Bill Text: HI HB432 | 2020 | Regular Session | Introduced

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Bill Title: Relating To Planned Community Associations.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced - Dead) 2019-12-01 - Carried over to 2020 Regular Session. [HB432 Detail]

Download: Hawaii-2020-HB432-Introduced.html

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HOUSE OF REPRESENTATIVES	H.B. NO.	432
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to planned community associations.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

PART I

     SECTION 1.  Chapter 421J, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part    .  REGISTRATION, ADMINISTRATION, AND ENFORCEMENT OF PLANNED COMMUNITY ASSOCIATIONS

     §421J-A  Associations; registration.  (a)  On or before June 30, 2021, each association having more than five units shall:

     (1)  Register with the commission through approval of a completed registration application, payment of fees, and submission of any other additional information set forth by the commission.  The registration shall be for a biennial period with termination on June 30 of each odd-numbered year.  The commission shall prescribe a deadline date prior to the termination date for the submission of a completed reregistration application, payment of fees, and any other additional information set forth by the commission.  Any association that has not met the submission requirements by the deadline date shall be considered a new applicant for registration and be subject to initial registration requirements.  Any new association shall register within thirty days of the association's first meeting.  If the association has not held its first meeting and it is at least one year after the closing of the first conveyance of a unit to a person other than a developer, the developer or developer's affiliate or the managing agent shall register on behalf of the association and shall comply with this section.  The public information required to be submitted on any completed application form shall include but not be limited to names and positions of the board of the association, the name of the association's managing agent, if any, the tax map key numbers of the association in the recorded association documents, and the location of the principal office of the association where the association can be contacted directly;

     (2)  Pay a nonrefundable application fee and, upon approval, an initial registration fee, a reregistration fee upon reregistration, and the planned community association education trust fund fee, as provided in rules adopted by the director of commerce and consumer affairs pursuant to chapter 91;

     (3)  Register or reregister and pay the required fees by the due date.  Failure to register or reregister or pay the required fees by the due date shall result in the assessment of a penalty equal to the amount of the registration or reregistration fee; and

     (4)  Report promptly in writing to the commission any changes to the information contained on the registration or reregistration application or any other documents required by the commission.  Failure to do so may result in termination of registration and subject the project or the association to initial registration requirements.

     (b)  The commission may reject or terminate any registration submitted by an association that fails to comply with this section.  Any association that fails to register as required by this section or whose registration is rejected or terminated shall not have standing to maintain any action or proceeding in the courts of this State until it registers.  The failure of an association to register, or rejection or termination of its registration, shall not impair the validity of any contract or act of the association nor prevent the association from defending any action or proceeding in any court in this State.

     §421J-B  General powers and duties of commission.  (a)  The commission may:

     (1)  Adopt, amend, and repeal rules pursuant to chapter 91;

     (2)  Assess fees;

     (3)  Conduct investigations, issue cease and desist orders, and bring an action in any court of competent jurisdiction to enjoin persons, consistent with and in furtherance of the objectives of this chapter;

     (4)  Prescribe forms and procedures for submitting information to the commission; and

     (5)  Prescribe the form and content of any documents required to be submitted to the commission by this chapter.

     (b)  If it appears that any person has engaged, is engaging, or is about to engage in any act or practice in violation of this chapter or any of the commission's related rules or orders, the commission, without prior administrative proceedings, may maintain an action in the appropriate court to enjoin that act or practice or for other appropriate relief.  The commission shall not be required to post a bond or to prove that no adequate remedy at law exists in order to maintain the action.

     (c)  The commission may exercise its powers in any action involving the powers or responsibilities of a developer under this chapter.

     (d)  The commission may accept grants-in-aid from any governmental source and may contract with agencies charged with similar functions in this or other jurisdictions, in furtherance of the objectives of this chapter.

