Hawaii Condo Law

Moving Hawaii Condo Law

2006-01-20T12:10:00.000-10:00

As indicated earlier, we are moving this blog. Hawaii Condo Law can be found by clicking this link. If you've been using "hawaiicondominiumlaw.com" to access this blog, you don't need to do anything new. Most of the non-legislative articles have been ported to the new blog, but the old blog will remain active for some time. The newest article about the bills that have just been introduced are on the new site.

Legislative Session to Begin

2006-01-12T20:31:00.000-10:00

On Wednesday, January 18, 2006, the Hawaii State Legislature will open at 10:00 a.m. and will adjourn after 60 legislative days. Due to weekends, holidays, and recesses, the Legislature will adjourn on May 4, 2006. The Legislative Timetable contains the various deadlines for the session. This is the second year of the biennial session. This means that any bills introduced last year can still be considered in the 2006 session. These are called "Carried Over Measures". In addition, new bills can be introduced. The deadline for introduction of bills is January 25, 2006. As I've done before, I'll provide information about the bills that affect community associations.

Most bills affecting community associations will be heard by the Senate Commerce, Consumer Protection, and Housing Committee chaired by Senator Ron Menor and the House Consumer Protection & Commerce Committee chaired by Rep. Robert N. Herkes. Rep. Herkes is the new chair of the committee after the resignation of former Representative Ken Hiraki. Other committees will also hear legislation that affects community associations.

It's difficult to predict what kinds of bills will be considered by the legislature. We are certain that a bill tweaking the Recodification will be heard by the Legislature. We've heard rumours that a bill to expand the Pilot Condo Court Project to apply to planned community associations will be introduced. Other than that, virtually anything is a possibility.

Auditor Recommends Against Certification of Condominium Association Managers

2006-01-09T12:41:00.000-10:00

On May 3, 2005, the Hawaii Legislature adopted a resolution asking the Legislative Auditor to conduct a sunrise review of the certification of condominium association managers. This is the first step before a profession is regulated by the State of Hawaii.

On December 22, 2005, the Auditor transmitted a letter to the Hawaii Senate President informing him of the recommendation against the mandatory certification of managers. The actual report explains the reasons for the recommendation:

The proposed regulation is unnecessary for several reasons. We found little evidence that condominium association managers have presented a danger to the health, safety, and welfare of the public. Most of the complaints filed at the Regulated Industries Complaint Office related to problems between condominium owners and their boards. In addition, complainants have many remedies available to them. Mediation services are available from the Real Estate Commission and the Regulated Industries Complaints Office. The Legislature also established a Condominium Dispute Resolution Program that would allow cases that hand not been resolved through mediation to be heard by the Commerce Department's Office of Administrative Hearing.

The Legislative Auditor also stated that the Recodification will be effective in a few months and it would be premature to consider any regulatory changes until the new law comes into effect and its impact on condominium management can be assessed.

The Legislative Auditor's standard for evaluating whether a profession is to be regulated is whether there is a significant risk to the health, safety and welfare of the public. On that basis, the Legislative Auditor has taken the position that various professions should not be regulated. Despite these recommendations, the Legislature has decided to regulate many professions. So, there is still a possibility that the Legislature will approve legislation requiring certification of condominium association managers during the upcoming legislative session.

Terrorism Risk Insurance Act Extension Moves Forward in Congress

2005-12-13T19:42:00.000-10:00

On November 21, 2005, I reported on the Senate's Passage of an extension to the Terrorism Risk Insurance Act ("TRIA"). On December 7, 2005, the House passed it's version of the extension bill. The House Financial Services Committee's website contains a summary of the bill. The House version is broader than the Senate version which is supported by the White House. Reuter's reports that Senate Majority Leader Bill Frisk predicts that a compromise bill will be approved before TRIA's expiration on December 31, 2005.

Hawaii Supreme Court Upholds Right of Condominium Association to Vacate Residents for Maintenance

2005-12-06T19:30:00.000-10:00

Most people involved with condominium associations understand that sometimes it is necessary to undertake repairs and maintenance of the common elements which might displace residents. For some reason, there have been a few recent instances where residents have challenged the right of an association to force the owners to vacate their units for this purpose. These cases have been complicated by the fact that very few condominium declarations and bylaws have provisions expressly authorizing the Board to force residents to vacate their apartments.

