The State of Washington will be only the sixth state in the Union to require condominium associations to disclose their financial stability. The Seattle Times reports a new law will uncover “the dirty little secret of the condo world -- that most condos are severely underfunded,” according to Kris Sundberg, a condominium attorney in the area and a past-president of the Washington State Community Associations Institute.
Condominium association watchers have long contended that this type of oversight and accountability is long overdue for a segment of the housing market that charges monthly fees to its homeowners. Those fees are largely based on the condition of the joint-owned property and the cost of replacement or repair.
Many condominium buyers have recently begun suing association management and anyone connected with the purchase, the Times reports, because of undisclosed financial chaos from long-term neglect, followed by exorbitant assessments.
"We regularly see assessments in the $60,000 to $80,000 range per unit," Sundberg says. "Most condominium associations have neither a current reserve study nor adequately funded reserves."
Lawmakers hope the new regulation will make it difficult for condo associations to “conceal from buyers a lack of long-term financial planning,” the Times reports. Any association that does not conduct the financial checkup, claiming financial hardship, will be required to disclose the following warning: "The lack of a current reserve study poses certain risks to you, the purchaser. Insufficient reserves may, under some circumstances, require you to pay" a special assessment.