Bill Text: HI HB638 | 2019 | Regular Session | Introduced
Bill Title: Relating To Planned Community Associations.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2019-02-01 - The committee(s) on CPC recommend(s) that the measure be deferred. [HB638 Detail]
Download: Hawaii-2019-HB638-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
638 |
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THIRTIETH LEGISLATURE, 2019 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO PLANNED COMMUNITY ASSOCIATIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 421J, Hawaii Revised Statutes, is amended as follows:
1. By designating sections 421J-1 through 421J-16 as:
"PART I. GENERAL PROVISIONS AND GOVERNANCE"
2. By adding sixteen new sections to part I to be appropriately designated and to read:
"§421J-A Association; powers.
(a) Except as provided
in section 421J-B, and subject to the provisions of the declaration and bylaws,
the association, even if unincorporated, may:
(1) Adopt and amend
the declaration, bylaws, and rules and regulations;
(2) Adopt and amend
budgets for revenues, expenditures, and reserves and collect assessments from
members;
(3) Hire and
discharge managing agents and other independent contractors, agents, and
employees;
(4) Institute,
defend, or intervene in litigation or administrative proceedings in its own
name on behalf of itself or two or more unit owners on matters affecting the planned
community. For the purposes of actions
under chapter 480, associations shall be deemed to be "consumers";
(5) Make contracts
and incur liabilities;
(6) Regulate the
use, maintenance, repair, replacement, and modification of common areas;
(7) Cause
additional improvements to be made as a part of the common areas;
(8) Acquire, hold,
encumber, and convey in its own name any right, title, or interest to real or
personal property; provided
that:
(A) Designation
of additional areas to be common areas or subject to common expenses after the
initial filing of the declaration or bylaws shall require the approval of at
least sixty-seven per cent of the unit owners;
(B) If the
developer discloses to the initial buyer in writing that additional areas will
be designated as common areas whether pursuant to an incremental or phased
project or otherwise, the requirements of this paragraph shall not apply as to
those additional areas; and
(C) The
requirements of this paragraph shall not apply to the purchase of a unit for a
resident manager, which may be purchased with the approval of the board;
(9) Grant
easements, leases, licenses, and concessions through or over the common areas
and permit encroachments on the common areas;
(10) Impose and
receive any payments, fees, or charges for the use, rental, or operation of the
common areas, and for services provided to unit owners;
(11) Impose charges
and penalties, including late fees and interest, for late payment of
assessments and levy reasonable fines for violations of the declaration,
bylaws, rules, and regulations of the association, either in accordance with
the bylaws or, if the bylaws are silent, pursuant to a resolution adopted by
the board that establishes a
fining procedure that states the basis for the fine and allows an appeal to the
board of the fine with notice and an opportunity to be heard and providing that
if the fine is paid, the unit owner shall have the right to initiate a dispute
resolution process as provided by sections 421J-13, 421J-Q, or by filing a
request for an administrative hearing with the department of commerce and
consumer affairs;
(12) Impose
reasonable charges for the preparation and recordation of amendments to the
declaration, documents requested for resale of units, or statements of unpaid
assessments;
(13) Provide for
cumulative voting through a provision in the bylaws;
(14) Provide for the
indemnification of its officers, board, committee members, and agents, and
maintain directors' and officers' liability insurance;
(15) Assign its
right to future income, including the right to receive regular assessments, but
only to the extent section 421J-B expressly so provides;
(16) Exercise any
other powers conferred by the declaration or bylaws;
(17) Exercise all
other powers that may be exercised in this State by legal entities of the same
type as the association, except to the extent inconsistent with this chapter;
(18) Exercise any other
powers necessary and proper for the governance and operation of the
association; and
(19) By regulation,
subject to sections 421J-10.5, 421J-13, and 421J-Q, require that disputes
between the board and members or between two or more members regarding the planned
community be submitted to nonbinding alternative dispute resolution in the
manner described in the regulation as a prerequisite to commencement of a
judicial proceeding.
(b) If a tenant of a member violates the
declaration, bylaws, or rules and regulations of the association, in addition
to exercising any of its powers against the member, the association may:
(1) Exercise
directly against the tenant the powers described in subsection (a)(11);
(2) After giving
notice to the tenant and the member and an opportunity to be heard, levy
reasonable fines against the tenant for the violation, provided that a member
shall be responsible for the conduct of the member's tenant and for any fines
levied against the tenant or any legal fees incurred in enforcing the
declaration, bylaws, or rules and regulations of the association against the
tenant; and
(3) Enforce any
other rights against the tenant for the violation which the member as landlord
could lawfully have exercised under the lease, including eviction, or which the
association could lawfully have exercised directly against the member, or both.
(c) The rights granted under subsection (b)(3)
may only be exercised if the tenant or member fails to cure the violation
within ten days after the association notifies the tenant and member of that
violation; provided that no notice shall be required when the breach by the
tenant causes or threatens to cause damage to any person or constitutes a
violation of section 521-51(1) or 521-51(6).
(d) Unless a lease otherwise provides, this
section does not:
(1) Affect rights
that the member has to enforce the lease or that the association has under
other law; or
(2) Permit the
association to enforce a lease to which it is not a party in the absence of a
violation of the declaration, bylaws, or rules and regulations.
§421J-B Association; limitations on powers.
(a) The
declaration and bylaws may not impose limitations on the power of the
association to deal with the developer which are more restrictive than the
limitations imposed on the power of the association to deal with other persons.
(b) Unless otherwise permitted by the
declaration, bylaws, or this chapter, an association may adopt rules and
regulations that affect the use of or behavior in units that may be used for
residential purposes only to:
(1) Prevent any use
of a unit which violates the declaration or bylaws; or
(2) Regulate any
behavior in or occupancy of a unit which violates the declaration or bylaws or
unreasonably interferes with the use and enjoyment of other units or the common
areas by other unit owners.
Otherwise, the association may not regulate any
use of or behavior in units by means of the rules and regulations.
(c) No association shall deduct and apply
portions of regular assessment payments received from a member to unpaid late
fees, legal fees, fines, and interest (other than amounts remitted by a unit in
payment of late fees, legal fees, fines, and interest).
