Frequently Asked Questions

Shelter Bay Homeowners Association


Buying a home in Shelter Bay includes automatic membership in the homeowners association (HOA), called Shelter Bay Community, Inc. There are rights and obligations that come with being a member of Shelter Bay. The information below attempts to give you a basic understanding of what membership in Shelter Bay may involve. In addition to the information provided below, you should review the Shelter Bay governing documents and consider seeking the assistance of legal counsel to answer any questions you may have.


1. What is a homeowners association (HOA)?
Washington law defines a homeowners association as a legal entity in which each member is an owner of residential property which is subject to the homeowners association's jurisdiction as a result of certain recorded governing documents. The Washington Homeowners Association Act, RCW, Ch. 64.38, provides more information in this regard.

2. Does the Shelter Bay community have a homeowners association?
Yes. The homeowners association is called "Shelter Bay Community, Inc.", and is a registered corporation in the State of Washington.

3. What are Shelter Bay's governing documents?
The principal governing document of Shelter Bay is the Declaration of Protective Covenants. This document provides for protections and restrictions placed on the property. Other governing documents include the Shelter Bay Community, Inc. Articles of Incorporation, Bylaws, and Rules and Regulations.

4. Am I required to be a member of the Shelter Bay homeowners association?
Membership in the Shelter Bay Community, Inc. homeowners association is required for all homeowners in the community. The Declaration of Protective Covenants (governing document) make such membership mandatory. This document is essentially a legally binding contract between the owner/members and the association. If you have questions about your legal rights and obligations as a member of the homeowners association, you should consult an attorney.

5. How does membership in the Shelter Bay Community, Inc. homeowners association affect the ownership of my home?
By virtue of your membership, you will have various rights and obligations as described in the governing documents. These may include restrictions on the use of your property, architectural controls on future improvements of your property, and the obligation to pay assessments, also known as dues, to the homeowners association.

6. Who is in charge of the Shelter Bay Community, Inc. homeowners association?
Shelter Bay is governed by a volunteer board of nine (9) directors, elected by the homeowners. The Board's responsibilities and its powers are identified in the Bylaws. In addition, there are five Standing Committees, comprised of community volunteers appointed by the Board. Those committees include: Rules, Building, Lot, Greenbelt, and Social & Recreation. Shelter Bay is self-managed, and directly employs a Community Manager, as well as administrative and maintenance staff, who work on the premises. The Manager oversees the day-to-day operation of the community within the authorized budget and policy parameters as approved by the Board of Directors.

7. How does Shelter Bay enforce the governing documents?
The various Committees are charged with enforcement of specific aspects of the Declaration of Protective Covenants. Fines can be levied against members for violations of the covenants or general rules and regulations. In addition, the member can be required to pay for damages or other associated costs caused by the violation. There is tiered appeals process, with the Committee at the first level; the Rules Committee at the second level, and the Board at the top level.

8. What happens if I do not pay my assessments?
The Declaration of Protective Covenants gives Shelter Bay Community, Inc. the power to place a lien on your home or take other legal action if you fail to pay properly levied assessments. If you do not bring the assessments current, this could result in a foreclosure of your home by the association.

9. What is the difference between a homeowners association and a condominium association?
A condominium association is a specialized type of homeowners association, created under different statutes than those which apply to homeowners associations. Shelter Bay Community, Inc. is not a condominium association.

10. What services and amenities are provided by Shelter Bay?
Shelter Bay has many amenities, including: the Shelter Bay Community office, a clubhouse/banquet hall, two outdoor swimming pools, two tennis courts, a barbeque area, a 9-hole par-3 golf course, a private marina, private beach, and numerous park and open greenbelt areas. In addition, Shelter Bay is self-managed, and employs administrative and maintenance personnel for the purpose of assisting members with applications for requests, issuing monthly billings for dues, water and sewer; payment processing, clubhouse reservations, marina administration, and other miscellaneous support.