The Hawaii Supreme Court in Association Of Apartment Owners Of Ahuimanu Gardens v. Flint, just issued a decision that confirms the right of a condominium association to require owners to vacate the unit for termite fumigation of the common elements. John A. Morris of our office wrote the brief on behalf of the association. The Hawaii Supreme Court said:

Despite its lack of express authority in the Bylaws, the Board's broad authority to do all things necessary for the operation of the Association includes the authority to require Flint to temporarily vacate her unit so that termite infestation in the common elements may be treated by tent fumigation of the building in which she owns and occupies a unit.

Unfortunately, the The Hawaii Supreme Court decision is unpublished, which means it cannot be cited in other cases [Haw. Rules of App. Proc. 35(c)]. Even if it cannot be cited in other proceedings, the decision does provide some information about how the Court would rule in similar situations.

Recodification Available Online

2005-12-06T10:37:00.000-10:00

As we have been mentioning for the last few years, the Recodification of the Condominium Property Act will be effective on July 1, 2006. The new Chapter of the Hawaii Revised Statutes will be designated Chapter 514B. The Hawaii State Legislature has updated its website to include the Recodification. This is important because this version contains some minor revisions made by the Revisor of Statutes. For instance, where the statute says the "effective date of the act", the Revisor of Statutes has replaced it with July 1, 2006.

Comfort Animals Part II

2005-12-02T10:41:00.000-10:00

Yesterday, I wrote about comfort animals and how the 9th Circuit Court of Appeals is considering whether a comfort animal can be a reasonable accommodation under the Federal Fair Housing Act. The 9th Circuit is likely to rule whether a comfort animal must be specially trained to ameliorate a disability. Part of the reason that the 9th Circuit Case is so important is that there is a lot of confusion in the law. Some earlier cases have assumed that comfort animals would be a reasonable accommodation. For instance, Crossroads Apartments Associates, 152 Misc. 2d 830, 834, 578 N.Y.S. 2d 1004, (City Ct. 1991); HUD v. Riverbay (HUD ALJ 9-8-94), Fair Housing - Fair Lending ¶25,080 at 25,740-41; and Janush v. Charities Housing Dev. Corp., 169 F. Supp. 2d 1133, Fair Housing - Fair Lending ¶16,618 at 16,618.2 (N.D. Cal. 2000) (request to keep 2 birds and 2 cats as an accommodation for a mentally disabled resident may be required by the Act) have all indicated a possibility that comfort animals may be a reasonable accommodation. More recently, the court in Auburn Woods I Homeowners Assn. v. Fair Employment and Housing Commission (Elebiari), 121 Cal. App. 4th 1578, 18 Cal. Rptr. 3d 669, 2004 WL 1888284 (Cal. App. 2004) has also ruled that comfort animals may be permitted under the California State Fair Housing laws.

The difficulty with even these cases is that the scope of the accommodation is not fully developed. In particular, these cases rarely deal with the issue of what accommodations are necessary to permit a disabled individual equal opportunity to use and enjoy a dwelling. As a result, it is difficult for anyone to determine how much of an accommodation they should make in any particular instance. For instance, in the Janush cases, one court ruled that even if there is a basis for an accommodation, the accommodation should involve fewer than the 2 birds and 2 cats owned by the plaintiff. A later court raised doubts about the number of pets that might be permitted. Even those inclined to permit comfort animals would have probably said that a single comfort animal would be sufficient as an accommodation.

What is a comfort animal?

2005-12-01T12:47:00.000-10:00

The Federal Fair Housing Act "FHA" prohibits discrimination against disabled individuals in addition to other protected classes. A residential housing provider is normally required to make reasonable accommodations in its policies, procedures, and practices that are necessary to afford a disabled individual with an equal opportunity to use and enjoy the dwelling. In communities that restrict pets, that means that the community cannot prohibit seeing eye dogs to someone legally blind. Some individuals have attempted to use the FHA to permit them to keep pets that would otherwise be prohibited by the community. They have claimed that they are disabled and that an animal would make them feel better.

There are a number of problems with this claim. First, to the extent that these individuals are not truly disabled, they trivialize and undermine the law that is intended to provide needed protections for those who are truly disabled. When the law was first adopted, it was assumed that disability was something that was easily proven. The Courts have limited the scope of disability in a number of ways. Therefore, an individual may not be legally disabled despite a note from their doctor. We normally recommend to our clients that they obtain a written certification from a doctor to validate the disability unless it is obvious.