(d) No member who requests legal or other
information from the association, the board, the managing agent, or their
employees or agents, shall be charged for the reasonable cost of providing the
information unless the association notifies the member that it intends to
charge the member for the reasonable cost.
The association shall notify the member in writing at least ten days
prior to incurring the reasonable cost of providing the information, except
that no prior notice shall be required to assess the reasonable cost of
providing information on delinquent assessments or in connection with
proceedings to enforce the law or the association's governing documents.
After being notified of the
reasonable cost of providing the information, the member may withdraw the
request, in writing. A member who
withdraws a request for information shall not be charged for the reasonable
cost of providing the information.
(e) Subject to any approval requirements and
spending limits contained in the declaration or bylaws, the association may
authorize the board to borrow money for the repair, replacement, maintenance,
operation, or administration of the common areas and personal property of the planned
community, or the making of any additions, alterations, and improvements
thereto; provided that written notice of the purpose and use of the funds is
first sent to all members and owners representing fifty per cent of the common
interest vote or give written consent to the borrowing. In connection with the borrowing, the board
may grant to the lender the right to assess and collect monthly or special
assessments from the members and to enforce the payment of the assessments or
other sums by statutory lien and foreclosure proceedings. The cost of the borrowing, including, without
limitation, all principal, interest, commitment fees, and other expenses
payable with respect to the borrowing or the enforcement of the obligations
under the borrowing, shall be a regular assessment of the project. For purposes of this section, the financing
of insurance premiums by the association within the policy period shall not be
deemed a loan and no lease shall be deemed a loan if it provides that at the
end of the lease the association may purchase the leased equipment for its fair
market value.
§421J-C Board;
powers and duties. (a)
Except as provided in the declaration, the bylaws, subsection (b), or
other provisions of this chapter, the board may act in all instances on behalf
of the association. 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. Any violation by a board or its officers or
members of the mandatory provisions of section 421J-13 or 421J-Q may constitute
a violation of the fiduciary duty owed pursuant to this subsection; provided
that a board member may avoid liability under this subsection by indicating in
writing the board member's disagreement with such board action or rescinding or
withdrawing the violating conduct within forty-five days of the occurrence of
the initial violation.
(b) The
board may not act on behalf of the association to amend the declaration or
bylaws, to remove the planned community from the provisions of this chapter, or
to elect members of the board or determine the qualifications, powers and
duties, or terms of office of board members; provided that nothing in this
subsection shall be construed to prohibit board members from voting proxies to
elect members of the board; provided further that notwithstanding anything to
the contrary in the declaration or bylaws, the board may only fill vacancies in
its membership to serve until the next annual or duly noticed special
association meeting. Notice of a special
association meeting to fill vacancies shall include notice of the
election. Any special association
meeting to fill vacancies shall be held on a date that allows sufficient time
for owners to declare their intention to run for election and to solicit
proxies for that purpose.
(c)
Within thirty days after the adoption of any proposed budget for
the planned community, the board shall make available a copy of the budget to
all the members and shall notify each member that the member may request a copy
of the budget.
(d) The declaration may provide for a period of
developer control of the association, during which a developer, or persons
designated by the developer, may appoint and remove the officers and members of
the board. Regardless of the period
provided in the declaration, a period of developer control terminates no later
than the earlier of:
(1) Two years after
the developer has ceased to offer units for sale in the ordinary course of
business;
(2) Two years after
any right to add new units was last exercised; or
(3) The day the
developer, after giving written notice to unit owners, records an instrument
voluntarily surrendering all rights to control activities of the association.
A developer may voluntarily surrender the right
to appoint and remove officers and members of the board before termination of
that period, but in that event the developer may require, for the duration of
the period of developer control, that specified actions of the association or
board, as described in a recorded instrument executed by the developer, be
approved by the developer before they become effective.
(e) Not
later than the termination of any period of developer control, the unit owners
shall elect a board of at least three members. A decrease in the number of directors shall
not deprive an incumbent director of any remaining term of office.
(f) At any regular or special meeting of the
association, any member of the board may be removed and successors shall be
elected for the remainder of the term to fill the vacancies thus created. The removal and replacement shall be by a
vote of a majority of the unit owners and, otherwise, in accordance with all
applicable requirements and procedures in the bylaws for the removal and
replacement of directors and, if removal and replacement is to occur at a
special meeting.
§421J-D Board; limitations. (a) An owner shall not act as an officer of an
association and an employee of the managing agent retained by the
association. Any owner who is a board
member of an association and an employee of the managing agent retained by the
association shall not participate in any discussion regarding a management
contract at a board meeting and shall be excluded from any executive session of
the board where the management contract or the property manager will be
discussed.
(b) Directors shall not expend association funds
for their travel, directors' fees, and per diem, unless owners are informed and
a majority approve of these expenses; provided that, with the approval of the
board, directors may be reimbursed for actual expenditures incurred on behalf
of the association. The board meeting
minutes shall reflect in detail the items and amounts of the reimbursements.
(c) Associations at their own expense shall
provide all board members with a current copy of the association's declaration,
bylaws, house rules, and, annually, a copy of this chapter with amendments.
(d) The directors may expend association funds, which shall not be deemed to be compensation to the directors, to educate and train themselves in subject areas directly related to their duties and responsibilities as directors; provided that the approved annual operating budget shall include these expenses as separate line items. These expenses may include registration fees, books, videos, tapes, other educational materials, and economy travel expenses. Except for economy travel expenses within the State, all other travel expenses incurred under this subsection shall be subject to the requirements of subsection (b).
§421J-E Planned
community mutual obligations. (a)
All members, tenants of owners, employees of owners and tenants, or any
other persons that may in any manner use property or any part thereof submitted
to this chapter are subject to this chapter and to the declaration and bylaws of
the association adopted pursuant to this chapter.
(b) All
agreements, decisions, and determinations lawfully made by the association in
accordance with the voting percentages established in this chapter, the
declaration, or the bylaws are binding on all members.
(c) Each
member, tenants and employees of an owner, and other persons using the property
shall comply strictly with the covenants, conditions, and restrictions set
forth in the declaration, the bylaws, and other organizational document adopted
pursuant thereto. Failure to comply with
any of the same shall be grounds for an action to recover sums due, for damages
or injunctive relief, or both, maintainable by the managing agent, resident
manager, or board on behalf of the association or, in a proper case, by an
aggrieved member.