     (e)  The commission may cooperate with agencies performing similar functions in this and other jurisdictions to develop uniform filing procedures and forms, uniform disclosure standards, and uniform administrative practices, and may develop information that may be useful in the discharge of the commission's duties.

     (f)  The commission, by rule, may require bonding at appropriate levels over time, escrow of portions of sales proceeds, or other safeguards to assure completion of all improvements that a developer is obligated to complete, or has represented that it will complete.

     §421J-C  Investigatory powers.  If the commission has reason to believe that any person is violating or has violated this chapter, or the rules of the commission adopted pursuant thereto, the commission may conduct an investigation of the matter and examine the books, accounts, contracts, records, and files of the association, the board of directors, the managing agent, or the developer.  For the purposes of this examination, the developer shall keep and maintain records of all sales transactions and of the funds received by the developer pursuant thereto, and shall make the records accessible to the commission upon reasonable notice and demand.

     §421J-D  Cease and desist orders.  In addition to its authority under section 421J-E, whenever the commission has reason to believe that any person is violating or has violated this chapter, or the rules of the commission adopted pursuant thereto, it shall issue and serve upon the person a complaint stating its charges in that respect and containing a notice of a hearing at a stated place and upon a day at least thirty days after the service of the complaint.  The person served has the right to appear at the place and time specified and show cause why an order should not be entered by the commission requiring the person to cease and desist from the violation of the law or the rules of the commission charged in the complaint.  If, upon the hearing, the commission is of the opinion that this chapter or the rules of the commission have been or are being violated, it shall make a report in writing stating its findings as to the facts and shall issue and cause to be served on the person an order requiring the person to cease and desist from the violations.  The person, within thirty days after service upon the person of the report or order, may obtain a review thereof in the appropriate circuit court.

     §421J-E  Power to enjoin.  Whenever the commission believes from satisfactory evidence that any person has violated this chapter or the rules of the commission adopted pursuant to this chapter, it may conduct an investigation on the matter and bring an action in the name of the people of the State in any court of competent jurisdiction against the person to enjoin the person from continuing the violation or engaging therein or doing any act or acts in furtherance thereof.

     §421J-F  Penalties.  (a)  Any person who violates or fails to comply with this chapter is guilty of a misdemeanor and shall be punished by a fine not exceeding $10,000 or by imprisonment for a term not exceeding one year, or both.  Any person who violates or fails, omits, or neglects to obey, observe, or comply with any rule, order, decision, demand, or requirement of the commission under this chapter shall be punished by a fine not exceeding $10,000.

     (b)  Any person who violates any provision of this chapter or the rules of the commission adopted pursuant to this chapter shall also be subject to a civil penalty not exceeding $10,000 for any violation.  Each violation shall constitute a separate offense.

     §421J-G  Planned community association education trust fund.  (a)  The commission shall establish a planned community association education trust fund that the commission shall use for educational purposes.  Educational purposes shall include financing or promoting:

     (1)  Education and research in the field of planned community association governance and association registration for the benefit of the public and those required to be registered under this chapter;

     (2)  The improvement and more efficient administration of associations;

     (3)  Expeditious and inexpensive procedures for resolving association disputes;

     (4)  Support for mediation of association related disputes, pursuant to section 421J-13; and

     (5)  Support for voluntary binding arbitration between parties in association related disputes, pursuant to section 421J-J.

     (b)  The commission shall use all moneys in the planned community association education trust fund for purposes consistent with subsection (a).

     §421J-H  Planned community association education trust fund; payments by associations and developers.  (a)  Each association with more than five units shall pay to the department of commerce and consumer affairs:

     (1)  A planned community association education trust fund fee within one year after the closing of the first conveyance of a unit to a person other than a developer or within thirty days of the association's first meeting, and thereafter, on or before June 30 of every odd-numbered year, as prescribed by rules adopted pursuant to chapter 91; and

     (2)  Beginning with the July 1, 2021, biennium registration, an additional annual planned community association education trust fund fee in an amount equal to the product of $1.50 times the number of units included in the registered association to be dedicated to supporting mediation or voluntary binding arbitration of association related disputes.  The additional planned community association education trust fund fee shall total $3 per unit until the commission adopts rules pursuant to chapter 91.

