Bill Text: HI HB2542 | 2018 | Regular Session | Introduced
Bill Title: Relating To Associations.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-01-29 - Referred to CPC, JUD, referral sheet 9 [HB2542 Detail]
Download: Hawaii-2018-HB2542-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2542 |
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TWENTY-NINTH LEGISLATURE, 2018 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to Associations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 421J, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§421J- Association
attorneys; legal actions; communication with unit owners. Any attorney retained by an association,
or board on behalf of an association, to pursue legal action against an owner, occupant, tenant, employee of an owner,
or any other person who may in any manner use the property, including legal
action to:
(1) Collect delinquent assessments against an
owner's unit;
(2) Foreclose any lien thereon; or
(3) Enforce any provision of the association
documents or this chapter;
shall first
communicate with the unit owner regarding the legal action, including
information on the alleged violation.
All communication regarding the alleged violation and legal action shall
be made directly with a unit owner, or if a unit owner has retained an attorney
with the attorney representing the unit owner, and shall be in the form of
written correspondence, fax transmittal, electronic mail, telephone
communication, or in-person communication."
SECTION 2. Chapter 514B, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§514B- Association
attorneys; legal actions; communication with unit owners. Any attorney retained by an association,
or board on behalf of an association, to pursue legal action against an owner,
occupant, tenant, employee of an owner, or any other person who may in any
manner use the property, including legal
action to:
(1) Collect
delinquent assessments against an owner's unit;
(2) Foreclose
any lien thereon; or
(3) Enforce any provision of the declaration,
bylaws, house rules, this chapter, or the rules of the real estate commission;
shall first communicate
with the unit owner regarding the legal action, including information on the
alleged violation. All communication
regarding the alleged violation and legal action shall be made directly with a
unit owner, or if a unit owner has retained an attorney with the attorney representing
the unit owner, and shall be in the form of written correspondence, fax
transmittal, electronic mail, telephone communication, or in-person
communication."
SECTION 3. Section 421J-10.5, Hawaii Revised Statutes, is amended to read as follows:
"§421J-10.5 Association fiscal matters; lien for
assessments. (a) All sums assessed by the association, but
unpaid for the share of the assessments chargeable to any unit, shall
constitute a lien on the unit. The
priority of the association's lien shall, except as otherwise provided by law,
be as provided in the association documents or, if no priority is provided in
the association documents, by the recordation date of the liens; provided that
any amendment to the association documents that governs the priority of liens
on the unit shall not provide that an association lien shall have priority over
a mortgage lien that is recorded before the amendment is recorded. A lien recorded by an association for unpaid
assessments shall expire six years from the date of recordation unless proceedings to enforce the lien are instituted
prior to the expiration of the lien; provided that the expiration of a recorded
lien shall in no way affect the association's automatic lien that arises
pursuant to this subsection or the association documents. Any proceedings to enforce an association's
lien for any assessment shall be instituted within six years after the
assessment became due; provided that if the owner of a unit subject to a lien
of the association files a petition for relief under the United States
Bankruptcy Code (11 U.S.C. §101 et seq.),
the period of time for instituting proceedings to enforce the association's
lien shall be tolled until thirty days after the automatic stay of proceedings
under section 362 of the United States Bankruptcy Code (11 U.S.C. §362) is
lifted.
The lien of the association may
be foreclosed by action or by nonjudicial or power of sale foreclosure
procedures set forth in chapter 667, by the managing agent or board, acting on
behalf of the association and in the name of the association; provided that
no association shall exercise nonjudicial or power of sale foreclosure procedures set forth in chapter 667 to
foreclose a lien against a unit unless specifically provided for in the
purchase agreement between a unit owner and an association; provided
further that no association may exercise the
nonjudicial or power of sale remedies provided in chapter 667 to foreclose
a lien against any unit that arises solely from fines, penalties, legal fees, or
late fees, and the foreclosure of any such lien shall be filed in court
pursuant to part IA of chapter 667. In
any association foreclosure, the unit owner shall be required to pay a
reasonable rental for the unit, if so provided in the association documents or
the law, and the plaintiff in the foreclosure shall be entitled to the
appointment of a receiver to collect the rental owed by the unit owner or any
tenant of the unit. If the association
is the plaintiff, it may request that its managing agent be appointed as
receiver to collect the rental from the tenant.
The managing agent or board, acting on behalf of the association and in
the name of the association, may bid on the unit at foreclosure sale and
acquire and hold, lease, mortgage, and convey the unit thereafter as the board
deems reasonable. Action to recover a
money judgment for unpaid assessments shall be maintainable without foreclosing
or waiving the lien securing the unpaid assessments owed.