Second, two courts have ruled that a comfort animal is not covered by the reasonable accommodation provisions of the Fair Housing Act. In re Keena Homes Cooperative Corp., 210 W. Va. 380, 557 S.E. 2d 787; Fair Housing - Fair Lending ¶18,328 (2001) andPrindable v. AOAO 2987 Kalakaua, 304 F.Supp. 1245, 2003 U.S. Dist. LEXIS 23744 (D. Haw. 2003) have ruled that in order for an animal to be covered by the reasonable accommodation provisions of the law, it must be individually trained to ameliorate the effects of the disability. The 9th Circuit is currently hearing the case and a decision is expected in a few months.

What is a reasonable modification?

2005-11-29T11:02:00.000-10:00

The Federal Fair Housing Act "FHA" provides protections for people with disabilities. In addition to a prohibition against discriminating against someone because they are disabled, the FHA has two affirmative duties for those covered by the Act. One of them is to provide a reasonable accommodation. The other is that a housing provider must permit people with disabilities to make reasonable modifications to their dwelling or the common areas at the disabled person's expense that are necessary for the disabled person to use or enjoy the dwelling.

The Americans with Disabilities Act "ADA" has a similar provision. Under the ADA, a public accommodation (usually a commercial entity) must remove architectural barriers to the place of public accommodation necessary to afford the goods, services, facilities, privileges, advantages or accommodations provided by the public accommodation to individuals with disabilities if it is readily achievable. Removal of architectural barriers are readily achievable if it can be accomplished with little cost and does not prove burdensome or substantially alter the goods or services provided by the public accommodation. Under the ADA, unlike the FHA, the public accommodation pays for the cost of barrier removal. If the barrier removal is not readily achievable, the public accommodation must normally make a reasonable accommodation to provide the goods, services, facilities, etc. to the disable person.

Happy Thanksgiving!

2005-11-27T21:41:00.000-10:00

On this Thanksgiving Weekend, we'd like to wish you all a wonderful holiday. You may have noticed that except for this last week, it has been over a month since our last post. During this time, I haven't been idle, but most of the work has been behind the scenes. I've been setting-up the new home for Hawaii Condo Law Blog. I'll be hosting the new Hawaii Condo Law Blog at the Ekimoto & Morris website. I think you'll like the added functionality as well as the new look and feel. The switch-over will occur sometime during the beginning of the new year, but you'll continue to be able to use the http://www.hawaiicondominiumlaw.com url to access the blog even when it moves to its new home.

Many of you have already seen our book, The 2005 Director's Guide to Hawaii Community Association Law. In addition, a searchable CD version of the book will be available shortly. The Director's Guide includes an explanation on Hawaii Community Association Law written by John A. Morris as well most of the laws affecting community associations. The CD version has several extras including our legislative update, the Hawaii Condominium Fee Conversion law and bookmarks to locate key sections of the Director's Guide. Copies of the book and the CD are available to our clients. You should receive your copies of the books from your community association manager. We'll let you know how to get a copy of the CD when they're produced.

John and I are working on a major rewrite of the Director's Guide to coincide with the rewrite of the Hawaii Condominium Act. The Recodification means that many things in Hawaii Condominium Law will be changing effective July 1, 2006.

What is a reasonable accommodation?

2005-11-23T17:32:00.000-10:00

The Federal Fair Housing Act "FHA" and the Americans with Disabilities Act "ADA" provides protections for people with disabilities. In addition to a prohibition against discriminating against someone because they are disabled, these laws have affirmative duties for those covered by the two Acts. Under the FHA, one of the affirmative duties is to permit reasonable modifications. In addition, a housing provider must make reasonable accommodations to its policies, practices or procedures if it is necessary for a disabled person to use or enjoy the dwelling.

Similarly, under the ADA, a housing provider must make reasonable accommodations to its policies, practices or procedures if it is necessary to afford the goods, services, facilities, privileges, advantages or accommodations provided by the public accommodation (usually the commercial entity) to individuals with disabilities. The ADA also contains a barrier removal requirement similar to reasonable modifications.

What is a disability?

2005-11-22T15:15:00.000-10:00

The Federal Fair Housing Act and the Americans with Disabilities Act provides protections for people with disabilities. The Fair Housing Act uses the term, "handicap" while the Americans with Disabilities Act uses the term, "disability" but they are defined the same.

