Corporate Status – Association, Inc.
Patrick McDonald
A common question board members ask is whether their association is a non-profit corporation or a community association. The answer is that they are not mutually community associations should be incorporated, not all of them are required to be. Whether your association is required to incorporate depends on when your association was created and what type of association it is.
Condominium associations created after June 30, 1990 are governed by the Washington Condominium Act (WCA) and are required to be incorporated. The WCA also provides that in the event of a conflict between the WCA and the statutes that govern corporations, the WCA controls. In comparison, condominium associations that were created before July 1, 1990 are governed by the Horizontal Property Regimes Act (HPRA) and are not required to be incorporated. Likewise, there is no requirement in RCW 64.38 (HOA Act) that non- condominium homeowners associations be incorporated.
Although your association may not be required to be starters, the HPRA and HOA Act are rather skeletal when it comes to providing corporate governance procedures for the steps for calling meetings, establishing a quorum, filling board vacancies, or creating committees. And that just scratches the surface. This can be problematic when an association’s governing documents are silent on what steps the association needs to take in order to take a certain action. In cases where the governing documents are silent, the corporate statutes can provide some procedural guidance and help avoid disputes.
Incorporation may also give the association more operational property (such as after a lien foreclosure against a unit or lot) and also borrow money. (Note that whether the loan can be securitized is a separate question.) If the association is not incorporated, these powers might not be available.
Most importantly, incorporating can insulate individual owners from personal liability for the wrongful acts of the association. In Riss v. Angel, the Washington State
24 Community Associations Journal | March 2018
Supreme Court held that members of an unincorporated non-condominium homeowners association were jointly and severally liable for the association’s unlawful architectural control decision. As a result, the owners’ personal assets against the association.
The ruling in Riss introduced the possibility that an entire judgment against an unincorporated association could be recovered from a single owner who had nothing to do with the association’s action. As you can imagine, it would be quite shocking for an owner to have his or her wages garnished or assets sold by a sheriff to satisfy a judgment against the association.
Had the association been incorporated in Riss, liability for owners. Granted, a judgment against an association could result in a special assessment to satisfy the judgment. In that case, all owners would be assessed in accordance with their percentage interest in the association. However, each owner would avoid having a judgment entered against him or her personally or being on the hook for paying the entire judgment.
to make sure that the association’s governing documents are consistent with the relevant corporate statute. Some provisions of the corporate statutes can be deviated from by an association’s governing documents while others cannot.
If you are unsure if your association is incorporated, you can check on the Secretary of State’s website under the “corporation search” option. The website will also allow you to see your association’s previous filings free of charge, such as the articles of incorporation and annual reports. It is important to make sure the association keeps its records updated with the Secretary of State.
With the different types of community associations and differing governing laws, corporate governance issues can be a confusing topic. If you have questions regarding your association’s corporate status or want to make sure your documents are consistent with applicable statute(s), it would be a good idea to reach out to your association’s attorney.
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