§421J-F Association meetings; minutes. (a)
Minutes of meetings of the association shall be approved at the next
succeeding regular meeting or by the board, within sixty days after the
meeting, if authorized by the owners at an annual meeting. If approved by the board, owners shall be
given a copy of the approved minutes or notified of the availability of the
minutes within thirty days after approval.
(b) Minutes of all meetings of the association
shall be available within seven calendar days after approval, and unapproved
final drafts of the minutes of a meeting shall be available within sixty days
after the meeting.
(c) An owner shall be allowed to offer
corrections to the minutes at an association meeting.
§421J-G Voting for elections; cumulative
voting. (a) If the bylaws provide for cumulative voting
for an election at a meeting, each member present in person or represented by
proxy shall have a number of votes equal to the member's voting percentage
multiplied by the number of positions to be filled at the election.
(b) Each member shall be entitled to cumulate the
votes of the member and give all of the votes to one nominee or distribute the
votes among any or all of the nominees.
(c) The nominee or nominees receiving the highest
number of votes under this section, up to the total number of positions to be
filled, shall be deemed elected and shall be given the longest term.
(d) This section shall not prevent the filling of
vacancies on the board of directors in accordance with this chapter and the
association's governing documents.
§421J-H Managing agents. (a) Every managing agent shall:
(1) Be a:
(A) Licensed real estate broker in compliance with
chapter 467 and the rules of the commission; or
(B) Corporation authorized to do business under
article 8 of chapter 412;
(2) Register with
the commission prior to conducting managing agent activity 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 December 31 of an even-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 managing agent who has not met the submission requirements by the
deadline date shall be considered a new applicant for registration and subject
to initial registration requirements.
The information required to be submitted with any application shall
include the name, business address, phone number, and names of associations
managed;
(3) Obtain and keep
current a fidelity bond in an amount equal to $500 multiplied by the aggregate
number of units of the association managed by the managing agent; provided that
the amount of the fidelity bond shall not be less than $20,000 nor greater than
$500,000. Upon request by the commission,
the managing agent shall provide evidence of a current fidelity bond or a
certification statement from an insurance company authorized by the insurance
division of the department of commerce and consumer affairs certifying that the
fidelity bond is in effect and meets the requirements of this section and the
rules adopted by the commission. The
managing agent shall permit only employees covered by the fidelity bond to
handle or have custody or control of any association funds, except any
principals of the managing agent that cannot be covered by the fidelity
bond. The fidelity bond shall protect
the managing agent against the loss of any association's moneys, securities, or
other properties caused by the fraudulent or dishonest acts of employees of the
managing agent. Failure to obtain or
maintain a fidelity bond in compliance with this chapter and the rules adopted
pursuant thereto, including failure to provide evidence of the fidelity bond
coverage in a timely manner to the commission, shall result in nonregistration
or the automatic termination of the registration, unless an approved exemption
or a bond alternative is presently maintained.
A managing agent who is unable to obtain a fidelity bond may seek an exemption
from the fidelity bond requirement from the commission;
(4) Act promptly
and diligently to recover from the fidelity bond, if the fraud or dishonesty of
the managing agent's employees causes a loss to an association, and apply the
fidelity bond proceeds, if any, to reduce the association's loss. If more than one association suffers a loss,
the managing agent shall divide the proceeds among the associations in
proportion to each association's loss.
An association may request a court order requiring the managing agent to
act promptly and diligently to recover from the fidelity bond. If an association cannot recover its loss
from the fidelity bond proceeds of the managing agent, the association may
recover by court order from the real estate recovery fund established under
section 467-16, provided that:
(A) The loss is caused by the fraud,
misrepresentation, or deceit of the managing agent or its employees;
(B) The managing agent is a licensed real estate
broker; and
(C) The association fulfills the requirements of
sections 467-16 and 467-18 and any applicable rules of the commission;
(5) Pay a nonrefundable application fee and, upon
approval, an initial registration fee, and subsequently pay a reregistration
fee, as prescribed by rules adopted by the director of commerce and consumer
affairs pursuant to chapter 91. A
compliance resolution fee shall also be paid pursuant to section 26‑9(o)
and the rules adopted pursuant thereto; and
(6) Report
immediately in writing to the commission any changes to the information
contained on the registration application or any other documents provided for
registration. Failure to do so may
result in termination of registration and subject the managing agent to initial
registration requirements.
(b) The
commission may deny any registration or re-registration application or
terminate a registration without hearing if the fidelity bond and supporting
documents fail to meet the requirements of this chapter and the rules adopted
pursuant thereto.
(c) Every
managing agent shall be considered a fiduciary with respect to any property
managed by that managing agent.
(d) The registration requirements of this section
shall not apply to active real estate brokers in compliance with and licensed
under chapter 467.
(e) If a managing agent receives a request from
the commission to distribute any commission-generated information, printed
material, or documents to the association, its board, or unit owners, the
managing agent shall make the distribution at the cost of the association
within a reasonable period of time after receiving the request. The requirements of this subsection apply to
all managing agents, including unregistered managing agents.
§421J-I Association employees; background check; prohibition. (a)
The board, managing agent, or resident manager, upon the written
authorization of an applicant for employment as a security guard or resident
manager or for a position that would allow the employee access to the keys of
or entry into the units in the planned community or access to association funds,
may conduct a background check on the applicant or direct another responsible
party to conduct the check. Before
initiating or requesting a check, the board, managing agent, or resident
manager shall first certify that the signature on the authorization is
authentic and that the person is an applicant for such employment. The background check, at a minimum, shall
require the applicant to disclose whether the applicant has been convicted in
any jurisdiction of a crime which would tend to indicate that the applicant may
be unsuited for employment as an association employee with access to
association funds or the keys of or entry into the units in the planned
community, and the judgment of conviction has not been vacated.
For purposes of this section, the
criminal history disclosure made by the applicant may be verified by the board,
managing agent, resident manager, or other responsible party, if so directed by
the board, managing agent, or resident manager, by means of information
obtained through the Hawaii criminal justice data center. The applicant shall provide the Hawaii
criminal justice data center with personal identifying information, which shall
include, but not be limited to, the applicant's name, social security number,
date of birth, and gender. This
information shall be used only for the purpose of conducting the criminal
history record check authorized by this section. Failure of an association, managing agent, or
resident manager to conduct or verify or cause to have conducted or verified a
background check shall not alone give rise to any private cause of action
against an association, managing agent, or resident manager for acts and
omissions of the employee hired.