11. What obligations does Shelter Bay Community, Inc. have?
The association maintains common areas and amenities; maintains the roads; operates the water and sewer utilities; administers and enforces use and architectural restrictions, adopts budgets and collects assessment and other fees.

12. What happens if one of the common areas of Shelter Bay must be repaired or replaced?
Shelter Bay maintains limited reserve funds for out of plan repairs of community-owned assets. In addition, Capital Improvements Projects are budgeted each year, and assessed to members for planned repairs/replacement of facilities.

13. What is the amount of the assessments that can be charged by Shelter Bay Community, Inc.?
The current dues and assessments will be disclosed at the time a purchase contract is in escrow. The amount is determined by the annual budget(s). If you have questions, you may contact the Community Manager at (306) 466-3805 or a member of the Board of Directors.

14. Can assessments be increased?
Assessments/dues can be adjusted based on the annual budget. Shelter Bay?s annual Operating Budget and Capital Improvement Projects Budget are approved by the Board of Directors and ratified by the membership in its annual election in May of each year.

15. Can Shelter Bay restrict the types of improvements I can make to my home?
Shelter Bay has certain architectural and design guidelines and restrictions. Members are required to submit plans and specifications to the Shelter Bay Building Committee for approval before making any changes to the exterior or building any additions or other structures. A Building Committee packet contains specific guidelines and restrictions, and may be obtained through the business office or on the website.

16. Are there use rules that might affect my home?
The Declaration of Protective Covenants contain rules relating to trees, landscaping, pets, satellite dishes, clotheslines, fences, parking, home businesses, rental of homes and other issues. You should carefully read this document to understand the nature of these restrictions.

17. As a member of the Shelter Bay Community, Inc., can I rent my home?
Members have the right to rent or lease their real property subject to restrictions in the Declaration of Protective Covenants. You should carefully read this document to understand the nature of these restrictions.

18. When does the Shelter Bay Community, Inc. homeowners association meet?
The annual meeting of the membership is held the first Saturday of May each year. Other special membership meetings may be scheduled, as needed. Notice of the date and time of the meeting is provided by officers of the Board. The Board of Directors has regularly scheduled meetings each month, which are generally held on the third Wednesday of the month, and located in the Community Clubhouse.

19. Can I attend the regular meetings of the Shelter Bay Board of Directors?
Yes. Board meetings are open to all members, and members are encouraged to attend. While members do not generally participate in the meetings, there is a Public Comment period in which members can provide comment. The Washington Homeowners Association Act permits the Board to consider certain sensitive topics in private Executive Session, in which members are excluded from that part of the Board's meeting.

20. As a member of the association, can I obtain copies of the community's records?
The Washington Homeowners Association Act provides that the records must be made available for review by owners/members during normal working hours at the office. In most cases, copies may be obtained, and a copy charge may apply.

21. Does Shelter Bay face any serious financial problems?
As a purchaser of a home, you are entitled to receive a disclosure statement, which will provide you information regarding the financial condition of the homeowners association and whether it is involved in any litigation. However, you should also question the seller to get a clear picture of the homeowners association's financial condition.

22. Do the benefits of belonging to Shelter Bay Community, Inc. outweigh the burdens?
That is a question you should consider when purchasing a home that requires membership in homeowners association. Some of the typical benefits and burdens are described above. Studying the Shelter Bay governing documents is an important step. Consider exploring this question with your seller, real estate professional, attorney and other advisors. You may also wish to speak with neighboring homeowners about the community. In the end, only you can decide whether what you want in a home and a neighborhood matches what this home and this community have to offer.

Frequently Asked Questions - Shelter Bay Lease


The community of Shelter Bay is situated on about 420 acres of land, located within the Swinomish Indian Reservation at the south end of Fidalgo Island. The Shelter Bay subdivision includes 914 residential lots, a marina, a golf course, other recreational facilities and open greenbelts on a total of about 420 acres. Of this, about 20 acres (44 residential lots in Division 1) are owned by members in fee simple. The remaining 400 acres (870 residential lots in Divisions 2 through 5) are owned by the Swinomish Indian Tribal Community and are under long-term lease, through the year 2044, to the Shelter Bay Company. This long-term lease is referred to as the Master Lease. Shelter Bay Company is a wholly-owned subsidiary of Shelter Bay Community, Inc

Shelter Bay Company holds individual leases with the 870 residential lots in Divisions 2 through 5. These individual leases are referred to as Subleases. The terms of the subleases mirror the Master Lease, and extend through the year 2044.


