A number of considerations go into the formation and operation of a condo association, including several layers of laws and rules established by federal and state and local governments.
How to form a condo association
In Washington, Chapter 64.34 RCW of the Condominium Act has five articles that regulate condominium associations.
Creating, operating, and terminating a condominium association,
Management of the association,
Protection of the purchasers,
Beside the tapestry of government rules and regulations, a condo association has a set of governing documents that determines how the association must be operated by the Board of Directors (BoD).
Since July 1990, Washington State law requires all new condominium associations to be created as nonprofit corporations. Here are the primary steps involved with forming a condo association in Washington.
How to Form a Condo Association
1. Reserve name and incorporate
The first step to forming a condo association requires the reservation of the entity’s name. The name cannot be similar to any other registered entity on record or reserve names. If available, the name can be placed on reserve for a renewable 180 day period by paying a fee. Once the name has been placed on reserve, articles of incorporation are filed with the Washington Secretary of State to incorporate the association.
The Washington Business Corporation Act (Title 23B of the Revised Code of Washington) outlines what information must be included in the articles of incorporation, including the incorporator(s) and BoD names and addresses.
2. Prepare governing documents
Every condo association must submit to the hierarchy of laws and rules that oversee the various community associations. However, condominium associations also have a set of governing documents that range from the most restrictive to the least restrictive for operating the affairs of the association, including:
Declaration – Sometimes called Covenants, Conditions, and Restrictions (CC&R), the document declares the building as a condominium trust. It contains the majority of the rules that will govern the association.
Bylaws – consist of the rules that covers the administration— the procedural aspects of how an association is operated, election of a BoD, calling condo association meetings, voting procedures, and more.
Rules & Regulations – These are the “house rules” or guidelines for living in the community.
The declaration must be recorded in the county where the condominium building is located and the document contains the date of filing. For new buildings, it can only be filed once all the structural and mechanical components have been “substantially completed.” The bylaws do not need to be filed with the state but a copy must be kept on file at the association’s address.
Generally, the process of creating these documents goes hand-in-hand with reserving a name and incorporating. In the event of a conflict between the documents, the declaration trumps both bylaws and rules and regulations.
3. Board of Directors
Elect a BoD that consists of members who have a basic awareness of the building(s), community, and finances of the condo association. The primary responsibility of the BoD is to ensure that the association adheres to the rules contained in the governing documents, including:
Voting on expenditures
Evaluating the management company
Hiring outside experts
Resolving disputes between members
Many of the duties of board members mimic the requirements under the Condominium Act, such as commissioning annual audits performed by an independent certified public accountant or purchasing of liability insurance.
The responsibilities and activities associated with forming a condo association require the help of a real estate attorney that specializes in condominiums. An experienced attorney can create the core documents for the association and help incorporators sidestep the procedural and legal pitfalls of forming a condo association.