Frequently Asked Questions

Shelter Bay Homeowners Association

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 - Other

1. Are there any special assessments planned in the near future?
Other than the annual Capital Improvement Projects assessment, and Supplemental Rent assessment related to the Master Lease rent, no other special assessments are planned in the near future.

2. Do I automatically get a marina slip when I become a Shelter Bay resident/member?
No, as there are only 317 slips for the 914 residents. However, members take priority over non-members on the waiting list, and members also enjoy a reduced slip moorage rate. The marina waiting list is maintained in the Community business office.

3. Do I automatically get a storage space in the RV Storage Lot when I become a Shelter Bay resident/member?
No, as there are not enough spaces for all residents. The RV Storage Lot is for use by members only. A waiting list is maintained in the Community business office.

Frequently Asked Questions - Shelter Bay Lease

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 June 30, 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 for July 1, 2003, and will remain constant for ten 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.

2. What if the new Master Lease rent is more than is collected by sublease rents?
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 can decide to assess its members for the deficit balance. For the rent period of July 1, 2003 through June 30, 2013, the sublease rents collected by the Shelter Bay Company are less than the total rent amount due to the Tribe/BIA under the master lease. For the fiscal year 2009-2010, members of the Shelter Bay Community, Inc. ratified an assessment for “Supplemental Rent”, which works to supplement the annual leasehold income (from sublease rents) to the Shelter Bay Company. It is highly likely that similar assessments will be approved and ratified for future years. Information on this assessment can be obtained from the Shelter Bay office: (360) 466-3805.

3. Will there be an extension on the lease?
If the Master Lease is extended, the subleases will be automatically extended. Shelter Bay hopes to engage in lease extension discussions with the Tribe/BIA sometime during the year 2010.

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 June 30, 2044 termination 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. This overview was last updated in January 2010.

What is Shelter Bay Community, Inc., and What is Shelter Bay Company?
Shelter Bay Community, Inc. is a Washington State corporation, and 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 the time of a refinancing or sale.

Master Lease Rent Determination
When we talk about the “Master Lease”, we are actually talking about two separate lease contracts.  Lease Contract No. 5020 covers the leased land in Divisions 2, 3 and 5.  Lease Contract No. 5086 covers the leased land in Division 4. Both leases expire on June 30, 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.  They 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 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. Both the Tribe and Shelter Bay Company agreed to use the arbitration process to determine the land value for the 2003 rental adjustment.  In January 2008 the arbitration judge determined the land value to be $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 July 2013.  Because the determination of the 2003 rent adjustment was not made until January 2008, a significant amount of retroactive rent was then due, with interest, totaling just over $6 million.

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.  The Company (the holder of the master lease) has turned to its holding company, Shelter Bay Community, Inc., to assist with the payment of the $6 million retroactive back rent and the $1,358,000 annual rent liability each year going forward.

In May of 2008, members of the Shelter Bay Community, Inc. ratified an assessment for the payment of retroactive back rent on the master lease for the period July 1, 2003 through June 30, 2008.  The amount assessed to each member varied in the range of $4,000 to $18,000 per lot, based on the land value of the lot.  As of January 2010, about 85% of the members have paid their back rent assessment balances in full.  The remaining account balances are being paid monthly, with payment in full due May 31, 2013.  Using the back rent payments received, plus reserve funds held by the Company and the Community, the Back Rent liability to the Tribe was paid in full on November 30, 2009.

In May of 2008 and again in May 2009, members of the Shelter Bay Community, Inc. ratified an assessment for “Supplemental Rent”, which works to supplement the annual leasehold income (from sub-lessees) to the Shelter Bay Company.  The Supplemental Rent also varies in the range of $500 to $2,200 per lot per year, again based on the land value of the lot.  This will be a recurring assessment as long as the master lease rent exceeds the proceeds of the Company’s annual sublease fees received.

Master Lease Extension Beyond 2044
Shelter Bay Company has expressed the desire to have the Tribe/Indian Owners extend the terms of the Master Lease beyond June 30, 2044.  An extension would help to maintain property values and facilitate buyers in securing mortgage financing. Most mortgage loan underwriters look for at least 30 years + 5 years remaining under the lease as criteria to underwrite a 30-year loan.  As we have passed the 35-year underwriting countdown, the ability to get loans on the property has been somewhat diminished.  Both the Tribe and Shelter Bay Company acknowledge this dilemma.  Shelter Bay hopes to enter into lease extension discussions with the Tribe during the year 2010.