     (b)  Each developer shall pay to the department of commerce and consumer affairs the planned community association education trust fund fee for each unit in the project, as prescribed by rules adopted by the director of commerce and consumer affairs pursuant to chapter 91.

     (c)  Payments of any fees required under this section shall be due on or before the registration due date and shall be nonrefundable.  Failure to pay the required fee by the due date shall result in a penalty assessment of ten per cent of the amount due and the association shall not have standing to bring any action to collect or to foreclose any lien for common expenses or other assessments in any court of this State until the amount due, including any penalty, is paid.  Failure of an association to pay a fee required under this section shall not impair the validity of any claim of the association for common expenses or other assessments, or prevent the association from defending any action in any court of this State.

     (d)  The department of commerce and consumer affairs shall allocate the fees collected under this section to the planned community association education trust fund established pursuant to section 421J-G.  The fees collected pursuant to this section shall be administratively and fiscally managed together as one planned community association education trust fund established by section 421J-G.

     §421J-I  Planned community association education trust fund; management.  (a)  The sums received by the commission for deposit in the planned community association education trust fund pursuant to section 421J-G shall be held by the commission in trust for carrying out the purpose of the fund.

     (b)  The commission and the director of commerce and consumer affairs may use moneys in the planned community association education trust fund collected pursuant to section 421J-H and the rules of the commission to employ necessary personnel not subject to chapter 76 for additional staff support, to provide office space, and to purchase equipment, furniture, and supplies required by the commission to carry out its responsibilities under this chapter.

     (c)  The moneys in the planned community association education trust fund collected pursuant to section 421J-H and the rules of the commission may be invested and reinvested in the same manner as are the funds of the employees' retirement system of the State.  The interest and earnings from these investments shall be deposited to the credit of the planned community association education trust fund.

     (d)  The department of commerce and consumer affairs professional and vocational licensing division's budget ceiling shall be amended to reflect the annual planned community association education trust fund fee required by section 421J‑H and paid into the planned community association education trust fund.  On June 30 of every odd-numbered year, any unexpended additional amounts paid into the planned community association education trust fund and initially dedicated to supporting mediation or voluntary binding arbitration of association related disputes, as required by section 421J-H(a)(2) shall be used for educational purposes as provided in section 421J-G(a)(1), (2), and (3).

     (e)  The commission shall annually submit to the legislature, no later than twenty days prior to the convening of each regular session:

     (1)  A summary of the programs funded during the prior fiscal year and the amount of money in the fund, including a statement of which programs were directed specifically at the education of planned community association members; and

     (2)  A copy of the budget for the current fiscal year, including summary information on programs that were funded or are to be funded and the target audience for each program.  The budget shall include a line item reflecting the total amount collected from associations."

PART II

     SECTION 2.  Chapter 421J, Hawaii Revised Statutes, is amended by designating sections 421J-1 to 421J-16 as part I, entitled "General Provisions".

     SECTION 3.  Chapter 421J, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§421J-J  Voluntary binding arbitration.  (a)  Any parties permitted to mediate association related disputes pursuant to section 421J-13 may agree to enter into voluntary binding arbitration, which may be supported with funds from the planned community association education trust fund pursuant to section 421J-G; provided that voluntary binding arbitration under this section may be supported with funds from the planned community association education trust fund only after the parties have first attempted evaluative mediation.

     (b)  Any voluntary binding arbitration entered into pursuant to this section and supported with funds from the planned community association education trust fund:

     (1)  Shall include a fee of $175 to be paid by each party to the arbitrator;

     (2)  Shall receive no more from the fund than is appropriate under the circumstances, and in no event more than $6,000 total; and

     (3)  May include issues and parties in addition to those identified in subsection (a); provided that a member or a developer and board are parties to the arbitration at all times and the member or developer and the board mutually consent in writing to the addition of the issues and parties."

