Hearing on Recodification, Investment, Condo Court, Records & Cumulative Voting Bills

There is a hearing on Monday, March 14, 2005 at 1:30 p.m. in room 325 on some bills of interest to community associations before the House Consumer Protection Committee before chair Rep. Kenneth T. Hiraki. The hearing notice discusses the following bills of interest to community associations:

SB 1132 SD2 This is the second part of the Recodification. Although there are issues with the Recodification, it is better than the current law.

SB1137 SD1 This bill would eliminate the prohibition on purchasing CDs through a securities broker from the Recodification. The prohibition was added at the last minute and would make most associations immediately in violation of the law upon the effective date of the Recodification. There is no good reason for associations to be limited in the ways it acquires its federally insured investments.

SB 1345 SD1 This bill would expand the scope of the pilot condo court law to any matter that is subject to mediation. While I believe that the condo court pilot project should be expanded, the proposed expansion is over broad. It is hoped that an expanded pilot project would allow a realistic evaluation of an administrative process for condominium associations. One possible outcome might be a reduction in the number of bills each year seeking to further limit the ability of Hawaii condominium associations to self-govern. I believe that the original pilot project was so restrictive that no cases would be heard and it would not be possible to evaluate the program. In fact, that has turned out to be the case. No one has filed any cases under the pilot project.

However, the proposed bill goes too far in the other direction. It covers any matter that may be mediated. Effectively, it covers any disputes at all. The expansion overload the limited ability to the administrative hearings office to handle cases. More importantly, the expansion would include questions of interpretation of the Association's Declaration, By-Laws and House Rules. While it is reasonable for an administrative law judge to be familiar with the Hawaii Condo Law, it is not reasonable for them to be conversant with the multitude of different condominium documents used throughout the State.

In addition, exceptions for the removal of directors (HRS 514A-82(b)(1)), the amendment of the By-Laws (HRS 514A-82(b)(2)), non-judicial foreclosure of association liens (514A-82(b)(13)), and pets to the extent that they involve fair housing (HRS 514A-82.5 & 82.6) are not appropriate for Condo Court. If the removal of directors or an amendment to the By-Laws are being challenged that is something so serious that the courts need to be involved. The foreclosure of association liens should be handled as provided by Hawaii Condo Law. If the owner pays the delinquency subject to challenge, the owner is able to bring an action in small claims court or force mediation. Finally, if there is a claim involving a pet that raises Federal or State Fair Housing concerns, they should be addressed pursuant to Federal and State law. It is doubtful whether the state law could supercede the Federal Fair Housing Act.

SB 1348 SD1 This bill requires that board of director minutes for the current and prior year be made available at no cost or on 24 hour loan to all members at the resident manager's office. Currently, only the current minutes are available at no cost or 24 hour loan. The other minutes for the current and prior year are available for review at a convenient location designated by the Board (usually the managing agent's office). I have concerns about the bill because it micromanages condominium associations. The Association is free to make the documents available on site, but many associations have few or no onsite members. The Senate placed an effective date of 2050 to insure that further discussion is held on the bill.

SB 1349 SD1 This bill would change the law so that associations would need to make 5 years of financial statements, general ledgers, the accounts receivable ledger, accounts payable ledgers, check ledgers, insurance policies, contracts, and invoices available to its members rather than 2 years. I have concerns about this bill because it attempts to micromanage condominium associations. What many people misunderstand is that there is a cost to keeping records and there does not appear to be a good reason to require that 5 years of documents be maintained and made available to members. The Senate placed an effective date of 2050 to insure that further discussion is held on the bill.

SB 1798 This bill would eliminate condominium associations from the coverage of the cumulative voting sections of the nonprofit corporation act. There really is no reason to treat condominiums differently from other nonprofit corporations. The nonprofit corporation act recognizes that cumulative voting takes away power from the majority. As a result, the law requires that notice be given and a member request cumulative voting before it be applied.


PERSONS WISHING TO TESTIFY ARE REQUESTED TO SUBMIT 35 COPIES OF THEIR TESTIMONY AT LEAST 24 HOURS PRIOR TO THE HEARING TO: (1) THE COMMITTEE'S VICE CHAIR IN ROOM 425, STATE CAPITOL, OR (2) THE HOUSE SGT.-AT-ARMS TESTIMONY DROP OFF BOX IN THE TURNAROUND AREA OF THE CAPITOL BASEMENT PARKING LOT. TESTIMONY MAY ALSO BE FAXED IF LESS THAN 5 PAGES IN LENGTH TO THE HOUSE SGT.-AT-ARMS OFFICE AT: 586-6501 (OAHU) OR 1-800-535-3859 (NEIGHBOR ISLANDS). WHEN FAXING, PLEASE INDICATE TO WHOM THE TESTIMONY IS BEING SUBMITTED, THE DATE AND TIME OF THE HEARING, AND THE REQUIRED NO. OF COPIES THAT IS NEEDED FOR SUBMITTAL.