In
the case of a voluntary conveyance, the grantee of a unit shall be jointly and
severally liable with the grantor for all unpaid assessments against the latter
for the grantor's share of the common expenses up to the time of the grant or
conveyance, without prejudice to the grantee's right to recover from the
grantor the amounts paid by the grantee.
Any such grantor or grantee is entitled to a statement from the board,
either directly or through its managing agent or resident manager, setting
forth the amount of the unpaid assessments against the grantor. The grantee is not liable and the unit
conveyed is not subject to a lien for any unpaid assessments against the
grantor in excess of the amount set forth in the statement, except as to the
amount of subsequently dishonored checks mentioned in the statement as having
been received within the thirty-day period immediately preceding the date of
such statement.
(b) Except as provided in subsection (g) or in
the association documents, when the mortgagee of a mortgage of record or other
purchaser of a unit obtains title to the unit as a result of foreclosure of the
mortgage, the acquirer of title and the acquirer's successors and assigns shall
not be liable for the share of the assessments by the association chargeable to
the unit that became due prior to the acquisition of title to the unit by the
acquirer. The unpaid share of
assessments shall be deemed to be assessments collectible from all of the unit
owners, including the acquirer and the acquirer's successors and assigns. The mortgagee of record or other purchaser of
the unit shall be deemed to acquire title and shall be required to pay the
unit's share of assessments beginning:
(1) Thirty-six
days after the order confirming the sale to the purchaser has been filed with
the court;
(2) Sixty
days after the hearing at which the court grants the motion to confirm the sale
to the purchaser;
(3) Thirty
days after the public sale in a nonjudicial power of sale foreclosure conducted
pursuant to chapter 667; or
(4) Upon the recording of the instrument of conveyance;
whichever occurs first; provided that the mortgagee of record or other purchaser of the unit shall not be deemed
to acquire title under paragraph (1), (2), or (3), if transfer of title is
delayed past the thirty-six days specified in paragraph (1), the sixty days
specified in paragraph (2), or the thirty days specified in paragraph (3), when
a person (other than the mortgagee of record or other purchaser of the unit)
who appears at the hearing on the motion or a party to the foreclosure action (other
than the mortgagee of record or other purchaser of the unit) requests
reconsideration of the motion or order to confirm sale, objects to the form of
the proposed order to confirm sale, appeals the decision of the court to grant
the motion to confirm sale, or the debtor or mortgagor declares bankruptcy or
is involuntarily placed into bankruptcy.
In any such case, the mortgagee of record or other purchaser of the unit
shall be deemed to acquire title upon recordation of the instrument of
conveyance.
(c) Except as provided in section 667-92(c), no
unit owner shall withhold any assessment claimed by the association. A unit owner who disputes the amount of an
assessment may request a written statement clearly indicating:
(1) The
amount of regular and special assessments included in the assessment, including
the due date of each amount claimed;
(2) The
amount of any penalty, late fee, lien filing fee, and any other charge included
in the assessment;
(3) The
amount of attorneys' fees and costs, if any, included in the assessment;
(4) That
under Hawaii law, a unit owner has no right to withhold assessments for any
reason;
(5) That a
unit owner has a right to demand mediation to resolve disputes about the amount
or validity of an association's assessment; provided that the unit owner
immediately pays the assessment in full or enters into an installment
payment agreement pursuant to subsection (i) and keeps assessments and
installment payments current; and
(6) That
payment in full of the assessment or payment of installment payments
pursuant to subsection (i) does not prevent the unit owner from contesting
the assessment or receiving a refund of amounts not owed.
Nothing in this section shall limit the rights of a
unit owner to the protection of all fair debt collection procedures mandated
under federal and state law.
(d) A unit owner who pays an association the full
amount claimed by the association or who enters into an installment payment
agreement pursuant to subsection (i) and keeps installment payments current
may file a claim against the association in court, including small claims
court, or require the association to mediate under section 421J-13 to resolve
any disputes concerning the amount or validity of the association's claim. If the unit owner and the association are
unable to resolve the dispute through mediation, either party may file for
relief with a court; provided that a unit owner may only file for relief in
court if all amounts claimed by the association are paid in full on or before the
date of filing[.] or if all payments under an installment payment
agreement pursuant to subsection (i) are current as of the date of filing. If the unit owner fails to keep all
association assessments or installment payments current during the court
hearing, the association may ask the court to temporarily suspend the
proceedings. If the unit owner pays all
association assessments or delinquent installment payments within thirty
days of the date of suspension, the unit owner may ask the court to recommence
the proceedings. If the unit owner fails
to pay all association assessments or delinquent installment payments by
the end of the thirty-day period, the association may ask the court to dismiss
the proceedings. The unit owner shall be
entitled to a refund of any amounts paid to the association that are not owed.