     SECTION 4.  Section 421J-2, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

     ""Commission" means the real estate commission established pursuant to section 467-3."

     SECTION 5.  Section 421J-13, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§421J-13[]]  Mediation of disputes.  (a)  [At the request of any party, any] The mediation of a dispute concerning or involving one or more members and an association, its board of directors, managing agent, manager, or one or more other members [relating to the interpretation, application, or enforcement of this chapter or the association documents, shall first be submitted to mediation.] shall be mandatory upon written request to the other party when:

     (1)  The dispute involves the interpretation, application, or enforcement of this chapter or the association documents;

     (2)  The dispute falls outside the scope of subsection (b);

     (3)  The parties have not already mediated the same or a substantially similar dispute; and

     (4)  An action or an arbitration concerning the dispute has not been commenced.

     (b)  [Nothing in subsection (a) shall be interpreted to mandate the mediation of any dispute involving:

     (1)  Actions seeking equitable relief involving threatened]

The mediation of a dispute concerning or involving one or more members and an association, its board of directors, managing agent, manager, or one or more other members shall not be mandatory when the dispute involves:

     (1)  Threatened property damage or the health or safety of association members or any other person;

     (2)  Actions to collect assessments;

     (3)  Personal injury claims; or

     (4)  [Actions against an association, a board of directors, or one or more directors, officers, agents, employees, or other persons for amounts in excess of $2,500 if insurance coverage under a policy of insurance procured by the association or its board of directors would be unavailable for defense or judgment because mediation was pursued.

     (c)  If any mediation under this section is not completed within two months from commencement, no further mediation shall be required unless agreed to by the association and the member.]

          Matters that would affect the availability of any coverage pursuant to an insurance policy obtained on or behalf of an association.

     (c)  If evaluative mediation is requested in writing by one of the parties pursuant to subsection (a), the other party cannot choose to do facilitative mediation instead, and any attempt to do so shall be treated as a rejection to mediate.

     (d)  A member or an association may apply to the circuit court in the judicial circuit where the planned community is located for an order compelling mediation only when:

     (1)  Mediation of the dispute is mandatory pursuant to subsection (a);

     (2)  A written request for mediation has been delivered to and received by the other party; and

     (3)  The parties have not agreed to a mediator and a mediation date within forty-five days after a party receives a written request for mediation.

     (e)  Any application made to the circuit court pursuant to subsection (d) shall be made and heard in a summary manner and in accordance with procedures for the making and hearing of motions.  The prevailing party shall be awarded its attorneys' fees and costs in an amount not to exceed $1,500.

     (f)  Each party to a mediation shall bear the attorneys' fees, costs, and other expenses of preparing for and participating in mediation incurred by the party, unless otherwise specified in:

     (1)  A written agreement providing otherwise that is signed by the parties;

     (2)  An order of a court in connection with the final disposition of a claim that was submitted to mediation;

     (3)  An award of an arbitrator in connection with the final disposition of a claim that was submitted to mediation; or

     (4)  An order of the circuit court in connection with compelled mediation in accordance with subsection (e).

     (g)  Any individual mediation supported with funds from the planned community association education trust fund pursuant to section 421J-G:

     (1)  Shall include a fee of $375 to be paid by each party to the mediator;

     (2)  Shall receive no more from the fund than is appropriate under the circumstances, and in no event more than $3,000 total;

     (3)  May include issues and parties in addition to those identified in subsection (a); provided that a member or a developer and board are parties to the mediation at all times and the member or developer and the board mutually consent in writing to the addition of the issues and parties; and

     (4)  May include an evaluation by the mediator of any claims presented during the mediation.

