Like It or Not, WUCOIA is Coming…(Part 2 – Finances)

On January 1, 2028, RCW 64.90, known as the Washington Uniform Common Interest Ownership Act or more commonly, “WUCIOA”, will apply to all common interest communities, with a handful of exceptions. In other words, it will apply to most condominium and homeowners’ associations and will effectively repeal the prior statutory schemes: the Homeowners’ Association Act (RCW 64.38), the Horizontal Property Regimes Act (RCW 64.32), and the Condominium Act (RCW 64.34). I have gone into general detail about the adoption of WUCOIA in a past blog post here. I also posted the first article in this series, regarding WUCOIA insurance requirements, here.

This post constitutes part 2 of the ongoing series regarding specific changes that WUCOIA will bring to community association life – today’s topic: financing requirements. WUCOIA will, among other things, bring sweeping changes to financial aspects of association governance. Some of the significant changes include the following:

• Annual audits cannot be waived by a vote of the members, except for associations with an annual budget under $50,000.

• Accrual-Basis Accounting: Associations must transition to accrual-basis accounting (based on when revenue is earned and expenses incurred, not when cash goes in and out) and perform annual account reconciliations.

• The Board must be in direct control of reserve funds, and withdrawal from reserves requires the signature of two Board members. Additionally, reserve funds must be kept separate from other association funds.

• Reserve studies must be updated annually, must have a visual site inspection every three years, must highlight each time the replacement cost of an item exceeds 1% of the annual budget, and must express reserve surpluses or deficits on a per-unit basis.

• There is less deference to the Board about the contents and preparation of reserve studies.

• Associations must accept at least one form of payment at no charge.

• Reserve funds can be invested pursuant to specific criteria.

These constitute large adjustments to the current requirements for some community associations. Many community associations, up until now, among other things, had the ability to: (1) allow other forms of accounting; (2) waive audit requirements; (3) opt out of reserve studies under unreasonable hardship; (4) require payment processing fees. WUCOIA strictly prohibits this flexibility, and that is not all. Beyond additional financial requirements, the changes enacted by the widespread adoption of WUCOIA are numerous, and future blog posts will cover some of the other additional developments.

While WUCOIA has not yet supplanted the previous statutes governing community associations, that day is coming soon. Updating your CC&Rs may be of vital importance to avoid significant confusion regarding your rights and responsibilities. If you have questions about your CC&Rs, WUCOIA, or any other matters that have to do with community association issues and laws, please feel free to reach out to the lawyers at Beresford Booth for assistance at info@beresfordlaw.com or by phone at (425) 776-4100. We remain prepared and available to assist you.