A person with a disability is someone who: (1) has a physical or mental impairment which substantially limits one or more major life activities (i.e., caring for one's self, performing manual tasks, walking, seeing, breathing, etc.); (2) has a record of such an impairment; or (3) is regarded as having such an impairment. A disability does not include a current illegal use of or addiction to a controlled substance or is a transvestite. Courts have limited what constitutes a disability in a number of ways. For instance, the courts look to whether someone's condition substantially limits a major life activity in its corrected condition. Therefore, someone who is legally blind without glasses is not disabled if they are not impaired if they were to be fitted with glasses.

Terrorism Risk Insurance Act Extension Moves Forward in Congress

2005-11-21T19:24:00.000-10:00

The Terrorism Risk Insurance Act is scheduled to expire on December 31, 2005. However, last week both the Senate Banking Committee and the House Financial Services Committee today approved different versions of legislation that would extend TRIA for two years.

On Friday, the full Senate voted to approve the Senate version of the extension legislation. The White House has indicated support for the Senate version, but has reservations about the House version which would be more expensive. The full House of Representative is expected to vote on the House version of the extension legislation after Thanksgiving recess.

What is the Terrorism Risk Insurance Act?

2005-11-20T18:48:00.000-10:00

The Federal Government adopted the Terrorism Risk Insurance Act (TRIA) two years ago in response to the decision of most insurers to refuse to provide terrorism insurance after the events of September 11, 2001. The law included a provision requiring insurers to make available terrorism insurance to their customers. The "make available" provisions of TRIA require that, from the date of enactment (November 26, 2002) through the last day of the second year of the Program (December 31, 2004), each insurer must make available, in all of its commercial property and casualty insurance policies, coverage for losses due to covered acts of terrorism that does not differ materially from the terms, amounts and other coverage limitations applicable to losses arising from events other than acts of terrorism. TRIA did not regulate the cost of the insurance, but it included provisions that limited the insurance industry's losses which indirectly lowered the cost of the insurance.

TRIA required that the Secretary of the Treasury determine whether the "make available" provision should be extended for an additional year. On June 18, 2004, the U.S. Treasury Department today announced its decision to extend the "make available" provisions of TRIA for a third year. Currently, the TRIA "make available" is scheduled to end on December 31, 2004.

New Bankruptcy Law Now In Effect

2005-10-17T20:45:00.000-10:00

On May 9, 2005, I posted a FAQ on the new bankruptcy law. As I stated, on October 17, 2005, all the provisions of the new bankruptcy law will be effective. So, all bankruptcy filings from today will be governed by the new bankruptcy law.

On a related note, the Bankruptcy Courts have adopted interim rules for filings from today on. Formal rules normally take many months, so they just adopted interim rules.

Purchase of Leased Fee Interest by Condominium Association Upheld

2005-08-12T18:59:00.000-10:00

On July 22, 2005, the Hawaii Supreme Court ruled in Association of Apartment Owners of Maalaea Kai, inc. v. Stillson that the purchase of the leased fee interest by the condominium association was proper. This is the second appeal in this case. The case began when Stillson failed to pay his maintenance fees. After several demands, the Association filed a notice of lien and then sought to foreclose the lien. Stillson claimed that the Association was prohibited from purchasing the leased fee interest in the Project unless 100% of the apartment owners approved the purchase. Eventually, Stillson paid the assessments and pursued his counterclaim challenging the purchase of the leased fee interest. The trial court agreed with Stillson's argument that the purchase of the leased fee interest required approval of 100% of the apartment owners. In the first appeal, the Hawaii Supreme Court overturned the decision stating that approval of 75% would be sufficient. It remanded the case to determine whether the requisite approval was obtained.

Upon remand, the trial court ruled that less than 75% of the apartment owners approved the purchase of the leased fee interest. The court arrived at this conclusion because not all of the owners for a unit voted in favor of the purchase. For instance, written consents were submitted by many units signed by either the husband or wife of a jointly owned apartment. The trial court disallowed part of the votes for each of these units.

The Hawaii Supreme Court ruled in the second appeal that the Association could rely upon the method of voting in the By-Laws if it does not violate law. The Association's By-Laws provided that votes of units could not be split and that if one joint owner of a unit voted without objection, the vote binds all the joint owners of the unit. The Supreme Court also ruled that even if there is a defect in the voting process, the purchase of the leased fee interest by more than 75% of the owners constitutes a ratification of the purchase. The ratification is treated as if it occurred at the time of the original vote. Two of the five justices of the Supreme Court dissented.