(b) An association's employees shall not engage
in selling or renting units in the planned community in which they are
employed, except association-owned units, unless such activity is approved by
sixty-seven per cent of the members.
§421J-J Tort
and contract liability; tolling of limitation period. (a) A member is not liable, solely by reason of
being a unit owner, for any injury or damage arising out of the condition or
use of the common elements. Neither the
association nor any member except the developer is liable for that developer's
torts in connection with any part of the planned community that the developer
has the responsibility to maintain.
(b) An
action alleging a wrong done by the association, including an action arising
out of the condition or use of the common areas, may be maintained only against
the association and not against any member.
If the wrong occurred during any period of developer control and the
association gives the developer reasonable notice of and an opportunity to
defend against the action, the developer who then controlled the association is
liable to the association or to any member for:
(1) All tort losses not covered by insurance suffered
by the association or that unit owner; and
(2) All costs that the association would not have
incurred but for a breach of contract or other wrongful act or omission, as the
same may be established through adjudication.
Whenever the
developer is liable to the association under this section, the developer is
also liable for all expenses of litigation, including reasonable attorneys'
fees, incurred by the association.
(c) Any
statute of limitation affecting the association's right of action against a
developer is tolled until the period of developer control terminates. A member is not precluded from maintaining an
action contemplated by this section because the member is a unit owner or a
member or officer of the association.
§421J-K Insurance. (a)
Unless otherwise provided in the declaration or bylaws,
the association shall purchase and at all times maintain the following:
(1) Property
insurance:
(A) On
the common areas;
(B) Providing
coverage for special form causes of loss; and
(C) In
a total amount of not less than the full insurable replacement cost of the
insured property, less deductibles, but including coverage for the increased
costs of construction due to building code requirements, at the time the
insurance is purchased and at each renewal date;
(2) Commercial
general liability insurance against claims and liabilities arising in
connection with the ownership, existence, use, or management of the property in
a minimum amount of $1,000,000, or a greater amount deemed sufficient in the
judgment of the board;
(3) A fidelity
bond, as follows:
(A) An
association with more than five dwelling units shall obtain and maintain a
fidelity bond covering persons, including the managing agent and its employees
who control or disburse funds of the association, in an amount equal to $500 multiplied by the number of
units; provided that the amount of the fidelity bond required by this paragraph
shall not be less than $20,000 nor greater than $200,000; and
(B) All
management companies that are responsible for the funds held or administered by
the association shall be covered by a fidelity bond as provided in section 421J-H. The association shall have standing to make a
loss claim against the bond of the managing agent as a party covered under the
bond; and
(4) The board shall
obtain directors and officers liability coverage at a level deemed reasonable
by the board, if not otherwise limited by the declaration or bylaws.
(b) If a building contains attached units, the
insurance maintained under subsection (a)(1), to the extent reasonably
available, shall include the units, the limited common areas, except as
otherwise determined by the board, and the common areas. The insurance need not cover improvements and
betterments to the units installed by unit owners, but if improvements and
betterments are covered, any increased cost may be assessed by the association
against the units affected.
For the purposes of this section,
"improvements and betterments" means all decorating, fixtures, and
furnishings installed or added to and located within the boundaries of the
unit, including electrical fixtures, appliances, air conditioning and heating
equipment, water heaters, or built-in cabinets installed by unit owners.
(c) If a project contains detached units, then
notwithstanding the requirement in this section that the association obtain the
requisite coverage, if the board determines that it is in the best interest of
the association to do so, the insurance to be maintained under subsection
(a)(1) may be obtained separately for each unit by the unit owners; provided
that the requirements of subsection (a)(1) shall be met; and provided further
that evidence of such insurance coverage shall be delivered annually to the
association. In such event, the
association shall be named as an additional insured.
(d) The board, in the case of a claim for damage
to a unit or the common areas, may:
(1) Pay the deductible
amount as a common expense;
(2) After notice
and an opportunity for a hearing, assess the deductible amount against the
owners who caused the damage or from whose units the damage or cause of loss
originated; or
(3) Require the
unit owners of the units affected to pay the deductible amount.
(e) The declaration, bylaws, or the board may
require the association to carry any other insurance, including workers'
compensation, employment practices, environmental hazards, and equipment
breakdown, that the board considers appropriate to protect the association, the
unit owners, or officers, directors, or agents of the association. Flood insurance shall also be
maintained if the property is located in a special flood hazard area as
delineated on flood maps issued by the Federal Emergency Management
Agency. The flood insurance policy shall
comply with the requirements of the National Flood Insurance Program and the
Federal Insurance Administration.
(f) Any loss covered by the property policy under
subsection (a)(1) shall be adjusted by and with the association. The insurance proceeds for that loss shall be
payable to the association, or to an insurance trustee designated by the
association for that purpose. The
insurance trustee or the association shall hold any insurance proceeds in trust
for unit owners and secured parties as their interests may appear.
(g) The board, with the vote or written consent
of a majority of the unit owners, may require unit owners to obtain reasonable
types and levels of insurance. The
liability of a unit owner shall include but not be limited to the deductible of
the owner whose unit was damaged, any damage not covered by insurance required
by this subsection, as well as the decorating, painting, wall and floor
coverings, trim, appliances, equipment, and other furnishings.
If the unit owner does not
purchase or produce evidence of insurance requested by the board, the directors
may, in good faith, purchase the insurance coverage and charge the reasonable
premium cost back to the unit owner. In
no event is the association or board liable to any person either with regard to
the failure of a unit owner to purchase insurance or a decision by the board
not to purchase the insurance for the owner, or with regard to the timing of its
purchase of the insurance or the amounts or types of coverages obtained.
(h) The provisions of this section may be varied
or waived in the case of a project in which all units are restricted to
nonresidential use.
§421J-L Association
fiscal matters; audits, audited financial statement. (a) The association shall require an annual audit
of the association financial accounts and no less than one annual unannounced
verification of the association's cash balance by a public accountant; provided
that if the association is comprised of less than twenty units, the annual
audit and the annual unannounced cash balance verification may be waived at an
association meeting by a vote of a majority of the unit owners.
