Hawaii Condo Law

On April 23, 2007 and April 21, 2007, I reported on the conference committee on the leased fee conversion tax credit bill. The hearing notice states that the conference committee will reconvene on Thursday, April 26, 2007 at 10:30 a.m. in Conference Room 229.

On April 17, 2007, I reported on a House Consumer Protection Hearing on the Sunrise Review Resolution for a Condominium Commission. The House Consumer Protection Committee passed the bill without any amendments.

There is a hearing on Thursday, April 26, 2007 at 10:00 a.m. in room 309 on the bill before House Legislative Management Committee, Rep. Michael Y. Magaoay.

Persons wishing to offer comments are requested to submit 27 copies of their testimony at least 24 hours prior to the hearing to:

  Room 322 in the State Capitol; OR

  The HOUSE testimony drop off box in the turnaround area of the Capitol Basement parking lot.

Persons wishing to fax comments less than 5 pages in length are requested to transmit their testimony to 586-6501 (Oahu) or 1-800-535-3859 (Neighbor Islands). On the transmittal, please indicate:

  The Committee the comments are directed to;

  The date and time of the hearing; and

  The number of copies the Committee is requesting.

There is a hearing on Monday, April 24, 2007 at 2:00 p.m. in room 016 of Senate Conferees on bills of interest to community associations to decide whether to recommend agreement of the House versions.

Senate Conferees: Senators Taniguchi, Chair; Espero, Slom

The hearing notice discusses the following bills of interest to community associations:

SB 921 HD1 This bill would limit the charge for documents provided to owners to a reasonable fee not to exceed $1 per page (except that more may be charged for pages that are larger than 8 1/2 by 11.

SB 1654 HD1 This bill attempts to clarify that mediations and “condo court” proceedings apply to condominiums created before July 1, 2006 and that if any “condo court” cases were dismissed because of the repeal of the condo court provisions.

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

On April 21, 2007, I reported on the conference committee on the leased fee conversion tax credit bill. The hearing notice states that the conference committee will reconvene on Tuesday, April 24, 2007 at 10:30 a.m. in Conference Room 229.

4/24/2007: Corrected Title of Post (used to read “Cumulative Voting Bill Conference Committee Hearing”

There is a hearing on Monday, April 23, 2007 at 10:30 a.m. in room 229 on a bill of interest to community associations before a Conference Committee.

House Conferees: Representatives h, Co-Chairs; Ward
Senate Conferees: Senators Fukunaga, Chair; Taniguchi/Baker, Co-Chairs; Chun Oakland,

The hearing notice discusses the following bills of interest to community associations:

SB 600 HD2 This bill would provide a tax exemption for an unspecified portion of the capital gains tax for the sale of the leased fee interest to condominium associations or residential cooperatives. This would benefit associations and lessees in community associations by encouraging the sale of leased fee interests.

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

On April 18, 2007, I reported on the conference committee on the Condominium Owners List Bill and the Recodification correction bill. The hearing notice states that the conference committee will reconvene on Monday, April 23, 20067at 2:00 p.m. in Conference Room 016.

There is a hearing on Thursday, April 19, 2007 at 2:00 p.m. in room 016 on some bills of interest to community associations before a Conference Committee.

House Conferees: Representatives Herkes, Chair; McKelvey, Marumoto
Senate Conferees: Senators Taniguchi, Chair; Espero, Slom

The hearing notice discusses the following bills of interest to community associations:

SB 920, HD1 This bill would require that managing agents obtain the prior written consent to use a condominium association’s owners’ list. If read literally, the provision would require prior written board approval for the managing agent to send out the notice of annual meeting. The bill would also provide that membership lists in the possession of the managing agent or the resident manager are the property of the Association. This is apparently true even if they purchase the owners list from the tax department. Finally, the bill provides that the managing agent, resident manager, or board may not use the information contained in the lists to create any separate list for the purpose of evading this section. It is unclear why the Board is included since they are entitled to authorize the managing agent to use the Association’s list.