(e) In conjunction with or as an alternative to
foreclosure proceedings under subsection (a), where a unit is owner-occupied,
the association may authorize its managing agent or board, after sixty days
written notice to the unit owner of the unit's share of the assessments, to
terminate the delinquent unit's access to the common areas and cease supplying
a delinquent unit with any and all services normally supplied or paid for by
the association. Any terminated services
and privileges shall be restored upon payment of all delinquent assessments[,]
or entry into an installment agreement pursuant to subsection (i) but need not be restored
until payment in full is received[.] or at least a specified percentage of
installment payments required pursuant to an installment payment agreement is
received.
(f) Before the board or managing agent may take
the actions permitted under subsection (e), the board shall adopt a written
policy providing for such actions and have the policy approved by a majority
vote of the unit owners, as provided in the association documents, who are
present in person or by proxy or as otherwise permitted by the association
documents, at an annual or special meeting of the association or by the written
consent of a voting interest equal to a quorum of the unit owners unless the
association documents already permit the process.
(g) Subject to this subsection and subsection
(h), the board may specially assess the amount of the unpaid regular periodic
assessments for assessments against a person who, in a judicial or nonjudicial
power of sale foreclosure, purchases a delinquent unit; provided that:
(1) A
purchaser who holds a mortgage on a delinquent unit, which mortgage is not
subordinate to the priority of lien by the association, and who acquires the
delinquent unit through a judicial or nonjudicial foreclosure proceeding,
including purchasing the delinquent unit at a foreclosure auction, shall not be
obligated to make, nor be liable for, payment of the special assessment as
provided for under this subsection; and
(2) A
person who subsequently purchases the delinquent unit from the mortgagee
referred to in paragraph (1) shall be obligated to make, and shall be liable
for, payment of the special assessment provided for under this subsection; and
provided further that the mortgagee or subsequent purchaser may require the
association to provide, at no charge, a notice of the association's intent to
claim a lien against the delinquent unit for the amount of the special
assessment, prior to the subsequent purchaser's acquisition of title to the
delinquent unit. The notice shall state
the amount of the special assessment, how that amount was calculated, and the
legal description of the unit.
(h) The amount of the special assessment assessed
under subsection (g) shall not exceed the
total amount of unpaid regular periodic assessments that were assessed during
the six months immediately preceding the completion of the judicial or nonjudicial
power of sale foreclosure.
(i) The
board may enter into an agreement with a delinquent unit owner for installment
payments of all sums due by the unit owner to the association including regular
and special assessments, interest, late fees, penalties, and attorney's fees;
provided that payments made through an installment payment agreement shall be
assigned as follows:
(1) First, exclusively to the original principal amount of the assessments
due to the association until the delinquent assessments are paid in full;
(2) Second, to any interest, late fees, or penalties incurred; and
(3) Third, to any attorney's fees, which shall not exceed twenty-five percent
of the original principal amount of the delinquent assessment.
[(i)] (j) For purposes of subsections (g) and (h), the
following definitions shall apply, unless the context requires otherwise:
"Completion" means:
(1) In a
nonjudicial power of sale foreclosure, when the affidavit required under
section 667-33 is recorded; and
(2) In a
judicial foreclosure, when a purchaser is deemed to acquire title pursuant to
subsection (b).
"Regular periodic
assessments" does not include:
(1) Any
special assessment, except for a special assessment imposed on all units as
part of a budget adopted pursuant to the association documents;
(2) Late
charges, fines, or penalties;
(3) Interest
assessed by the association;
(4) Any
lien arising out of the assessment; or
(5) Any
fees or costs related to the collection or enforcement of the assessment,
including attorneys' fees and court costs."
SECTION 4. Section 421J-10.6, Hawaii Revised Statutes, is amended to read as follows:
"[[]§421J-10.6[]] Association fiscal matters; collection
of unpaid assessments from tenants or rental agents. (a) If
a unit owner rents or leases the unit and is in default for thirty days or more
in the payment of the unit's share of the regular assessments, the board, for
as long as the default continues, may demand in writing and receive each month,
or any other period of time for rental payment as provided in the lease, from
any tenant occupying the unit or rental agent renting the unit, an amount
sufficient to pay all sums due from the unit owner to the association,
including interest, if any, but the amount shall not exceed the tenant's rent
due at the time of demand. The tenant's
payment under this section shall discharge that amount of payment from the
tenant's rent obligation, and any contractual provision to the contrary shall
be void as a matter of law.