     (h)  A court or an arbitrator with jurisdiction may consider a timely request to stay any action or proceeding concerning a dispute that would be subject to mediation pursuant to subsection (a) in the absence of the action or proceeding, and refer the matter to mediation; provided that:

     (1)  The court or arbitrator determines that the request is made in good faith and a stay would not be prejudicial to any party; and

     (2)  No stay shall exceed a period of ninety days."

PART III

     SECTION 6.  Section 26-9, Hawaii Revised Statutes, is amended by amending subsection (o) to read as follows:

     "(o)  Every person licensed under any chapter within the jurisdiction of the department of commerce and consumer affairs and every person licensed subject to chapter 485A or registered under chapter 467B shall pay upon issuance of a license, permit, certificate, or registration a fee and a subsequent annual fee to be determined by the director and adjusted from time to time to ensure that the proceeds, together with all other fines, income, and penalties collected under this section, do not surpass the annual operating costs of conducting compliance resolution activities required under this section.  The fees may be collected biennially or pursuant to rules adopted under chapter 91, and shall be deposited into the special fund established under this subsection.  Every filing pursuant to chapter 514E or section 485A-202(a)(26) shall be assessed, upon initial filing and at each renewal period in which a renewal is required, a fee that shall be prescribed by rules adopted under chapter 91, and that shall be deposited into the special fund established under this subsection.  Any unpaid fee shall be paid by the licensed person, upon application for renewal, restoration, reactivation, or reinstatement of a license, and by the person responsible for the renewal, restoration, reactivation, or reinstatement of a license, upon the application for renewal, restoration, reactivation, or reinstatement of the license.  If the fees are not paid, the director may deny renewal, restoration, reactivation, or reinstatement of the license.  The director may establish, increase, decrease, or repeal the fees when necessary pursuant to rules adopted under chapter 91.  The director may also increase or decrease the fees pursuant to section 92-28.

     There is created in the state treasury a special fund to be known as the compliance resolution fund to be expended by the director's designated representatives as provided by this subsection.  Notwithstanding any law to the contrary, all revenues, fees, and fines collected by the department shall be deposited into the compliance resolution fund.  Unencumbered balances existing on June 30, 1999, in the cable television fund under chapter 440G, the division of consumer advocacy fund under chapter 269, the financial institution examiners' revolving fund, section 412:2-109, the special handling fund, section 414‑13, and unencumbered balances existing on June 30, 2002, in the insurance regulation fund, section 431:2-215, shall be deposited into the compliance resolution fund.  This provision shall not apply to the drivers education fund underwriters fee, sections 431:10C-115 and 431:10G-107, insurance premium taxes and revenues, revenues of the workers' compensation special compensation fund, section 386-151, the captive insurance administrative fund, section 431:19-101.8, the insurance commissioner's education and training fund, section 431:2-214, the medical malpractice patients' compensation fund as administered under section 5 of Act 232, Session Laws of Hawaii 1984, and fees collected for deposit in the office of consumer protection restitution fund, section 487-14, the real estate appraisers fund, section 466K-1, the real estate recovery fund, section 467-16, the real estate education fund, section 467-19, the contractors recovery fund, section 444-26, the contractors education fund, section 444-29, the planned community association education fund, section 421J-G, the condominium education trust fund, section 514B-71, and the mortgage foreclosure dispute resolution special fund, section 667-86.  Any law to the contrary notwithstanding, the director may use the moneys in the fund to employ, without regard to chapter 76, hearings officers and attorneys.  All other employees may be employed in accordance with chapter 76.  Any law to the contrary notwithstanding, the moneys in the fund shall be used to fund the operations of the department.  The moneys in the fund may be used to train personnel as the director deems necessary and for any other activity related to compliance resolution.

     A separate special subaccount of the compliance resolution fund, to be known as the post-secondary education authorization special subaccount, shall be established for fees collected by the department of commerce and consumer affairs pursuant to chapter 305J.  The special subaccount shall be governed by section 305J-19.