(b) The
board shall make available a copy of the annual audit to each unit owner at
least thirty days prior to the annual meeting which follows the end of the
fiscal year. The board shall not be
required to submit a copy of the annual audit report to an owner if the proxy
form issued pursuant to section 421J-4 is not marked to indicate that the owner
wishes to obtain a copy of the report.
If the annual audit has not been completed by that date, the board shall
make available:
(1) An unaudited year end financial statement for the
fiscal year to each unit owner at least thirty days prior to the annual
meeting; and
(2) The annual audit to all owners at the annual
meeting, or as soon as the audit is completed, but not later than six months
after the annual meeting.
(c) If the
association's fiscal year ends less than two months prior to the convening of
the annual meeting, the year-to-date unaudited financial statement may cover
the period from the beginning of the association's fiscal year to the end of
the month preceding the date on which notice of the annual meeting is mailed.
§421J-M Association
records; generally. The association shall keep financial and
other records sufficiently detailed to enable the association to comply with
requests for information and disclosures related to resale of units. Except as otherwise provided by law, all
financial and other records shall be made available pursuant to
section 421J-N for examination by any unit
owner and the owner's authorized agents.
Association records shall be stored on the island on which the
association is located; provided that if original records, including but not
limited to invoices, are required to be sent off-island, copies of the records
shall be maintained on the island on which the association's project is
located.
§421J-N Association records; records to be maintained. (a) An accurate copy of the declaration, bylaws,
house rules, if any, master lease, if any, a sample original conveyance
document, all public reports and any amendments thereto, shall be kept at the
managing agent's office.
(b)
The managing agent or board shall keep detailed, accurate records in
chronological order, of the receipts and expenditures affecting the common areas,
specifying and itemizing the maintenance and repair expenses of the common areas
and any other expenses incurred. The
managing agent or board shall also keep monthly statements indicating the total
current delinquent dollar amount of any unpaid regular assessments.
(c)
Subject to section 421J-M, all records and the vouchers authorizing the payments and statements shall be kept and
maintained at the address of the association, or elsewhere within the State as
determined by the board.
(d) The developer or affiliate of the developer,
board, and managing agent shall ensure that there is a written contract for
managing the operation of the property, expressing the agreements of all
parties, including but not limited to financial and accounting obligations,
services provided, and any compensation arrangements, including any subsequent
amendments. Copies of the executed
contract and any amendments shall be provided to all parties to the contract.
§421J-O Association documents to be provided. (a) Notwithstanding any other provision in the declaration, bylaws, or house rules, if any, the following documents, records, and information, whether maintained, kept, or required to be provided pursuant to this section or sections 421J-M, 421J-N, or 421J-7, shall be made available to any unit owner and the owner's authorized agents by the managing agent, resident manager, board through a board member, or the association's representative:
(1) All financial
and other records sufficiently detailed in order to comply with requests for
information and disclosures related to the resale of units;
(2) An accurate
copy of the declaration, bylaws, house rules, if any, master lease, if any, a
sample original conveyance document, and all public reports and any amendments
thereto;
(3) Detailed,
accurate records in chronological order of the receipts and expenditures
affecting the common areas, specifying and itemizing the maintenance and repair
expenses of the common areas and any other expenses incurred and monthly
statements indicating the total current delinquent dollar amount of any unpaid
assessments for common expenses;
(4) All records and the vouchers authorizing the payments and statements kept and maintained at the address of the project, or elsewhere within the State as determined by the board, subject to section 421J-M;
(5) All signed and
executed agreements for managing the operation of the property, expressing the
agreement of all parties, including but not limited to financial and accounting
obligations, services provided, and any compensation arrangements, including
any subsequent amendments;
(6) An accurate and
current list of members of the planned community association and the members'
current addresses and the names and addresses of the vendees under an agreement
of sale, if any. A copy of the list
shall be available, at cost, to any unit owner or owner's authorized agent who
furnishes to the managing agent, resident manager, or the board a duly executed
and acknowledged affidavit stating that the list:
(A) Shall
be used by the unit owner or owner's authorized agent personally and only for
the purpose of soliciting votes or proxies or for providing information to
other unit owners with respect to association matters; and
(B) Shall
not be used by the unit owner or owner's authorized agent or furnished to
anyone else for any other purpose;
(7) The
association's most current financial statement, at no cost or on
twenty-four-hour loan, at a convenient location designated by the board;
(8) Meeting minutes of the association, pursuant to section 421J-F;
(9) Meeting minutes
of the board, pursuant to section 421J-5, which shall be:
(A) Available
for examination by unit owners or owners' authorized agents at no cost or on
twenty-four-hour loan at a convenient location at the project, to be determined
by the board; or
(B) Transmitted
to any unit owner or owner's authorized agent making a request for the minutes
within fifteen days of receipt of the request by the owner or owner's
authorized agent; provided that:
(i) The
minutes shall be transmitted by mail, electronic mail transmission, or facsimile,
by the means indicated by the owner or owner's authorized agent, if the owner
or owner's authorized agent indicated a preference at the time of the request;
and
(ii) The
owner or owner's authorized agent shall pay a reasonable fee for administrative
costs associated with handling the request;
(10) Financial
statements, general ledgers, the accounts receivable ledger, accounts payable
ledgers, check ledgers, insurance policies, contracts, and invoices of the
association for the duration those records are kept by the association, and any
documents regarding delinquencies of ninety days or more shall be available for
examination by unit owners or owners' authorized agents at convenient hours at
a place designated by the board; provided that:
(A) The
board may require unit owners or owners' authorized agents to furnish to the
association a duly executed and acknowledged affidavit stating that the
information is requested in good faith for the protection of the interests of
the association, its members, or both; and
(B) Unit
owners or owners' authorized agents shall pay for administrative costs in
excess of eight hours per year;
(11) Proxies, tally sheets, ballots, unit owners' check-in lists, and the certificate of election subject to section 421J-7;
(12) Copies of an
association's documents, records, and information, whether maintained, kept, or
required to be provided pursuant to this section or section 421J-M, 421J-N, or 421J-7;
(13) A copy of the
management contract from the entity that manages the operation of the property
before the organization of an association;
(14) Other documents
requested by a unit owner or owner's authorized agent in writing; provided that
the board shall give written authorization or written refusal with an
explanation of the refusal within thirty calendar days of receipt of a request
for documents pursuant to this paragraph; and
(15) A copy of any
contract, written job description, and compensation between the association and
any person or entity retained by the association to manage the operation of the
property on-site, including but not limited to the general manager, operations
manager, resident manager, or site manager; provided that personal information
may be redacted from the contract copy, including but not limited to the
manager's date of birth, age, signature, social security number, residence
address, telephone number, non-business electronic mail address, driver's
license number, Hawaii identification card number, bank account number, credit
or debit card number, access code or password that would permit access to the
manager's financial accounts, or any other information that may be withheld
under state or federal law.