(b) Before taking any action under this section, the board shall give to the delinquent unit owner written notice of the board's intent to collect the rent owed. The notice shall:
(1) Be sent both by first-class and certified mail;
(2) Set forth the exact amount the association claims is due and owing by the unit owner; and
(3) Indicate the intent of the board to collect such amount from the rent, along with any other amounts that become due and remain unpaid.
(c) The unit owner shall not take any retaliatory action against the tenant for payments made under this section.
(d) The payment of any portion of the unit's share of regular assessments by the tenant pursuant to a written demand by the board is a complete defense, to the extent of the amount demanded and paid by the tenant, in an action for nonpayment of rent brought by the unit owner against a tenant.
(e) The board may not demand payment from the tenant pursuant to this section if:
(1) A commissioner or receiver has been appointed to take charge of the unit pending a mortgage foreclosure;
(2) A mortgagee is in possession of the unit pending a mortgage foreclosure; or
(3) The tenant is served with a court order directing payment to a third party.
(f) The
board may enter into an agreement with a delinquent unit owner for installment payments
of all sums due by the unit owner to the association including regular and
special assessments, interest, late fees, penalties, and attorney's fees;
provided that payments made through an installment payment agreement shall be
assigned as follows:
(1) First, exclusively to the original principal amount of the assessments
due to the association until the delinquent assessments are paid in full;
(2) Second, to any interest, late fees, or penalties incurred; and
(3) Third, to any attorney's fees, which shall not exceed twenty-five percent
of the original principal amount of the delinquent assessment.
[(f)] (g) In the event of any conflict between this
section and any provision of chapter 521, the conflict shall be resolved in
favor of this section; provided that if the tenant is entitled to an offset of
rent under chapter 521, the tenant may deduct the offset from the amount due to
the association, up to the limits stated in chapter 521. Nothing herein precludes the unit owner or
tenant from seeking equitable relief from a court of competent jurisdiction or
seeking a judicial determination of the amount owed.
[(g)] (h) Before the board may take the actions
permitted under subsection (a), the board shall adopt a written policy
providing for the actions and have the policy approved by a majority vote of
the unit owners, as provided in the association documents, who are present in
person or by proxy or as otherwise permitted by the association documents, at
an annual or special meeting of the association or by the written consent of a
voting interest equal to a quorum of the unit owners unless the association
documents already permit the process."
SECTION 5. Section 514B-145, Hawaii Revised Statutes, is amended to read as follows:
"§514B-145 Association fiscal matters; collection
of unpaid assessments from tenants or rental agents. (a) If
the owner of a unit rents or leases the unit and is in default for thirty days
or more in the payment of the unit's share of the common expenses, the board,
for as long as the default continues, may demand in writing and receive each
month from any tenant occupying the unit or rental agent renting the unit, an
amount sufficient to pay all sums due from the unit owner to the association,
including interest, if any, but the amount shall not exceed the tenant's rent
due each month. The tenant's payment
under this section shall discharge that amount of payment from the tenant's
rent obligation, and any contractual provision to the contrary shall be void as
a matter of law.
(b) Before
taking any action under this section, the board shall give to the delinquent
unit owner written notice of its intent to collect the rent owed. The notice shall:
(1) Be sent both by first-class and certified mail;
(2) Set forth the exact amount the association claims is due and owing by the
unit owner; and
(3) Indicate the intent of the board to collect such amount from the rent,
along with any other amounts that become due and remain unpaid.
(c) The
unit owner shall not take any retaliatory action against the tenant for
payments made under this section.
(d) The
payment of any portion of the unit's share of common expenses by the tenant
pursuant to a written demand by the board is a complete defense, to the extent
of the amount demanded and paid by the tenant, in an action for nonpayment of
rent brought by the unit owner against a tenant.
(e) The
board may not demand payment from the tenant pursuant to this section if:
(1) A commissioner or receiver has been appointed to take charge of the
premises pending a mortgage foreclosure;
(2) A mortgagee is in possession pending a mortgage foreclosure; or
(3) The tenant is served with a court order directing payment to a third
party.
