Hawaii Condo Law

The Hawaii Real Estate Commission is revising, editing and rewriting its 1991 brochures entitled “Condominium Owners Rights and Responsibilities” and “Condominium Board Members Powers and Duties“. The brochures will be updated to be consistent with the current condominium laws (Hawaii Revised Statutes Chapters 514A and 514B) and other related federal and state laws, court decisions administrative decisions and policies and procedures. John Morris and I have been selected by the Commission to rewrite and update the brochures.

We are soliciting written comments, recommendations and suggestions from interested condominium community stakeholders. If you, your organization, or anyone you know has any comments, recommendations and suggestions regarding the rewrite and update, please submit them in writing to us by September 26, 2008. Our address is:

Richard S. Ekimoto, Esq.
Ekimoto & Morris, LLLC
1001 Bishop Street, Suite 780
Honolulu, Hawaii 96813-3410

You can also email your comments to us at brochure @ hawaiicondolaw.com. Please include HREC Rewrite in the Subject Line.

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.

On July 18, 2006, I posted an article about the sections of the Recodification that automatically apply to existing condominiums as well as the sections that do not automatically apply to existing condominiums.

If you’d like to eliminate punitive damages for your condominium association or reduce the approval requirement for declaration amendments and leases of the common elements, Hawaii Revised Statutes §514B-23 is the answer. Hawaii Revised Statutes §514B-23 will allow you to amend your governing documents to conform to the provisions of Hawaii Revised Statutes Chapter 514B. While an amendment would not be needed for those sections that automatically apply to existing condominiums (provided that one of the three exceptions do not come into play), existing condominiums must adopt an amendment for the other provisions of the Recodification to apply. Originally, Hawaii Revised Statutes §514B-23 was silent on the approval requirement for these amendments. That meant that for most condominiums, By-Law amendments would require the approval of 67% and Declaration amendments would require 75% approval.

However, an amendment to the Recodification was adopted as Act 273 which provides that these amendments only require the approval of a majority of the owners. Most involved in the Recodification effort has referred to as the “opt-in” provision. With the approval of a majority of the apartment owners, you can adopt amendments to the governing documents which would allow you to take advantage of the Recodification sections that do no automatically apply to existing condominiums.

Any existing condominium association that is considering an amendment to their Declaration should seek a vote to opt-in. Even if you’re not amending your Declaration, there are significant provisions that could benefit the Association. Opting-in also has the benefit of eliminating the concern that the automatic provisions would not apply because of a contract clause issue. For that reason, it is likely that most condominium associations will eventually choose to opt-in.

On July 13, 2006, I posted an article about the exceptions to the Recodification sections that automatically apply to existing condominiums. In this article, I want to focus on the statutes that automatically apply and more importantly, the statutes that do not automatically apply to existing condominiums. The following are the sections that automatically apply to existing condominiums unless one of the three exceptions I wrote about On July 13, 2006 comes into play:

1. HRS §514B-3: Definitions (to the extent that they are involved in any of the other sections, below)
2. HRS §514B-4: Separate Title & Taxation of Condominium Units
3. HRS §514B-5: Conformance with county land use laws
4. HRS §514B-35: Unit boundaries provisions that would treat windows, doors and other parts of the project that affects fewer than all of the owners as limited common elements
5. HRS §514B-41(c): Exception to apportioning limited common expenses when it would be more expensive to allocate
6. HRS §514B-46: Merger of increments
7. HRS §514B-72: Payments into condominium education trust fund
8. HRS Chapter 514B, Part VI: Most of the provisions applicable to the management of condominiums

While most of the provisions that involve the governance of condominium associations automatically apply to existing condominiums there are a few provisions that do not automatically apply to existing condominium associations. Some of the most significant provisions that do not automatically apply to existing condominiums are:

1. HRS §514B-9 (this provision establishes an obligation of good faith for associations, directors and owners on obligations and duties imposed by HRS Chapter 514B)
2. HRS §514B-10 (this provision requires that the condominium documents and 514B to be liberally construed by the courts and eliminates punitive damages for any claims under 514B)
3. HRS §514B-32(11) (this provision reduced the approval requirement for Declaration amendments to 67%)
4. HRS §514B-38 (this provision: (a) reduced the approval requirement for leases of the common elements to 67%; (b) permits the Association to allow owners to have minimal exclusive use of the common elements without 100% approval; and (c) permits the Association to convert open spaces to other uses without 100% approval)
5. HRS §514B-47 (this provision includes specific instructions for what happens when a leasehold condominium is condemned)

As you can see, some of the provisions that do not automatically apply to existing condominiums can have a substantial benefit to the associations. In my next post, I will discuss “opting-in” to the Recodification which will allow condominium associations to take advantage of these provisions.

There is a fair amount of confusion about how the Recodification applies to existing condominiums. Hawaii Revised Statutes §514B-22 identifies what parts of the Recodification are applicable to existing condominiums. It states:

Applicability to preexisting condominiums. Sections 514B-4, 514B-5, 514B-35, 514B-41(c), 514B-46, 514B-72, and part VI, and section 514B-3 to the extent definitions are necessary in construing any of those provisions, and all amendments thereto, apply to all condominiums created in this State before July 1, 2006; provided that those sections (i) apply only with respect to events and circumstances occurring on or after July 1, 2006; and (ii) shall not invalidate existing provisions of the declaration, bylaws, condominium map, or other constituent documents of those condominiums if to do so would invalidate the reserved rights of a developer or be an unreasonable impairment of contract. For purposes of interpreting this chapter, the terms “condominium property regime” and “horizontal property regime” shall be deemed to correspond to the term “condominium”; the term “apartment” shall be deemed to correspond to the term “unit”; the term “apartment owner” shall be deemed to correspond to the term “unit owner”; and the term “association of apartment owners” shall be deemed to correspond to the term “association.”

The statutory sections listed above are automatically applicable to existing condominiums unless:

1. you are dealing with an event or circumstance occurring before July 1, 2006
2. It conflicts with the existing provision of one of the condominium documents and the conflict would invalidate a reserve right of a developer; or
3. It conflicts with the existing provision of one of the condominium documents and the conflict would be an unreasonable impairment of contract

The first exception means if something occurred before the effective date of the Recodification, it would be governed by the old condominium law. For instance, an amendment to the By-Laws required 65% approval under the old condominium law but would require 67% approval under the new law. All the amendments that were passed before July 1, 2006 with more than 65% but less than 67% approval still remain valid.

The next two exceptions only apply when the new law conflicts with your Association’s governing documents. If the governing documents are silent or consistent with the list of statutory sections automatically applicable to existing condominiums, the last two exceptions are meaningless. The second exception is intended to protect the developer’s reserved rights. For instance, the developer might have reserved the right to merge phases into a single condominium. Hawaii Revised Statutes §514B-22 means that a change in the law won’t prevent the developer from merging the phases into a single condominium.

The last exception involves the “contract clause” of the U. S. Constitution. The contract clause prohibits the government from passing laws that impair contracts. That does not mean that all laws which contradict the provisions of a contract are invalid. The Hawaii Attorney General issued opinions that the legislature may adopt statutes having retroactive application on procedural issues. However, it is possible that a provision of 514B might be substantive and could legitimately be held to impair the existing governing documents of the Association.

The next two posts will discuss the list of statutes that are automatically applicable to existing condominiums(assuming that it does not fall under one of the exceptions) and “opting-in” to the Recodification.