(b) Copies of the items in subsection (a) shall
be provided to any unit owner or owner's authorized agent upon the owner's or
owner's authorized agent's request; provided that the owner or owner's
authorized agent pays a reasonable fee for duplication, postage, stationery,
and other administrative costs associated with handling the request.
(c) Notwithstanding any provision in the
declaration, bylaws, or house rules providing for another period of time, all
documents, records, and information listed under subsection (a), whether
maintained, kept, or required to be provided pursuant to this section or
section 421J-M, 421J-N, or 421J-7, shall be provided no later than thirty days
after receipt of a unit owner's or owner's authorized agent's written request,
unless a lesser time is provided pursuant to this section or section 421J-M,
421J-N, or 421J-7, and except as provided in subsection (a)(14).
(d) Any documents, records, and information,
whether maintained, kept, or required to be provided pursuant to this section
or section 421J-M, 421J-N, or 421J-7, may be made available electronically to the
unit owner or owner's authorized agent if the owner or owner's authorized agent
requests such in writing.
(e) An association may comply with this section
or section 421J-M, 421J-N, or 421J-7 by making the required documents, records,
and information available to unit owners or owners' authorized agents for
download through an internet site, at the option of each unit owner or owner's
authorized agent and at no cost to the unit owner or owner's authorized agent.
(f) Any fee charged to a unit owner or owner's
authorized agent to obtain copies of the association's documents, records, and
information, whether maintained, kept, or required to be provided pursuant to
this section or section 421J-M, 421J-N, or 421J-7, shall be reasonable;
provided that a reasonable fee shall include administrative and duplicating
costs and shall not exceed $1 per page, or portion thereof, except that the fee
for pages exceeding eight and one-half inches by fourteen inches may exceed $1
per page.
§421J-P Association as trustee. With respect to a third person dealing with the association in the association's capacity as a trustee, the existence of trust powers and their proper exercise by the association may be assumed without inquiry. A third person shall not be bound to inquire whether the association has power to act as trustee or is properly exercising trust powers. A third person, without actual knowledge that the association is exceeding or improperly exercising its powers, shall be fully protected in dealing with the association as if it possessed and properly exercised the powers it purports to exercise. A third person shall not be bound to assure the proper application of trust assets paid or delivered to the association in its capacity as trustee."
3. By amending section 421J-2 to add a new definition to be appropriately inserted and to read:
""Commission" means the real estate commission established pursuant to section 467-3."
4. By amending section 421J-5 to read:
"§421J-5 Meetings of the board of directors; committee
or subcommittee. (a)
All meetings of the board of directors, other than executive sessions,
shall be open to all members to provide input on the matters being discussed. Members who are not on the board of directors
may participate in any deliberation or discussion, other than during executive
sessions, unless a majority of a quorum of the board of directors votes
otherwise.
(b)
The board of directors shall meet at least once each year.
(c)
The board of directors, with the approval of a majority of a quorum of
its members, may adjourn any meeting and reconvene in executive session to
discuss and vote upon matters [concerning]:
(1) Concerning
personnel[,];
(2) Concerning
litigation in which the association is or may become involved[, or as may be
necessary];
(3) Necessary
to protect the attorney-client privilege of the association[.]; or
(4) Necessary to
protect the interests of the association while negotiating contracts, leases,
and other commercial transactions.
The general nature of any business to be considered in executive session shall be first announced in the regular session.
(d)
No board member shall vote by proxy at board meetings.
(e)
A director who has a conflict of interest on any issue before the board
shall disclose the nature of the conflict of interest prior to a vote on that
issue at the board meeting, and the minutes of the meeting shall record the
fact that a disclosure was made.
(f)
The board may appoint committees or subcommittees to review and consider
any specific matters, and may alter or eliminate the committees or
subcommittees; provided that the board in the minutes of the meeting at which
the action was taken to appoint the committee or subcommittee shall:
(1) Report
that the committee or subcommittee was appointed;
(2) Identify
the members of the committee or subcommittee; and
(3) Describe
the matter that the committee or subcommittee is to review and consider.
(g)
Minutes of the meetings of the board of directors shall include the
recorded vote of each board member present on all motions except motions voted
upon in executive session. Minutes of
all meetings of the board shall be approved no later than the second succeeding
regular meeting. Minutes of all meetings
of the board shall be available within seven calendar days after approval, and
unapproved final drafts of the minutes of a meeting shall be available within
thirty days of the meeting; provided that the minutes of any executive session
may be withheld if their publication would defeat the lawful purpose of the
executive session.
(h) Unless otherwise provided in the declaration or bylaws, a board may permit any meeting to be conducted by any means of communication through which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. If permitted by the board, any member may participate in a meeting conducted by a means of communication through which all participants may simultaneously hear each other during the meeting; provided that the board may require that the member pay for the costs associated with the participation."
5. By amending section 421J-10.5 to read:
"§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. section 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. section 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 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)]
(j) 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 receives a demand for
payment from an association and 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[,] or fine, late fee, lien filing fee, and
any other charge included in the assessment[;] that is not imposed on
all members as a regular assessment; and
(3) The
amount of attorneys' fees and costs, if any, included in the assessment[;].
