There is a hearing on Tuesday, February 7, 2006 at 9:00 a.m. in room 016 on bills of interest to community associations before the Senate Commerce, Consumer Protection and Housing Committee before Chair Sen. Ron Menor. The hearing notice discusses the following bills of interest to community associations:
SB 2668 would require managing agents that leases space that it manages to obtain an appraisal for the lease value. In addition, the bill would require developers to obtain at least two bids for managing agents. The problem with this bill is that it fails to understand that appraisals cost money that will eventually be paid by the association through lower lease rents. Moreover, most people are aware of the going lease rent for property. In the unusual situations where the association is unsure, it can decide for itself if an appraisal is necessary.
SB 2763 would require associations to send notices by certified mail of delinquencies 10, 30 and 45 days to the delinquent owner. The 45 day notice shall state that attorneys fees will be assessed, but attorneys fees cannot be assessed until 60 days. If the notices are not sent as provided in the bill, the Association would be prohibited from collecting the delinquency. The bill would also limit late fees to 20% of the delinquency. This bill has many problems. First, the bill is extremely onerous. If the notice requirements are not exactly met, the Association would be prohibited from collecting the delinquency. Therefore, if the 10 day notice is sent on the 11th day, the Association would be barred from collecting the fees. What is even worse it that all the other owners that are current with their assessments would have to pay for the delinquency. Second, the costs of collecting assessments would go up considerably if notices must be sent out on the 10th, 30th and 45th days by certified mail. Third, there is no rational basis for prohibiting attorneys fees until the 60th day. Many associations have policies that submit delinquencies to an attorney if the owner is chronically delinquent. Moreover, sometimes the attorneys must get involved early because the owner is selling their unit or a foreclosure has been commenced by another party. Fourth, the limit on late fees are not reasonable. Typically, late fees are a set dollar amount which is intended to pay for certain expenses related to the delinquency. These expenses exist regardless of the amount of the delinquency. Fifth, the philosophy of the bill is backwards. It casts the Association and the owners that pay their assessments as the villains and the delinquent owners as the victims. The reverse is actually true. The delinquent owners are leeching off the owners that pay their assessments in a timely fashion.
SB 2962 would make various changes to the Recodification proposed by CAI’s Hawaii Legislative Action Committee. It contains some housekeeping corrections to the law. In addition, it makes some needed changes to the law including clarifying how the law would apply to existing condominiums and clarifying the insurance provisions.
SB 2103 would make the Recodification apply to all condominiums. While it makes sense that certain provisions of the Recodification apply to existing condominiums, the bill would create problems. For instance, since the Recodification changes the provisions for creating and the initial disclosure for condominiums, all existing condominiums would be in violation of the law if the bill were passed. A better approach would be to make certain provisions applicable to existing condominiums. That approach is taken in SB 2962, above.
SB 2543 would make condo court permanent. The condo court proposed by this bill continues to include a limit of 30 cases per year and also includes all disputes that are subject to mediation. As many of you know, I supported a more limited form of condo court as it could limit the micromanagement of associations through legislation. Not all disputes that should be mediated should be subject to a extra-judicial process. For instance, sometimes it is important for an association to seek an injunction before an owner takes steps that endanger health or safety or makes permanent changes to the project. In addition, the bill is probably unconstitutional since it eliminates the right to a jury trial protected by the Hawaii State Constitution. If this year’s bills are any indication, the attempts to micromanage associations through legislation is not being curtailed, but an extra-judicial remedy still makes sense if it were more limited.
SB 2545 would extend the condo court pilot project for an additional 2 years.
SB 2544 would create a 2-year pilot condo court project for planned community associations and extend the pilot condo court project for an additional 2 years. The bill has an additional constitutional defect in that the subject of the bill (which includes condo court for condominium associations) is broader than the title of the bill (relating to planned community associations).
SB 2092 prohibits planned community associations from charging members costs for information unless the association notifies the member in writing at least 10 days prior. The bill would exclude prior notice of information on delinquent assessments or in connection with proceedings to enforce the law or governing documents.
SB 2192 would require that the current financial statements be made available at no cost to the owners or on 24 hour loan at a location within the planned community. In addition, the bill would require that board minutes for the current or prior year be available at no cost or on 24 hour loan within the community; or transmitted by mail, fax or email as indicated by the member. The member must be informed of the cost prior to transmittal. The problem with this bill is that many planned community associations do not have locations within the community to make documents available. Many planned communities, even large ones, do not have site managers or employees.
SB 3067 would make the grantee and grantor of a unit in a planned community association jointly and severally liable for delinquent assessments, but would allow the purchaser to obtain a notice from the association of the amounts owed and rely on it. This procedure is in existence for condominium associations and works well.
SB 2193 would require that planned community associations allow members to review financial statements, general ledgers, accounts receivable ledgers, accounts payable ledgers, check ledgers, insurance policies, contracts, invoices for the duration that the association keeps the records rather than for 2 years.
Persons wishing to testify should submit 25 copies of their testimony to the committee clerk, Room 219, State Capitol, 24 hours prior to the hearing. Testimony may also be faxed if less than 5 pages in length, to the Senate Sergeant-At-Arms Office at 586-6659 or 1-800-586-6659 (toll free for neighbor islands), at least 24 hours prior to the hearing. When faxing, please indicate to whom the testimony is being submitted, the date and time of the hearing, and the required number of copies needed for submittal.
2/6/2006: Corrected date of hearing from Thursday, February 9, 2006 to Tuesday, February 7, 2006 and changed reference to SB 2076 to SB 2668.
2/11/2006: Corrected description of SB 2545.