SB 1704, HD1 This bill re-enacts portions of Hawaii Revised Statutes Chapter 514A (the old condominium law) that was accidentally repealed last year. In addition, the bill makes some changes that the bill describes as technical and conforming amendments. These are:

• A proposed amendment to HRS §514B-86 relating to the public report
• A proposed amendment to HRS §514B-103 relating to the condominium association’s fidelity bond
• A proposed amendment to Act 93 (2005) relating to a developer converting HRS 514A projects to 514B projects

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees to express your opinions on the bills.

In the year 2000, we were successful in getting condominium associations a limited priority lien for delinquent assessments. The limited priority lien is for up to 6 months of delinquent assessments or $1,800.00, whichever was smaller. This means that a portion of the condominium association’s lien will be paid before the mortgage on the unit. The limited priority lien statute is contained in HRS §514B-146(g) & (h).

As part of a compromise with the mortgage bankers, the law included a couple of provision, including that the limited priority lien would automatically end in December, 2003. In 2003, that sunset date was extended to December 31, 2007.

On April 17, 2007, Governor Lingle signed into law SB923 which repealed the sunset date. This means that the limited priority lien is now a permanent part of the condominium law.

There is a hearing on Friday, April 20, 2007 at 9:00 a.m. in room 229 on a resolution of interest to community associations before the House Consumer Protection Committee before Chair, Rep. Robert N. Herkes. The hearing notice discusses the following resolution of interest to community associations:

SCR 160, SD1 Under Hawaii law, before the state can implement a new scheme regulating a profession, it must first have the Auditor conduct a sunrise review. A sunrise review is a study evaluating the need for the regulation of the profession or industry. This resolution would require the auditor to conduct a study to determine whether it is appropriate for the State to establish a new Commission to:

1. Oversee the implementation and regulation of chapter 514B, Hawaii Revised Statutes, relating to condominiums; and
2. Develop, implement, and enforce policies relating to condominiums in the State; now, therefore,

A few years ago, a sunrise review was done for the certification of condominium managers. I have some concerns about the resolution. First, the proposed Commission would have broader powers than the Hawaii Real Estate Commission. The Hawaii Real Estate Commission only has powers with respect to certain sections of Hawaii Revised Statutes Section 514B. In contrast, the proposed Condominium Commission would oversee the implementation and regulation of all of Chapter 514B. This may lead to even greater micromanagement of condominium associations in Hawaii.

Second, there does not appear to be a limit of the powers of the proposed Condominium Commission to enforce policies relating to condominiums. This, too, could increase the extent of micromanagement of condominium associations in Hawaii.

Third, there is some concern that a Condominium Commission might be a magnet for individuals with an agenda rather than people with concerns about a how a regulatory system affects thousands of condominiums of different sizes and needs throughout the State. Explaining this to legislators who must answer to voters is a lot easier than explaining it to appointed commissioners.

Persons wishing to offer comments are requested to submit 35 copies of their testimony at least 24 hours prior to the hearing to: Room 315 in the State Capitol; OR The HOUSE testimony drop off box in the turnaround area of the Capitol Basement parking lot. Persons wishing to fax comments less than 5 pages in length are requested to transmit their testimony to 586-6501 (Oahu) or 1-800-535-3859 (Neighbor Islands). On the transmittal, please indicate:

  The Committee the comments are directed to;

  The date and time of the hearing; and

  The number of copies the Committee is requesting.

Most people are aware that when someone files for bankruptcy, creditors are to cease collection efforts until a court order is issued lifting the automatic stay. A decision this week from the Hawaii Bankruptcy Court involving the automatic stay illustrates the risks of not complying with the automatic stay. The debtor filed an adversarial proceeding against the creditor seeking damages for violating the automatic stay. The creditor is alleged to have sent statements with the amounts owed “for informational purposes”. The court ruled that the complaint stated a valid claim if proven and allowed the claim to go to hearing.

For a community association, this means that statements of accounts should not be sent to a delinquent owner once they have filed for bankruptcy. The only exception would be statements that showed only the amounts that were incurred after the bankruptcy petition has been filed. Since community associations are permitted to seek recovery of post-petition indebtedness, sending a statement for only those amounts is permitted. Failure to follow these procedures could result in the association being sued for damages for violating the automatic stay.

Related issues: FAQ on Bankruptcy Abuse Prevention and Consumer Protection Act of 2005