(d) A unit
owner who disputes the information in the written statement received from the
association pursuant to subsection (c) may request a subsequent written
statement that additionally informs the unit owner that:
[(4) That
under] (1) Under Hawaii law, a unit owner has
no right to withhold assessments for any reason;
[(5) That a] (2)
A unit owner has a right to demand mediation to resolve disputes about
the amount or validity of an association's regular assessment; provided
that the unit owner immediately pays the regular assessment in full and
keeps regular assessments current; [and]
[(6) That
payment] (3) Payment in full of the regular
assessment [does] shall not prevent the unit owner from
contesting the regular assessment or receiving a refund of amounts not
owed[.]; and
(4) If the
unit owner contests any attorney's fee and cost, penalty or fine, late fee,
lien filing fee, special assessment not imposed on all members, or other
charges included in the assessment, except regular assessments, the unit owner
may demand mediation as provided in subsection (g) prior to paying those
charges.
(e) No unit owner shall withhold any regular assessment
that is claimed by the association. 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)] (f) A unit owner who pays an association the full
amount of the regular assessment claimed by the association 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 regular
assessment 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;] arbitration; provided
that a unit owner may only file for [relief in court] arbitration
if all amounts claimed by the association as regular assessments are
paid in full on or before the date of filing.
If the unit owner fails to keep all association regular assessments
current during the [court hearing,] arbitration, the association
may ask the [court] arbitrator to temporarily suspend the arbitration
proceedings. If the unit owner pays all
association regular assessments within thirty days of the date of
suspension, the unit owner may ask the [court] arbitrator to
recommence the proceedings. If the unit
owner fails to pay all association regular assessments by the end of the
thirty-day period, the association may ask the [court] arbitrator
to dismiss the proceedings. The unit
owner shall be entitled to a refund of any amounts paid as regular
assessments to the association that are not owed.
(g)
A unit owner who contests the amount of any attorneys' fees and costs,
penalties or fines, late fees, lien filing fees, special assessments not imposed
on all members, or any other charges, except regular assessments, may make a
demand in writing for mediation on the validity of those charges. The unit owner has thirty days from the date
of the written statement requested pursuant to subsection (d) to file demand
for mediation on the disputed charges, other than regular assessments. If the unit owner fails to file for mediation
within thirty days of the date of the written statement requested pursuant to
subsection (d), the association may proceed with the collection of the
charges. If the unit owner makes a
request for mediation within thirty days, the association shall be prohibited
from attempting to collect any of the disputed charges until the association
has participated in the mediation. The
mediation shall be completed within sixty days of the unit owner's request for
mediation; provided that if the mediation is not completed within sixty days or
the parties are unable to resolve the dispute by mediation, the association may
proceed with collection of all amounts due from the unit owner for attorneys'
fees and costs, penalties or fines, late fees, lien filing fees, special
assessments not imposed on all members, or any other charges.
[(e)] (h) 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, but need not be restored
until payment in full is received.
[(f)] (i) Before the board or managing agent may take
the actions permitted under subsection [(e),] (h), 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)] (j) Subject to this subsection and subsection [(h),]
(k), 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)] (k) The amount of the special assessment assessed
under subsection [(g)] (j) 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)] (l) For purposes of [subsections (g) and (h),]
this section, 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."
6. By amending section 421J-13 to read:
"[[]§421J-13[]] Mediation of disputes. [(a) At the request of any party, any 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.
(b) Nothing in subsection (a) shall be
interpreted to mandate the mediation of any dispute involving:
(1) Actions seeking
equitable relief involving 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.] (a)
The mediation of a dispute between a member and the board, member and
the managing agent, board members and the board, or directors and managing
agents and the board shall be mandatory upon written request to the other party
when:
(1) The dispute
involves the interpretation or enforcement of the association's declaration,
bylaws, or similar organizational 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)
The mediation of a dispute between a member and the board,
member and the managing agent, board members and the board, or directors and
managing agents and the board shall not be mandatory when the dispute involves:
(1) Threatened
property damage or the health or safety of members or any other person;
(2) Assessments;
(3) Personal injury
claims; or
(4) Matters that
would affect the availability of any coverage pursuant to an insurance policy
obtained by or on 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 member's property 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
subsections (d) and (e).
(g) 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."
7. By adding two new parts to be appropriately designated and to read:
"PART II.
ALTERNATIVE DISPUTE RESOLUTION
§421J-Q Arbitration. (a) At the request of any party, any dispute concerning or involving one or more members and an association, its board, managing agent, or one or more other members relating to the interpretation, application, or enforcement of this chapter or the association's declaration, bylaws, or similar organizational documents adopted in accordance with its bylaws shall be submitted to arbitration. The arbitration shall be conducted, unless otherwise agreed by the parties, in accordance with the rules adopted by the commission and of chapter 658A; provided that the rules of the arbitration service conducting the arbitration shall be used until the commission adopts its rules; provided further that where any arbitration rule conflicts with chapter 658A, chapter 658A shall prevail; and provided further that notwithstanding any rule to the contrary, the arbitrator shall conduct the proceedings in a manner which affords substantial justice to all parties. The arbitrator shall be bound by rules of substantive law and shall not be bound by rules of evidence, whether or not set out by statute, except for provisions relating to privileged communications. The arbitrator shall permit discovery as provided for in the Hawaii rules of civil procedure; provided that the arbitrator may restrict the scope of such discovery for good cause to avoid excessive delay and costs to the parties or the arbitrator may refer any matter involving discovery to the circuit court for disposition in accordance with the Hawaii rules of civil procedure then in effect.
(b) Nothing in subsection (a) shall be interpreted to mandate the arbitration of any dispute involving:
(1) The real estate commission;
(2) The mortgagee of a mortgage of record;
(3) Actions seeking equitable relief involving threatened property damage or
the health or safety of unit owners or any other person;
(4) Actions to collect assessments which are liens or subject to foreclosure;
provided that a unit owner who pays the full amount of an assessment and
fulfills the requirements of section 421J-10.5 shall have the right to demand
arbitration of the owner's dispute, including a dispute about the amount and
validity of the assessment;
(5) Personal injury claims;
(6) Actions for amounts in excess of $2,500 against an association, a board,
or one or more directors, officers, agents, employees, or other persons, if
insurance coverage under a policy or policies procured by the association or
its board would be unavailable because action by arbitration was pursued; or
(7) Any other cases which are determined, as provided in subsection (c), to
be unsuitable for disposition by arbitration.
(c) At any
time within twenty days of being served with a written demand for arbitration,
any party so served may apply to the circuit court in the judicial circuit in
which the member's property is located for a determination that the subject
matter of the dispute is unsuitable for disposition by arbitration.
