In short
Every Washington study carries a statutory warning paragraph. The yearly budget summary has to say whether the association has a compliant study and how far the budget departs from it. A seller’s resale certificate includes the current study, or a set warning that there is none.
Inside the study
RCW 64.90.550(3) requires a disclosure in the study itself. It begins:
“This reserve study should be reviewed carefully.”
The rest of the paragraph warns owners that the study may not include every component that will need major maintenance, repair or replacement, and that if it does not, the association may have to defer work, increase contributions, borrow or levy a special assessment. The older Condominium Act carries a matching warning in RCW 64.34.382(3).
The study must also disclose whether a reserve study professional helped prepare it and whether that person was independent. An annual update the board prepares in house is allowed between site visits, but the document still has to say who helped.
In the budget summary
Each year the board sends owners a summary of the proposed budget for ratification. Under RCW 64.90.525(2) it must include, among other things:
- The amount of regular assessments budgeted for the reserve account.
- A statement of whether the association has a reserve study that meets RCW 64.90.550 and, if it does, how far the budget meets or departs from the study’s recommendations.
- The current reserve deficit or surplus, per unit.
This is where most owners meet the study. A board that funds below the recommendation has to show that in writing, every year.
In the resale certificate
When an owner sells, the association furnishes a resale certificate within 10 days of the request (RCW 64.90.640). On reserves it must include a statement of whether the association has a reserve study prepared under RCW 64.90.545 and .550, and a copy of the most current reserve study.
The association may charge up to $275 for preparing the certificate, plus up to $100 to update one within six months, and cannot charge extra for documents it already makes available online. The buyer can generally cancel within five business days of first receiving the certificate, so an alarming study can end a sale.
When there is no study
If the association has no study that complies with the statute or its governing documents, the resale certificate must carry a prescribed disclosure. It opens:
“This association does not have a current reserve study.”
It goes on to warn the buyer that, with reserves possibly short, they may be asked to pay a special assessment for major maintenance, repair or replacement. Lenders and buyers’ agents read that sentence closely.
What it means for the board
- Keep the current study where the manager can attach it to a resale certificate the same day.
- Make sure the study states its date, its level and that it meets RCW 64.90.550; all three are on the statute’s list.
- When the budget departs from the recommendation, say why in the summary. Owners and buyers will ask.
- Diary the third-year site visit. A lapsed cycle is the most common reason a study stops being current.