(f) The
board may enter into an agreement with a delinquent unit owner for installment
payments for all sums due by the unit owner to the association including
regular and special assessments, interest, late fees, penalties, and attorney's
fees; provided that payments made through an installment payment agreement
shall be assigned as follows:
(1) First, exclusively to the original principal amount of the assessments
due to the association until the delinquent assessments are paid in full;
(2) Second, to any interest, late fees, or penalties incurred; and
(3) Third, to any attorney's fees, which shall not exceed twenty-five percent
of the original principal amount of the delinquent assessment.
[(f)]
(g) In the event of any conflict
between this section and any provision of chapter 521, the conflict shall be
resolved in favor of this section; provided that if the tenant is entitled to
an offset of rent under chapter 521, the tenant may deduct the offset from the
amount due to the association, up to the limits stated in chapter 521. Nothing herein precludes the unit owner or
tenant from seeking equitable relief from a court of competent jurisdiction or
seeking a judicial determination of the amount owed.
[(g)]
(h) Before the board may take the
actions permitted under subsection (a), the board shall adopt a written policy
providing for the actions and have the policy approved by a majority vote of
the unit owners at an annual or special meeting of the association or by the
written consent of a majority of the unit owners."
SECTION 6. Section 514B-146, Hawaii Revised Statutes, is amended to read as follows:
"§514B-146 Association fiscal matters; lien for
assessments. (a)
All sums assessed by the association but unpaid for the share of the
common expenses chargeable to any unit shall constitute a lien on the unit with
priority over all other liens, except:
(1) Liens for real property taxes and assessments lawfully imposed by
governmental authority against the unit; and
(2) Except as provided in subsection (g), all sums unpaid on any mortgage of
record that was recorded prior to the recordation of a notice of a lien by the
association, and costs and expenses including attorneys' fees provided in such
mortgages;
provided that a
lien recorded by an association for unpaid assessments shall expire six
years from the date of recordation unless proceedings to enforce the lien are instituted prior to
the expiration of the lien; provided further that the expiration of a recorded
lien shall in no way affect the association's automatic lien that arises
pursuant to this subsection or the declaration or bylaws. Any proceedings to enforce an association's
lien for any assessment shall be instituted within six years after the
assessment became due; provided that if the owner of a unit subject to a lien
of the association files a petition for relief under the United States
Bankruptcy Code (11 U.S.C. §101 et
seq.), the period of time for instituting proceedings to enforce the
association's lien shall be tolled until thirty days after the automatic stay
of proceedings under section 362 of the United States Bankruptcy Code (11
U.S.C. §362) is lifted.
The lien of the association may be foreclosed by
action or by nonjudicial or power of sale foreclosure procedures set forth in
chapter 667, by the managing agent or board, acting on behalf of the
association and in the name of the association;
provided that no association shall exercise nonjudicial or power of sale
foreclosure procedures set forth in chapter 667 to foreclose a lien against a unit
unless specifically provided for in the purchase agreement between a unit owner
and an association; provided further that no association may exercise the
nonjudicial or power of sale remedies provided in chapter 667 to foreclose a
lien against any unit that arises solely from fines, penalties, legal fees, or
late fees, and the foreclosure of any such lien shall be filed in court
pursuant to part IA of chapter 667.
In any such foreclosure, the unit owner shall be
required to pay a reasonable rental for the unit, if so provided in the bylaws
or the law, and the plaintiff in the foreclosure shall be entitled to the
appointment of a receiver to collect the rental owed by the unit owner or any
tenant of the unit. If the association
is the plaintiff, it may request that its managing agent be appointed as
receiver to collect the rent from the tenant.
The managing agent or board, acting on behalf of the association and in
the name of the association, unless prohibited by the declaration, may bid on
the unit at foreclosure sale, and acquire and hold, lease, mortgage, and convey
the unit. Action to recover a money
judgment for unpaid common expenses shall be maintainable without foreclosing
or waiving the lien securing the unpaid common expenses owed.