1. How does the Lease affect my home?
The homes located in Shelter Bay Divisions 2 through 5 are situated on leased land, and are subleased from Shelter Bay Company. The subleases extend through the year 2044, as does the Master Lease. There is an annual leasehold fee, which is provided in the disclosure statement. The leasehold fees were last adjusted in 2003, and will remain constant for the next few years. The next increases will be in the years 2013, 2023, and 2033. The increase is indexed to the Seattle CPI.

Sublease funds are used by Shelter Bay Company to pay the Master Lease rent to the Tribe. The Master Lease rent is adjusted on the same schedule as the subleases. The rent, however, is calculated differently than the subleases. The rent is determined as 7% of the current market value of the unimproved land, rather than being indexed to the Seattle CPI. The adjustment for 2003 is currently being heard through legal arbitration, to determine the land value upon which the rent is based. A decision is expected early in 2008. In accordance with the Master Lease, Shelter Bay Company continues to pay the old rent, until such time the new rent is determined; the company is current on all payments.

2. What if the new Master Lease rent is more than is collected by sublease fees?
The sublease rents are locked in by the individual sublease agreements, and will most likely not be renegotiated to a higher fee. Since the Shelter Bay Company is owned by the Community, the community homeowners association may decide to assess its members for the deficit balance. Before any decision to do so, the community's Board of Directors would hold a Town Meeting(s) for its members to present various options, solicit feedback and suggestions, prior to making any final decision pertaining to a special assessment.

3. Will there be an extension on the lease?
If the Master Lease is extended, the subleases will be automatically extended. Both parties under the Master Lease have acknowledged that discussions about extending the master lease will be deferred until the 2003 rent adjustment is resolved.

4. If the lease is not extended, what will happen to our house in 2044?
Both the Master Lease and the subleases provide for the homeowner's option to remove any improvements upon the leased land within 60 days after the expiration of the lease. The decision to leave or remove improvements is to be made by the homeowner.

5. How does the Skagit County Treasurer Compute taxes on the leasehold property/homes?
The Skagit County Assessor considers two components to the assessed valuation of your property/home: Land Value and Building Value. On leased land in Divisions 2 through 5, the Assessor's Statement of Value will include a Land Value for information purposes, however, the Skagit County Treasurer computes taxes only on the Building Value basis.



SHELTER BAY
MASTER LEASE AND SUBLEASE OVERVIEW


This overview is provided only to inform members on the relationship between the Shelter Bay Company, Shelter Bay Community, Inc., Master Leases, and Subleases. Shelter Bay cannot guarantee its timeliness or accuracy.

Master Lease Rent Determination
When we talk about the “Master Lease”, we are actually talking about two separate lease contracts. Lease No. 5020 covers the leased land in Divisions 2, 3 and 5. Lease No. 5086 covers the leased land in Division 4. Both leases expire in 2044. (For simplification, we often use the singular term “Master Lease” to refer to both contracts.) The two leases contain identical provisions for establishing the rent due to the Tribe/Indian Owners. The leases specify the rent due to the Tribe/Indian Owners as 7% of the value of the raw land, and call for the parties to recalculate the raw land value every ten years between 1993 and 2044. From 1993 to 2003, the determined [through arbitration] raw land value was $3 million, resulting in an annual rent payment of $210,000 each year for that 10-year period. In cases where the parties are unable to agree on the raw land value, the Master Lease provides that the parties may determine the raw land value through arbitration.

