavailable”, as that term is statutorily defined, then buyer can waive the right to receive the resale certificate. The definition of “unavailable” means that at least one of the following is true:
- The seller attests that the association failed to provide the resale certificate within 10 days of request and delivery of payment;
- The seller indicates in the seller disclosure statement (Form 17) that there is no homeowners' association and no regular periodic assessments;
- The seller attests that they have owned the property for at least 365 days and, to the best of the seller's knowledge, the association has not sent notice of an annual meeting, budget ratification, or assessments, or attempted to enforce the covenants in the last five years or since the seller purchased the property, whichever is less; or
- The seller attests that they have made three good-faith attempts to request the resale certificate and remit payment to the association or its authorized agent and has not received a response within three business days.
If the resale certificate is statutorily “unavailable”, then buyer may choose, but is not obligated, to waive the right to receive the resale certificate. To be clear, seller cannot waive buyer’s right to receive the resale certificate. Only buyer can make that waiver and buyer can make that waiver only if the resale certificate is “unavailable”. There is language on the bottom of Form 27CIC allowing seller to make one of the attestations of “unavailability” and for buyer to waive the right to receive the resale certificate.
This will be a challenging issue for brokers, sellers and owner associations until January 1, 2028. Brokers must become familiar with the details discussed in this article in order to properly protect buyers and sellers between now and January 1, 2028.
About the Author
Annie Fitzsimmons is the Washington REALTORS Legal Hotline Lawyer. To ask Annie a Legal Hotline question or to access the Hotline Q&A database please visit warealtor.org/legal-hotline.
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