(b) Except
as provided in subsection (g), when the mortgagee of a mortgage of record or
other purchaser of a unit obtains title to the unit as a result of foreclosure
of the mortgage, the acquirer of title and the acquirer's successors and
assigns shall not be liable for the share of the common expenses or assessments
by the association chargeable to the unit that became due prior to the
acquisition of title to the unit by the acquirer. The unpaid share of common expenses or
assessments shall be deemed to be common expenses collectible from all of the
unit owners, including the acquirer and the acquirer's successors and
assigns. The mortgagee of record or
other purchaser of the unit shall be deemed to acquire title and shall be required
to pay the unit's share of common expenses and assessments beginning:
(1) Thirty-six days after the order confirming the sale to the purchaser has
been filed with the court;
(2) Sixty days after the hearing at which the court grants the motion to
confirm the sale to the purchaser;
(3) Thirty days after the
public sale in a nonjudicial power of sale foreclosure conducted pursuant to
chapter 667; or
(4) Upon the recording of the instrument of conveyance;
whichever occurs
first; provided that the mortgagee of record or other purchaser of the unit
shall not be deemed to acquire title under paragraph (1), (2), or (3), if
transfer of title is delayed past the thirty-six days specified in paragraph
(1), the sixty days specified in paragraph (2), or the thirty days specified in
paragraph (3), when a person who appears at the hearing on the motion or a
party to the foreclosure action requests reconsideration of the motion or order
to confirm sale, objects to the form of the proposed order to confirm sale,
appeals the decision of the court to grant the motion to confirm sale, or the
debtor or mortgagor declares bankruptcy or is involuntarily placed into
bankruptcy. In any such case, the
mortgagee of record or other purchaser of the unit shall be deemed to acquire
title upon recordation of the instrument of conveyance.
(c) No
unit owner shall withhold any assessment claimed by the association. A unit owner who disputes the amount of an
assessment may request a written statement clearly indicating:
(1) The amount of common expenses included in the assessment, including the
due date of each amount claimed;
(2) The amount of any penalty, late fee, lien filing fee, and any other
charge included in the assessment;
(3) The amount of attorneys' fees and costs, if any, included in the
assessment;
(4) That under Hawaii law, a unit owner has no right to withhold assessments
for any reason;
(5) That a unit owner has a right to demand mediation or arbitration to
resolve disputes about the amount or validity of an association's assessment,
provided the unit owner immediately pays the assessment in full or
enters into an installment payment agreement pursuant to subsection (l) and keeps assessments and installment
payments current; and
(6) That payment in full of the assessment or payment of installment
payments pursuant to subsection (l) does not prevent the owner from
contesting the assessment or receiving a refund of amounts not owed.
Nothing in this
section shall limit the rights of an owner to the protection of all fair debt
collection procedures mandated under federal and state law.
(d) A unit
owner who pays an association the full amount claimed by the association or
who enters into an installment payment agreement pursuant to subsection (l) and
keeps installment payments current may file in small claims court or
require the association to mediate to resolve any disputes concerning the
amount or validity of the association's claim.
If the unit owner and the association are unable to resolve the dispute
through mediation, either party may file for arbitration under section 514B‑162;
provided that a unit owner may only file for arbitration if all amounts claimed
by the association are paid in full on or before the date of filing[.] or
if all payments under an installment payment agreement pursuant to subsection (l)
are current as of the date of filing. If the unit owner fails to keep all
association assessments or installment payments current during the
arbitration, the association may ask the arbitrator to temporarily suspend the
arbitration proceedings. If the unit
owner pays all association assessments or delinquent installment payments
within thirty days of the date of suspension, the unit owner may ask the
arbitrator to recommence the arbitration proceedings. If the owner fails to pay all association
assessments or delinquent installment payments by the end of the
thirty-day period, the association may ask the arbitrator to dismiss the
arbitration proceedings. The unit owner
shall be entitled to a refund of any amounts paid to the association which are
not owed.
(e)
In conjunction with or as an alternative to foreclosure proceedings
under subsection (a), where a unit is owner-occupied, the association may
authorize its managing agent or board to, after sixty days' written notice to
the unit owner and to the unit's first mortgagee of the nonpayment of the
unit's share of the common expenses, terminate the delinquent unit's access to
the common elements and cease supplying a delinquent unit with any and all
services normally supplied or paid for by the association. Any terminated services and privileges shall
be restored upon payment of all delinquent assessments or entry into an
installment payment agreement pursuant to subsection (l) but need
not be restored until payment in full is received[.] or at least a specified percentage of installment payments required
pursuant to the installment payment agreement is received.
(f) Before the board or managing agent may take the actions permitted under subsection (e), the board shall adopt a written policy providing for such actions and have the policy approved by a majority vote of the unit owners at an annual or special meeting of the association or by the written consent of a majority of the unit owners.
(g)
Subject to this subsection, and subsections (h) and (i), the board may
specially assess the amount of the unpaid regular monthly common assessments
for common expenses against a mortgagee or other purchaser who, in a judicial
or nonjudicial power of sale foreclosure, purchases a delinquent unit; provided
that the mortgagee or other
purchaser may require the association to provide at no charge a notice of the
association's intent to claim lien against the delinquent unit for the amount
of the special assessment, prior to the subsequent purchaser's acquisition of
title to the delinquent unit. The notice
shall state the amount of the special assessment, how that amount was
calculated, and the legal description of the unit.
