Hawaii Condo Law

A few years ago, the legislature adopted a law that governs the operation of nonprofit corporations that are incorporated. The law modifies the way that incorporated associations handle cumulative voting. Under Hawaii nonprofit corporation law, the following must happen before cumulative voting will be permitted at a community association’s election. The law for cumulative voting for nonprofit corporations requires all three of the following things before cumulative voting is allowed:

1.   Cumulative voting must be authorized by the association’s Articles of Incorporation or By-Laws;
2.   The notice of the association’s meeting (or a statement accompanying the notice) must state that cumulative voting will take place; and
3.   A member must give notice of intent to cumulatively vote at least 48 hours before the meeting or such longer period provided in the By-Laws.

The Hawaii law is based on the Model Nonprofit Corporation Act. The reason for these provisions in the Model Nonprofit Corporation Act is that cumulative voting deprives the rights of a majority of the owners. Cumulative voting allows a minority to elect a director even though the majority would prefer another candidate. Since it is contrary to the rights of the majority, the Hawaii Nonprofit Corporation Act requires notice be given and a member request the cumulative voting. There were probably some other policy concerns about cumulative voting. The average member does not understand how cumulative voting works. Since only a few people understand the process and the way it can be used to maximum effect, it’s antidemocratic effect is even more pronounced. In addition, there was also the practical recognition that if someone didn’t request cumulative voting, the corporation should have to go through the process of voting cumulatively.

As a result of this law, we recommend that all incorporated community associations other than condominiums to include the following language in their notice of meeting at which directors are to be elected if their By-Laws or Articles of Incorporation permit cumulative voting

Article ____, Section _____ of the Association’s By-Laws states that the election of directors shall be by cumulative voting. Hawaii Revised Statutes Section 414D-114 states that if the By-Laws authorizes cumulative voting by the members, cumulative voting will be permitted only if a member gives notice of intent to cumulatively vote not less than 48 hours before the meeting. Accordingly, unless notice is given within the time period mandated by the statute, cumulative voting will not be permitted.

After the notice of the meeting is distributed to the members, any member, including any board member may provide notice of intent to cumulatively vote.

In 2005, the cumulative voting provisions of the Nonprofit Corporation were partially superceeded for condominium associations only. For condominium associations (including incorporated condominium associations) owners holding more than 50% of the common interest in the condominium can remove any director at a meeting regardless of the provisions of the association’s By-Laws. The percentage would not change depending on whether cumulative voting was used to elect the director. If the By-Laws provide for cumulative voting by the owners, the owners may so vote if an owner gives notice of the owner’s intent to cumulatively vote before voting commences.

Revised August 14, 2005: This article was revised to incorporate the effect of Act 155 which adopted special rules for cumulative voting of condominium associations .

Under Hawaii Condo Law, an amendment to the governing documents must be submitted to the owners for approval. An amendment to the Declaration will require the approval of owners holding at least 75% of the common interest in the Project unless the project has five or fewer apartments. In these smaller projects, the Declaration may have a higher owner approval requirement for amendments. Under Hawaii Condo Law, an amendment to the By-Laws will require approval of owners holding at least 65% of the common interest in the Project. The owner approval for an amendment may occur at a meeting of the members or by written consent. The written consent is normally a ballot that is mailed to the members with a text of the proposed amendments and cover letter. The Recodification, if applicable to your condominium will change the approval requirements for amendments to Declarations and By-Laws to 67%.

After the amendment has been approved by the owners, the amendment must be recorded in the Bureau of Conveyances or filed with the Office of the Assistant Registrar of the Land Court. The amendment is not effective until it has been recorded or filed. After the amendment has been recorded, the normal practice is to mail out copies of the amendment to all the owners of the condominium association.

There are certain amendments that are either not permitted or would require 100% approval of the owners. For instance, changing a common element into a limited common element or part of an apartment would require approval of 100% of the owners. Judges have also ruled that changing the way maintenance fees are assessed requires approval of 100% of the owners.

Byron R. Hanke and I wrote a book called, Design Review: How Community Associations Maintain Peace & Harmony. Amazon CAI

The book is a short description of the architectural review process in layman’s terms. It covers design review authority, guidelines &procedures, facilitating compliance, and how Federal laws affecting design review. I should mention that the authors do not receive any royalties and the proceeds from the book go to the Community Associations Institute.

Design review is the process by which a community association regulates the overall appearance of the Project. The purpose of design review is to maintain, protect and enhance property values and to regulate changes which are otherwise detrimental to the community.

The Federal Fair Housing Act was adopted in 1968 as Title VIII of the Civil Rights Act of 1968. In 1988, Congress expanded the scope of the Federal Fair Housing Act by adopting the Federal Fair Housing Amendments Act of 1988. The Federal Fair Housing Amendments Act established new enforcement procedures and created two new protected classifications. The Federal Fair Housing Act protects individuals from housing discrimination on the basis of race, color, religion, sex, familial status, disability, or national origin. These categories are known as “Protected Classes”. In addition, the Hawaii State Fair Housing Act adds the classification of age and marital status to the Protected Classes.

The Federal Fair Housing Act introduced “familial status discrimination” in 1988. Lawmakers chose to use the term “familial status discrimination” rather than the more easily understood term “discrimination against families with minor children”. Under the Federal Fair Housing Act, it is illegal to discriminate against families with minor children in housing.

Community Associations refers to the organizations that manage and operate common property for the owners of a condominium, planned community and residential cooperative. In Hawaii, condominiums are governed by Hawaii Revised Statutes Chapter 514A. Condominiums are the most common for of community association in Hawaii. In a condominium, all the members own the common areas jointly while each member owns their own apartment.

Planned Communities are governed by Hawaii Revised Statutes Chapter 421J. In Planned Communities, the association is normally a Nonprofit Corporation and the corporation owns the common property. Each of the members own their lots.

Residential cooperatives are normally governed by Hawaii Revised Statutes Chapter 421I. In a residential cooperative, the cooperative is normally a corporation that owns or leases the Project. Each shareholder has the right to lease or sublease an apartment from the cooperative.

The 2004 legislature has adopted part of a new Condominium Property Act with an effective date of July 1, 2005. The amendment is substantial and is often referred to as the Recodification of the Condominium Property Act. The new Condominium Property Act is contingent upon the legislature’s adoption of the second half of the Recodification relating to development and sale of condominiums. The 2005 legislature adopted and the Governor signed the second part of the new Condominium Act. The effective date of the Recodification has been delayed until July 1, 2006. The Recodification is contained in Hawaii Revised Statutes Chapter 415B

Revised 6/23/2005 to reflect adoption of the second part of the Recodification and delayed effective date.

Revised 12/7/2005 to provide the new HRS Chapter Designation and the link for the Recodification at the Hawaii State Legislature.