     As used in this subsection, unless otherwise required by the context, "compliance resolution" means a determination of whether:

     (1)  Any licensee or applicant under any chapter subject to the jurisdiction of the department of commerce and consumer affairs has complied with that chapter;

     (2)  Any person subject to chapter 485A has complied with that chapter;

     (3)  Any person submitting any filing required by chapter 514E or section 485A-202(a)(26) has complied with chapter 514E or section 485A-202(a)(26);

     (4)  Any person has complied with the prohibitions against unfair and deceptive acts or practices in trade or commerce; or

     (5)  Any person subject to chapter 467B has complied with that chapter;

and includes work involved in or supporting the above functions, licensing, or registration of individuals or companies regulated by the department, consumer protection, and other activities of the department.

     The director shall prepare and submit an annual report to the governor and the legislature on the use of the compliance resolution fund.  The report shall describe expenditures made from the fund including non-payroll operating expenses."

     SECTION 7.  Section 467-4, Hawaii Revised Statutes, is amended to read as follows:

     "§467-4  Powers and duties of commission.  In addition to any other powers and duties authorized by law, the real estate commission shall:

     (1)  Grant licenses, registrations, and certificates pursuant to this chapter;

     (2)  Adopt, amend, or repeal rules as it may deem proper to effectuate this chapter and carry out its purpose, which is the protection of the general public in its real estate transactions.  All rules shall be approved by the governor and the director of commerce and consumer affairs, and when adopted pursuant to chapter 91 shall have the force and effect of law.  The rules may forbid acts or practices deemed by the commission to be detrimental to the accomplishment of the purpose of this chapter, and the rules may require real estate brokers and salespersons to complete educational courses or to make reports to the commission containing items of information as will better enable the commission to enforce this chapter and the rules, or as will better enable the commission from time to time to amend the rules to more fully effect the purpose of this chapter, and, further, the rules may require real estate brokers and salespersons to furnish reports to their clients containing matters of information as the commission deems necessary to promote the purpose of this chapter.  This enumeration of specific matters that may properly be made the subject of rules shall not be construed to limit the commission's broad general power to make all rules necessary to fully effectuate the purpose of this chapter;

     (3)  Enforce this chapter and rules adopted pursuant thereto;

     (4)  Suspend, fine, terminate, or revoke any license, registration, or certificate for any cause prescribed by this chapter, or for any violation of the rules, and may also require additional education or reexamination, and refuse to grant any license, registration, or certificate for any cause that would be a ground for suspension, fine, termination, or revocation of a license, registration, or certificate;

     (5)  Report to the governor and the legislature relevant information that shall include but not be limited to a summary of the programs and financial information about the trust funds, including balances and budgets, through the director of commerce and consumer affairs annually, before the convening of each regular session, and at other times and in other manners as the governor or the legislature may require concerning its activities;

     (6)  Publish and distribute pamphlets and circulars, produce seminars and workshops, hold meetings in all counties, and require other education regarding any information as is proper to further the accomplishment of the purpose of this chapter;

     (7)  Enter into contract or contracts with qualified persons to assist the commission in effectuating the purpose of this chapter; [and]

     (8)  Establish standing committees to assist in effectuating this chapter and carry out its purpose, which shall meet not less often than ten times annually, and shall from time to time meet in each of the counties[.]; and

     (9)  Enforce chapter 421J and rules adopted pursuant to that chapter."

PART IV

     SECTION 8.  In codifying the new sections added by sections 1 and 3 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 9.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 10.  This Act shall take effect upon its approval.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Planned Community Associations; Real Estate Commission; Registration; Administration; Enforcement; Planned Community Association Education Trust Fund; Mediation; Arbitration

 

Description:

On or before June 30, 2021, requires planned community associations to register with the real estate commission.  Requires the real estate commission to administer and enforce planned community association laws.  Establishes the planned community association trust fund for specific purposes related to planned community associations, including the use of mediation and arbitration of association related disputes.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.