(h) The amount of the special assessment assessed
under subsection (g) shall not exceed the total amount of unpaid regular
monthly common assessments that were assessed during the six months immediately
preceding the completion of the judicial or nonjudicial power of sale
foreclosure.
(i) For
purposes of subsections (g) and (h), the following definitions shall apply,
unless the context requires otherwise:
"Completion" means:
(1) In a nonjudicial power of sale foreclosure, when the affidavit after
public sale is recorded pursuant to section 667-33; and
(2) In a judicial foreclosure, when a purchaser is deemed to acquire title
pursuant to subsection (b).
"Regular monthly common assessments"
does not include:
(1) Any other special assessment, except for a special assessment imposed on
all units as part of a budget adopted pursuant to section 514B‑148;
(2) Late charges, fines, or penalties;
(3) Interest assessed by the association;
(4) Any lien arising out of the assessment; or
(5) Any fees or costs related to the collection or enforcement of the
assessment, including attorneys' fees and court costs.
(j) The
cost of a release of any lien filed pursuant to this section shall be paid by
the party requesting the release.
(k)
After any judicial or nonjudicial
foreclosure proceeding in which the association acquires title to the unit, any
excess rental income received by the association from the unit shall be paid to
existing lien holders based on the priority of lien, and not on a pro rata
basis, and shall be applied to the benefit of the unit owner. For purposes of this subsection, excess
rental income shall be any net income received by the association after a court
has issued a final judgment determining the priority of a senior mortgagee and
after paying, crediting, or reimbursing the association or a third party for:
(1) The lien for delinquent assessments pursuant to subsections (a) and (b);
(2) Any maintenance fee delinquency against the unit;
(3) Attorney's fees and other collection costs related to the association's
foreclosure of the unit; or
(4) Any costs incurred by the association for the rental, repair,
maintenance, or rehabilitation of the unit while the association is in
possession of the unit including monthly association maintenance fees,
management fees, real estate commissions, cleaning and repair expenses for the
unit, and general excise taxes paid on rental income;
provided that the lien for delinquent assessments under paragraph (1) shall be paid, credited, or reimbursed first.
(l) The
board may enter into an agreement with a delinquent unit owner for installment
payments of all sums due by the unit owner to the association including regular
and special assessments, interest, late fees, penalties, and attorney's fees;
provided that payments made through an installment payment agreement shall be
assigned as follows:
(1) First, exclusively to the original principal amount of the assessments
due to the association until the delinquent assessments are paid in full;
(2) Second, to any interest, late fees, or penalties incurred; and
(3) Third, to any attorney's fees, which shall not exceed twenty-five percent of the original principal amount of the delinquent assessment."
SECTION 7. Section 514B-157, Hawaii Revised Statutes, is amended to read as follows:
"[[]§514B-157[]] Attorneys' fees, delinquent assessments, and
expenses of enforcement. (a) All costs and expenses, including reasonable
attorneys' fees, incurred by or on behalf of the association for:
(1) Collecting any delinquent assessments against any owner's unit;
(2) Foreclosing any lien thereon; or
(3) Enforcing any provision of the declaration, bylaws, house rules, and this
chapter, or the rules of the real estate commission;
against an
owner, occupant, tenant, employee of an owner, or any other person who may in
any manner use the property, shall be promptly paid on demand to the
association by such person or persons; provided that if the claims upon which
the association takes any action are not substantiated, all costs and expenses,
including reasonable attorneys' fees, incurred by any such person or persons as
a result of the action of the association, shall be promptly paid on demand to
such person or persons by the association.
(b) If any
claim by an owner is substantiated in any action against an association, any of
its officers or directors, or its board to enforce any provision of the
declaration, bylaws, house rules, or this chapter, then all reasonable and
necessary expenses, costs, and attorneys' fees incurred by an owner shall be
awarded to such owner; provided that no such award shall be made in any
derivative action unless:
(1) The owner first shall have demanded and allowed reasonable time for the
board to pursue such enforcement; or
(2) The owner demonstrates to the satisfaction of the court that a demand for
enforcement made to the board would have been fruitless.
If any claim by an owner is not substantiated in
any court action against an association, any of its officers or directors, or
its board to enforce any provision of the declaration, bylaws, house rules, or
this chapter, then all reasonable and necessary expenses, costs, and attorneys'
fees incurred by an association shall be awarded to the association, unless
before filing the action in court the owner has first submitted the claim to
mediation, or to arbitration under subpart D, and made a good faith effort to
resolve the dispute under any of those procedures.
