Hawaii Condo Law

As most of you know, I have been involved with CAI’s National’s efforts to represent community associations in issues before the Federal Communications Commission (”FCC”). This summer, CAI submitted testimony on whether the FCC should consider prohibiting exclusive contracts for larger cable operators. CAI’s position was the same as it was 8 years ago when the FCC decided that it did not have the authority to prohibit exclusive contracts — that many community associations use exclusive contracts to negotiate better rates, special benefits (like rewiring of buildings) or prevent damage to the common areas. This summer the FCC reversed its prior decision and decided that it did have the authority to prohibit exclusive contracts.

Today, the FCC decided to adopt a rule prohibiting exclusive cable contracts for Multiple Dwelling Units (which would include condominiums, planned communities and residential cooperatives). Several people have asked why we haven’t written on this issue since it was a topic in recent newspaper articles. The difficulty is that although a rule has been adopted, the actual rule and FCC order is not yet generally available. The news paper accounts appear to be based on the FCC press release and the written statements of FCC Commissioners Martin, Copps, Adelstein, Tate and McDowell. A draft rule and order was also not available prior to the FCC Meeting.

It is clear from the press release and written statements that exclusive contract provisions in existing cable contracts with large cable companies are now void. However, other details will have to wait until the formal rule and order is issued. For instance, we do not know how bulk cable agreements will be affected by the FCC Rule and Order. It seems unlikely that bulk cable agreements would be prohibited, but it’s hard to comment without the actual rule and order. It is clear, however, that agreements with larger cable operators that prohibit other providers from the project would be illegal. The larger cable companies have indicated that they may challenge the FCC Rule and Order.

In addition to prohibiting exclusive cable contracts, the FCC also adopted a Further Notice of the Proposed Rulemaking that seeks comment on whether the FCC address exclusivity clauses entered into by Direct Broadcast Satellite providers (satellite television), private cable operators (smaller cable operators), and other multichannel video programming distributors.

I will update this article after the FCC’s Rule and Order is available.

Until the new condominium law, there was no formal statutory definition of a conflict of interest. HRS §514B-125(f) now defines:

“Conflict of interest”, as used in this subsection, means an issue in which a director has a direct personal or pecuniary interest not common to other members of the association.

Until the new condominium law, there was no formal statutory definition of a fiduciary duty. HRS §514B-106(a) now states:

In the performance of their duties, officers and members of the board shall owe the association a fiduciary duty and exercise the degree of care and loyalty required of an officer or director of a corporation organized under chapter 414D.

1. In good faith;
2. With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
3. In a manner the director reasonably believes to be in the best interests of the corporation.

Most of you are aware that the Hawaii State Legislature is in session to consider the super ferry bill. In addition, by law, the Senate is required to consider any appointments by the Governor to judgeships, cabinet positions and commissions. However, since no action involving community associations is likely, I was thinking that I didn’t have to say anything in the Hawaii Condo Law Blog. Then I realized that it was important to point that out so you’d know that we weren’t expecting any legislation involving community associations. If that changes, you’ll see something here.

Until the new condominium law, there was no formal definition of a resident manager. HRS §514B-3 now states:

“Resident manager” means any person retained as an employee by the association to manage, on-site, the operation of the property.

Pursuant to HRS §514B-137(a), the Association is responsible for the operation of the property. What is operation of the property. The condominium property act defines it very broadly in HRS §514B-3 as follows:

“Operation of the property” means the administration, fiscal management, and physical operation of the property, and includes the maintenance, repair, and replacement of, and the making of any additions and improvements to, the common elements.

One of the changes in the law is the adoption of terms from the Uniform Common Interest Ownership Act (UCIOA). UCIOA is a model act that has been adopted in some form by 17 states. The new law follows UCIOA’s use of the term “unit” rather than “apartment,” in part to reflect that condominium units are not only apartments. They can be parking stalls, boat docks, commercial spaces, warehouse spaces, etc. Hawaii Revised Statutes 514B-3 definition is:

“Unit” means a physical or spatial portion of the condominium designated for separate ownership or occupancy, the boundaries of which are described in the declaration or pursuant to section 514B-35, with an exit to a public road or to a common element leading to a public road.

Last month, I did a seminar for the Hawaii IREM Chapteron the new condominium law and how it is different from the old law. I’ve previously wrote about the process of opting-in more fully to the new condominium law. That article and those referenced in the article explain some of the major differences between the old law and new law. However, in the next few articles, I will discuss some of the other differences.

Last Wednesday, I wrote about how a bylaw amendment would likely be effective in restricting smoking in the unit, while a house rule would probably not be effective. I do not normally respond to questions emailed to us from our blog or website. The reason for this is that we want to avoid creating an attorney-client relationship which could create a conflict with one of existing clients and because it is impracticable to respond to all the questions we receive. However, in this case, we received a couple of questions on this topic, including one from an existing client: why would a court enforce a bylaw amendment restricting smoking in the unit but not a house rule. Historically, courts have given more deference to bylaw amendments than house rules. This is because generally, house rules are adopted by the Board while bylaw amendments are adopted by a super-majoirty of the owners (67% in Hawaii). In addition, because the bylaws are recorded as public records, courts given them more weight.

This judicial preference for bylaw amendments is reflected in the a case last year in which a Colorado court upheld a bylaw amendment prohibiting smoking in the units. Colorado attorneys Tom Hindman and Loura Sanchez were involved in this case and write about it in their web site.

On Wednesday, I posted an updated article on whether associations can restrict smoking in the units. Coincidentally, the City of Belmont, in the South Bay area (half way between San Francisco & San Jose) adopted a smoking ordinance a few weeks ago, that among other things, prohibits smoking in individual units and the patio/yard areas of multi-unit residences (apartments, condominiums, and townhouses) which share common floors and/or ceilings with at least one other such unit. The new law will become effective next month on November 2, 2007, but the provision prohibiting smoking in units of multi-unit residences would not become effective until 14 months thereafter or until the legal occupants vacate the unit. The San Jose Mercury News has identified this law as the first that prohibits smoking in one’s own home.

In addition to prohibiting smoking in units, the law establishes non-consensual exposure to second-hand smoke as a nuisance and trespass. This provision, if valid, would allow individuals to sue for nuisance without having to prove the the level of second-hand smoke was an unreasonable interference of real property rights.

There has been a lot of furor about the new law and it points to the difficulty of regulating smoking in a unit whether by an association or the government. The concept of “my home is my castle” clashes with the ability of governmental and associations regulating conduct for the collective good. I anticipate that more laws similar to the Belmont California ordinance will be considered by other city councils and state legislatures. Already several of our community association clients have adopted bylaw amendments restricting smoking in all or part of the units.