Master Lease Negotiations
The 10-year rent adjustment was due in July 2003 (2004 for Division 4). Shelter Bay Company, under ownership of the Osbergs, was unable to reach agreement with the Tribe/Indian Owners on the value of the raw land. In November 2004, when Shelter Bay Community, Inc. purchased the Company, discussions with the Tribe/Indian Owners continued, but with no agreement. The Company has continued to pay annual rent to the Tribe/Indian Owners at the previous 10-year rate ($210,000), in accordance with terms of the Master Lease. The Company has paid an additional $70,000 each year in good faith, believing the land value would go up, and to offset the retroactive back rent due. The difference of what we owe and what we have already paid will be charged interest at a rate of 8% per annum, as provided for in the Master Lease.

What is Shelter Bay Community, Inc., and what is Shelter Bay Company?
Shelter Bay Community, Inc. is the homeowners association. This corporation purchased the stock of Shelter Bay Company in November 2004. The Shelter Bay Company consists of the master leases and the marina improvements. The Company manages and operates the Marina facilities and bills and collects the sublease fees. Sub-lessees pay their land rent to the Company, which in turn makes the required payment to the Tribe. Also, the Company, because it holds all the subleases, approves and processes the sublease assignments and mortgage consents at time of a refinancing or sale.

The Arbitration Process
Both the Tribe and Shelter Bay Company agreed to use the arbitration process to determine the land value for the 2003 rental adjustment. The arbitration judge rendered his decision on January 23, 2008 for a land value of $19.4 million, resulting in rent due under the two master leases to be $1,358,000 annually until the next ten-year adjustment in 2013. The amount of back rent due under the two master leases as of January 23, 2008, is $5,066,599 plus accrued interest (8% per annum) of $991,909 for a total of $6,058,508.

Master Lease – Sublease Relationship
The subleases between Shelter Bay Company and Sub-Lessees also include a 10-year rent adjustment, with an adjustment date that aligns with the Master Lease. The annual sublease fees for the period 1993-2003 totaled $303,128. In July of 2003 the annual sublease fees were increased to $409,910. According to the subleases, the 10-year rent adjustment is determined by the Seattle Consumer Price Index (CPI), which is very different from the method of adjustment for the rent for the Master Leases which is 7% of the land value.

Sublease Fees are Less than Master Lease Changes in Rent
Beginning July 1, 2003 the rent paid to the Company by the Sub-Lessees does not cover the annual rent to the Tribe. For sublease rents paid to the Company the rent is fixed until the next adjustment in July 2013 using the Seattle CPI. The Company (the holder of the master lease) is now turning to its holding company, Shelter Bay Community, Inc., to assist with the payment of the retroactive rent liability, as well as needing to look to the Community to help with paying the rent due in the future years not covered by sublease fees. Back rent is due in excess of what was collected on the subleases, plus interest at 8% according to the Master Leases, and future rent will be the amount due over and above what can be charged to the Sub-Lessees.

The Shelter Bay Board of Directors has held Town Meetings with members of the homeowners association to discuss covering the rent liability, and is considering some type of an assessment to its members for the back rent due. The amount to be assessed to each member is yet to be determined, and will vary by Lot, but will fall in the range of $4,000-$15,000± per Lot. Once assessed, the liability stays with the Lot until paid.

Master Lease Extension
Shelter Bay Company has repeatedly expressed the desire to have the Tribe/Indian Owners extend the terms of the Master Lease beyond the year 2044 in order to maintain property values which helps the Tribe with its income stream by allowing buyers to secure mortgage financing. However, the Tribe had emphasized that they wanted to resolve the 10-year rent adjustment before discussing an extension. Many mortgage loan underwriters look for at least 30 years + 5 years remaining under the lease as criteria to underwrite a loan. As we encroach on the 35-year underwriting countdown to the year 2044, the ability to get loans on the property is diminished, and will continue to diminish, affecting re-sale value, into the future. Both the Tribe and Shelter Bay Company acknowledge this dilemma. As soon as the back rent is paid in full, the Tribe has said we can approach them with extension discussions.


 
Privacy Policy