(c) Upon
request by a unit owner, the association shall provide a clear cost breakdown
of all attorneys' fees incurred by the association for any legal action taken
by or on behalf of the association, including the attorney's hourly rate and the
amount of time the attorney spent on the action, or, if the fee is not based on
an hourly rate, the amount of the agreed upon fee."
SECTION 8. Section 607-14, Hawaii Revised Statutes, is amended to read as follows:
"§607-14 Attorneys' fees in actions in the nature of assumpsit, etc. In all the courts, in all actions in the nature of assumpsit and in all actions on a promissory note or other contract in writing that provides for an attorney's fee, there shall be taxed as attorneys' fees, to be paid by the losing party and to be included in the sum for which execution may issue, a fee that the court determines to be reasonable; provided that the attorney representing the prevailing party shall submit to the court an affidavit stating the amount of time the attorney spent on the action and the amount of time the attorney is likely to spend to obtain a final written judgment, or, if the fee is not based on an hourly rate, the amount of the agreed upon fee. The court shall then tax attorneys' fees, which the court determines to be reasonable, to be paid by the losing party; provided that this amount shall not exceed twenty-five per cent of the judgment.
Where the note or other contract in writing provides for a fee of twenty-five per cent or more, or provides for a reasonable attorney's fee, not more than twenty-five per cent shall be allowed.
Where the note or other contract in writing provides for a rate less than twenty-five per cent, not more than the specified rate shall be allowed.
Where the note or other contract in writing provides for the recovery of attorneys' fees incurred in connection with a prior debt, those attorneys' fees shall not be allowed in the immediate action unless there was a writing authorizing those attorneys' fees before the prior debt was incurred. "Prior debt" for the purposes of this section is the principal amount of a debt not included in the immediate action.
The above fees provided for by this section shall be assessed on the amount of the judgment exclusive of costs and all attorneys' fees obtained by the plaintiff, and upon the amount sued for if the defendant obtains judgment.
[Nothing in this section shall
limit the] The recovery of reasonable attorneys' fees and costs by an
association as defined under section 514B-3 or a planned community
association and its members in actions for the collection of delinquent
assessments, the foreclosure of any lien, or the enforcement of any provision
of the association's governing documents, [or affect any right of a
prevailing party to recover attorneys' fees in excess of] shall not
exceed twenty-five per cent of the judgment pursuant to any statute that
specifically provides that a prevailing party may recover all of its reasonable
attorneys' fees. "Planned community
association" for the purposes of this section means a nonprofit homeowners
or community association existing pursuant to covenants running with the land."
SECTION 9. Section 667-40, Hawaii Revised Statutes, is amended to read as follows:
"[[]§667-40[]] Use of power of sale foreclosure in
certain non-mortgage situations. A
power of sale foreclosure under this part may be used in certain non-mortgage
situations where a law or a written document contains, authorizes, permits, or
provides for a power of sale, a power of sale foreclosure, a power of sale
remedy, or a nonjudicial foreclosure[.]; provided
that no association shall use a power
of sale foreclosure under this part to foreclose a lien against a
unit for failure to pay assessments under section 421J-10.5 or 514B-146 unless
specifically provided for in the purchase agreement between a unit owner and an
association. These laws or
written documents are limited to those involving time share plans, condominium
property regimes, and agreements of sale."
SECTION 10. Section 667-91, Hawaii Revised Statutes, is amended to read as follows:
"[[]§667-91[]] Alternate power of sale process. The power of sale process in this part is an
alternative process for associations to the foreclosure by action in part IA
and the foreclosure by power of sale in part II[.];
provided that the power of sale process in this part shall not be used by an
association to foreclose a lien against a unit for failure to pay assessments
under section 421J-10.5 or 514B-146 unless specifically provided for in the
purchase agreement between a unit owner and an association."
SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 12. This Act shall take effect on July 1, 2019.
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INTRODUCED BY: |
_____________________________ |
Report Title:
Condominiums; Planned Communities; Associations; Delinquent Assessments; Legal Actions; Attorneys; Legal Fees; Foreclosure
Description:
Requires attorneys hired by an association in an action against a unit owner to communicate directly with the owner or owner's attorney. Prohibits nonjudicial foreclosure on liens, for unpaid assessments unless specified in the purchase agreement. Permits associations to offer delinquent owners a payment plan for unpaid assessments. Requires associations to provide a cost-breakdown of attorney's fees upon request of an owner.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
