SSB 6175: A "Lose-Lose" Situation for Washington Homeowners
Here it is, the Washington Common Interest Ownership Act that we have been talking about for years. It has finally obtained some momentum and is scheduled for a vote in the House TOMORROW, February 22. Problem is, this version of the bill will do far more harm than good for Washington Homeowners. Feel free to copy and paste any part of this article into an email urging your representatives to vote NO on SSB 6175.
Here is a link to find your district and legislators: http://app.leg.wa.gov/districtfinder/.
The main problem with the bill right now is the arbitration language allowing a developer to require owners and the association to participate in any type of arbitration the developer chooses by putting its expensive, one-sided provisions in the declaration itself, binding owners and associations while preventing owners from being able to negotiate any of the terms.
However, the list of anti-consumer issues contained within the massive bill is long. I have highlighted just a few of the biggest concerns here:
- While builders get the benefits of WaCIOA for all communities, only condos still have statutory warranties
- The statute replaces the condo act and the homeowners association act with untested language likely to have significant unintended consequences
- Allows binding, one-sided arbitration in the Declaration, preventing access to the courts for wronged homeowners
- Allows non-association members to be appointed by the board even after developer control
- Allows “class voting” that could give developers more power than non-developer owners
- Reduces the standard of care for developer board members from fiduciaries to the same degree of care of elected owners
- Allows creation of “miscellaneous communities,” that may allow the developer to avoid condo warranties while still essentially creating condos
- Removes an association’s 6-month “superpriority” over lenders, so banks don’t have to pay off any part of an owner’s delinquency, encouraging vacant units that don’t pay assessments
- Limits attorneys’ fees for collections actions, discouraging communities from being able to collect delinquent assessments
- Requires non-condominium homeowner associations to be more like condominiums, with lots of procedural requirements, without the benefit of warranties
As many of you know, I was part of the UCIOA study committee for years, but stopped attending when the committee as a whole (the vast majority of the members of which were developer attorneys) decided it would not improve, or even address construction warranties for non-condominium homeowners.
As a result, over multiple years, the committee made changes to the Uniform Act to ensure that developers can more easily develop common interest communities, can create “airspace” condos and units that owners purchase before they ever see the unit, and can continue to control homeowners associations long after they have no property interest in the community. The balance in the Uniform Act comes from increased consumer protection for all owners in common interest communities, but when it came to addressing homeowner rights in the uniform act, our committee balked, deciding it was “too controversial” (not in the building industry’s interest, from whom many legislatures get large contributions) to extend warranties. Thus, what Washington is considering enacting is not some fair and balanced version of a Uniform Act, but continues to help developers by eroding rights for Washington Homeowners.
If the committee decided anything with respect to warranties, it decided to keep the status quo – the same warranties would continue to apply to condominium owners, but would not be extended to non-condo homeowners associations. Unfortunately, this was apparently just a political ploy, knowing that the building industry has the pull to erode these warranties after the committee work was finished. And that is exactly what is happening now.
Not only were warranties not extended to owners in non-condominium communities contrary to the Uniform Act, but after the committee’s work was finished, changes were made to further erode homeowner rights. Moreover, the very developer stakeholders who participated in the committee lobbied legislators to further erode homeowner rights by allowing developer to insert one-sided arbitration provisions into declarations that would not only bind unsuspecting homeowners to near unconscionable provisions, but would bind the Association itself, preventing associations from access to justice even though the original Condominium Act preserved to all owners a “right to judicial review.”
In doing so, this portion of WaCIOA also guts the carefully-balanced arbitration provisions enacted in 2005 as a result of a legislative task force designed to study and designed balanced alternate dispute resolution procedures. Despite being called a “Win-Win” by developers attorneys at the time, developers are not happy with these balanced procedures and have convinced legislatures to allow them to craft their own provisions in a document that no owner can freely negotiate – the Declaration. This single insidious change does more damage to homeowner rights than any other bill over the last 15 years. This bill is not a reflection of the uniform act and no benefit to homeowners is gained that outweighs this single blow to justice.
The statute is very long – there is little chance that any legislators have had a chance to read or understand its implications. All anyone knows is what certain members of the committee with access to legislators have lobbied for and convinced legislators of, but make no mistake, WaCIOA in its present form is a “Lose-Lose” for homeowners in Washington.