every condominium association was required to have a reserve study done, unless (1) it did not have significant assets, or (2) the reserve study would constitute an unreasonable hardship. The HOA Act had a similar provision, RCW 64.38.065.
Under the pre-WUCIOA statutory scheme, there was room to argue about what constituted “significant assets” or what constituted an “unreasonable hardship” but it was clear that to be exempt from a reserve study requirement, a community had to meet one of those standards.
Enter WUCIOA
Although it applies primarily to communities created on or after July 1, 2018, a handful of sections apply to older communities. RCW 64.90.080, provides in part:
“Except for a nonresidential common interest community described in RCW 64.90.100, RCW 64.90.095, 64.90.405(1) (b) and (c), 64.90.525 and 64.90.545 apply, and any inconsistent provisions of chapter 58.19, 64.32, 64.34, or 64.38 RCW do not apply, to a common interest community created in this state before July 1, 2018.”
As an alert reader may have guessed, RCW 64.90.545 is the WUCIOA section that requires reserve studies and provides exceptions. It provides in relevant part:
“(1) Unless exempt under subsection (2) of this section, an association must prepare and update a reserve study in accordance with this chapter. […]
(2) Unless the governing documents require otherwise, subsection (1) of this section does not apply (a) to common interest communities containing units that are restricted in the declaration to nonresidential use, (b) to common interest communities that have only nominal reserve costs, or (c) when the cost of the reserve study or update exceeds ten percent of the association’s annual budget.”
These exceptions are similar, but clearly different from, the exceptions found in the Condo Act and HOA Act. If the adoption of WUCIOA was the end of the story, we would still have a straightforward answer to the question of who is exempt from the reserve study requirement. Under RCW 64.90.080, we know WUCIOA’s reserve study requirement and exceptions apply to communities created before July 1, 2018. WUCIOA provides specific, limited exceptions to
that reserve study requirement, so the provisions of the Condo Act and HOA Act that provide additional, different exceptions are “inconsistent” so should no longer apply.
More to the Story
That is not the end of the story! In 2019, the legislature went back to the Condo Act and HOA Act and got to tinkering. They changed both the Condo Act and HOA Act’s reserve study requirement to read “Except as provided in RCW 64.90.080 and 64.90.545, unless doing so would impose an unreasonable hardship, an association with significant assets shall prepare and update a reserve study…”
In 2019, they revisited the Condo Act and HOA Act and got to tinkering.
The new language defers to WUCIOA, so why might it create confusion about which exceptions apply? The answer is that when courts interpret and apply a statute, they try to give effect to all its words and do not assume that the legislature acted without reason. If WUCIOA’s reserve study requirement superseded the reserve study requirements in the Condo Act and HOA Act, there should have been no need for the legislature to amend the reserve study provisions of the Condo Act and HOA Act. If anything, those provisions should have been removed. By adopting new language, the legislature seems to have indicated its intent that the reserve study provisions in the older statutes have some continuing effect. If each provision does have continuing effect, can communities formed before July 1, 2018 take advantage of the more flexible exceptions in the Condo Act or HOA Act?
We do not have an answer from either the legislature or the courts.
The Safest Approach
We do not have an answer to that question from either the legislature or the courts. The safest approach is to follow the WUCIOA provision and obtain a reserve study unless your community falls into one of the explicit exemptions provided in RCW 64.90.545(2). The problem posed by this article is mostly conceptual. In reality, most associations will either fit into one of WUCIOA’s exceptions or will not have a problem complying with the reserve study requirement. However, questions remain about the effect of the legislature’s 2019 amendments and whether a pre-WUCIOA community can claim an exemption under the older standards.
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