Hearing on Non-Judicial Foreclosure Bill & Leased Fee Conversion Tax Credit

There is a hearing on Monday, March 21, 2005 at 9:00 a.m. in room 016 on some bills of interest to community associations before the Senate Commerce, Consumer Protection and Housing Committee before chair Sen. Ron Menor. The hearing notice discusses the following bills of interest to community associations:

HB 783 HD2 The first version of this bill would have repeal the 1874 nonjudicial (power of sale) foreclosure law and amend the 1998 alternate power of sale foreclosure process by allowing all mortgages to be foreclosed through the process, capping the public sale purchaser's downpayment to not more than 10 percent of the highest successful bid, removing the requirement that the borrower sign the conveyance document, and clarifying that the new property owner may take possession no sooner than 45 days after the public sale. Effective July 1, 2099. That version of the bill would be an improvement because the 1874 law does not contain consumer protections. The 1998 law was never used because no one would use the law because they couldn't rely on the borrower to sign the conveyance document after the foreclosure. The bill also adds the additional consumer protection that a 10% downpayment thereby insuring that more people would bid on the property. The current version of the bill, however, has reinstated the requirement that the borrower sign the deed and reinstated the 1874 law, which means in its current state, it will not do anything
because no one will use it because they can't rely on the borrower to sign the conveyance document after the foreclosure.

HB 1554 HD2 This bill would exempt from taxation 75% of the income received from the sale to a lessee of the leased fee interest in a residential house lot or multi-family residential leasehold property, or to the association of apartment owners, residential cooperative, or planned community of the multi-family residential leasehold building. Since Honolulu repealed Chapter 38 providing for mandatory conversion of the leased fee interest in condominiums and residential cooperatives, the tax incentive would be a welcome change to the law which may remove one reason a lessor may be unwilling to sell the leased fee interest to the lessees.


Persons wishing to testify should submit 25 copies of their testimony to the committee clerk, Room 219, State Capitol, 24 hours prior to the hearing. Testimony may also be faxed if less than 5 pages in length, to the Senate Sergeant-At-Arms Office at 586-6659 or 1-800-586-6659 (toll free for neighbor islands), at least 24 hours prior to the hearing. When faxing, please indicate to whom the testimony is being submitted, the date and time of the hearing, and the required number of copies needed for submittal.