In determining whether the subject matter of a
dispute is unsuitable for disposition by arbitration, a court may consider:
(1) The magnitude of the potential award, or any issue of broad public
concern raised by the subject matter underlying the dispute;
(2) Problems referred to the court where court regulated discovery is
necessary;
(3) The fact that the matter in dispute is a reasonable or necessary issue to
be resolved in pending litigation and involves other matters not covered by or
related to this chapter;
(4) The fact that the matter to be arbitrated is only part of a dispute
involving other parties or issues which are not subject to arbitration under
this section; and
(5) Any matters of dispute where disposition by arbitration, in the absence
of complete judicial review, would not afford substantial justice to one or
more of the parties.
Any such application to the circuit court 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 $200.
(d) In the
event of a dispute as to whether a claim shall be excluded from mandatory
arbitration under subsection (b)(7), any party to an arbitration may file a
complaint for declaratory relief against the involved insurer or insurers for a
determination of whether insurance coverage is unavailable due to the pursuit
of action by arbitration. The complaint
shall be filed with the circuit court in the judicial circuit in which the
member's property is located. The
insurer or insurers shall file an answer to the complaint within twenty days of
the date of service of the complaint and the issue shall be disposed of by the
circuit court at a hearing to be held at the earliest available date; provided
that the hearing shall not be held within twenty days from the date of service
of the complaint upon the insurer or insurers.
(e)
Notwithstanding any provision in this chapter to the contrary, the
declaration, or the bylaws, the award of any costs, expenses, and legal fees by
the arbitrator shall be in the sole discretion of the arbitrator and the
determination of costs, expenses, and legal fees shall be binding upon all
parties.
(f)
The award of the arbitrator shall be in writing and acknowledged
or proved in like manner as a deed for the conveyance of real estate, and shall
be served by the arbitrator on each of the parties to the arbitration,
personally or by registered or certified mail.
At any time within one year after the award is made and served, any
party to the arbitration may apply to the circuit court of the judicial circuit
in which the member's property is located for an order confirming the
award. The court shall grant the order
confirming the award pursuant to section 658A-22, unless the award is vacated,
modified, or corrected, as provided in sections 658A-20, 658A-23, and 658A‑24,
or a trial de novo is demanded under subsection (h) and section 421J-R, or the
award is successfully appealed under subsection (h) and section 421J-R. The record shall be filed with the motion to
confirm award, and notice of the motion shall be served upon each other party
or their respective attorneys in the manner required for service of notice of a
motion.
(g)
Findings of fact and conclusions of law, as requested by any party prior
to the arbitration hearing, shall be promptly provided to the requesting party
upon payment of the reasonable cost thereof.
(h) Any
party to an arbitration under this section may apply to vacate, modify, or
correct the arbitration award for the grounds set out in chapter 658A. All reasonable costs, expenses, and
attorneys' fees on appeal shall be charged to the nonprevailing party.
§421J-R
Trial de novo and appeal. (a)
The submission of any dispute to an arbitration under section 421J-Q
shall in no way limit or abridge the right of any party to a trial de novo.
(b)
Written demand for a trial de novo by any party desiring a trial de novo
shall be made upon the other parties within ten days after service of the arbitration
award upon all parties and the trial de novo shall be filed in circuit court
within thirty days of the written demand.
Failure to meet these deadlines shall preclude a party from demanding a
trial de novo.
(c) The
award of arbitration shall not be made known to the trier of fact at a trial de
novo.
(d) In any
trial de novo demanded under this section, if the party demanding a trial de
novo does not prevail at trial, the party demanding the trial de novo shall be
charged with all reasonable costs, expenses, and attorneys' fees of the
trial. When there is more than one party
on one or both sides of an action, or more than one issue in dispute, the court
shall allocate its award of costs, expenses, and attorneys' fees among the
prevailing parties and tax such fees against those nonprevailing parties who
demanded a trial de novo in accordance with the principles of equity.
PART III.
ADMINISTRATION
§421J-S General powers and duties of real estate 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-T 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, the real estate broker, the real estate salesperson, the purchaser, or
the developer. For the purposes of this
examination, the developer and the real estate broker shall keep and maintain
records of all sales transactions and of the funds received by the developer
and the real estate broker pursuant thereto, and shall make the records
accessible to the commission upon reasonable notice and demand.
§421J-U Cease and desist orders. In addition to its authority under section
421J-V, 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-V 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-W 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 thereto shall also be subject to a civil penalty not exceeding $10,000 for any violation. Each violation shall constitute a separate offense.
§421J-X
Association; registration. (a) Each association shall:
(1) Secure
and maintain a fidelity bond in an amount for the coverage and terms as
required by section 421J-K. An
association shall act promptly and diligently to recover from the fidelity bond
required by this section. An association
that is unable to obtain a fidelity bond may seek approval for an exemption, a
deductible, or a bond alternative from the commission. Current evidence of a fidelity bond includes
a certification statement from an insurance company registered with the
department of commerce and consumer affairs certifying that the bond is in
effect and meets the requirement of this section and the rules adopted by the
commission;
(2) 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 project or 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 project or 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 recordation of the purchase of
the first unit in the project, the developer or developer's affiliate or the
managing agent shall register on behalf of the association and shall comply
with this section, except for the fidelity bond requirement for associations
required by section 421J-K. The public
information required to be submitted on any completed application form shall
include but not be limited to evidence of and information on fidelity bond
coverage, names and positions of the officers of the association, the name of
the association's managing agent, if any, the street and the postal address of
the planned community association, and the name and current mailing address of
a designated officer of the association where the officer can be contacted
directly;
(3) Pay
a nonrefundable application fee and, upon approval, an initial registration fee
and a reregistration fee upon reregistration as provided in rules adopted by
the director of commerce and consumer affairs pursuant to chapter 91;
(4) 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
(5) 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 a project or 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."
SECTION 2. This Act does not affect rights and duties that have matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on January 1, 2020.
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INTRODUCED BY: |
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Report Title:
Planned Community Associations
Description:
Specifies the powers of a planned community association and its board. Inserts similar provisions concerning governance and documents as are provided to condominium associations. Specifies alternative dispute resolution procedures. Specifies the Real Estate Commission as the regulatory entity.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