Ekimoto & Morris Open New Law Firm

2005-07-31T14:16:00.000-10:00

We're happy to announce the formation of Ekimoto & Morris, A Limited Liability Law Company. Richard S. Ekimoto, a principal with Elisha Ekimoto & Harada and John A. Morris, Of Counsel with Ashford & Wriston will be forming a new law firm on August 1, 2005. The law firm will practice in the area of condominium and community association law. Elisha Ekimoto & Harada will cease to practice law as of July 31, 2005. Richard is a member of the prestigious College of Community Association Lawyers with a national reputation. John was Hawaii's first condominium specialist.

Arlette S. Harada, also a principal with Elisha Ekimoto & Harada will be Of Counsel to Ekimoto & Morris. Gordon M. Arakaki, an associate with Ashford and Wriston and Sandy S. Ma, an associate with Elisha Ekimoto & Harada will be associates with the firm. Gordon was the Recodification Attorney for the Hawaii Real Estate Commission and Sandy was a trial attorney for the Equal Employment Opportunity Commission.

Tobie Laimana and Nancy Bonilla staff at Ashford & Wriston and Melanie Sunada, John Forney, Stacey Wada and Margie Oyama, staff at Elisha Ekimoto & Harada will be joining the new firm.

Ekimoto & Morris will be located in the offices in which Elisha Ekimoto & Harada are currently located. Our address, phone numbers and website will be:

1132 Bishop Street, Suite 902
Honolulu, Hawaii 96813-2830
(808) 523-0702 (phone)
(808) 538-1927 (fax)
hawaiicondolaw.com

Emails at Ekimoto & Morris will be the first initial and last name of the recipient followed by "@hawaiicondolaw.com."

What is leased fee interest?

2005-07-25T21:34:00.000-10:00

The technical definition of "leased fee interest" is the Fee Simple interest in real property encumbered by a lease. Many people confuse "leased fee interest" and "fee simple interest". If you own 100% of the interest in real property, you own the real property in fee simple. The owner of real property in fee simple can do many things with the property including selling the property, mortgaging the property or leasing the property. If the owner of real property in fee simple leases the property on a long term lease, the real property is divided into two parts: (1) leasehold interest; and (2) leased fee interest. The lessee owns the leasehold interest. The leasehold interest is the right to use the property for the term of the lease and the obligation to pay rent during the term. There are other obligations created by the lease. The leased fee interest is the right to receive rent during the lease term and the right to receive the property at the end of the lease term (reversion). The owner of the leased fee interest does not have the present right to use the property. The leased fee interest is less than the fee simple interest.

Hawaii Federal District Court Affirms City Council's Lease Rent Repeal

2005-07-21T11:40:00.000-10:00

On June 24, 2005, I reported on a hearing held by Judge Ezra in a lawsuit involving the repeal of the Mandatory Conversion law by the City and County of Honolulu by Ordinance 05-001.

The case arose because apartment owners in the middle of the condemnation process were prevented by the City from continuing the process. The Honolulu Honolulu Star-Bulletin has reported that Judge Ezra has ruled on the case, denying the challenge. Judge Ezra stated that:

The fair and wise decision, from the perspective of the city, would have been to draft the repeal of Chapter 38 so as to allow those leaseholders ... who have begun in good faith the process of conversion to be grandfathered in.

Despite this, Judge Ezra ruled that the City acted within its legal limits in prohibited these leaseholders from completing the Chapter 38 process.

Chair of House Committee for Condo Legislation to Resign

2005-07-21T11:30:00.000-10:00

Representative Ken Hiraki announced his intention to resign from the Hawaii State Legislature to become a lobbyist for Hawaiian Telcom. Representative Hiraki is currently the Chair of the House Protection & Commerce Committee which hears most of the Hawaii Community Association Legislation. A new Chair will be appointed by the House Leadership. The new Chair will probably not be as familiar with condominiums and planned communities as Representative Hiraki.

Sexual Orientation and Gender Identity Discrimination in Real Property Transactions Bill Signed by Governor

2005-07-13T18:50:00.000-10:00

On June 29, 2005, I reported on HB1715 relating to sexual orientation and gender identity discrimination in real property transactions. The Governor had notified the Legislature that she was considering vetoing the bill. In her message announcing her intent to veto the bill, she stated:

The bill poses complex issues of application and enforcement given the ambiguous and vague nature of its language and fails to provide the public, renters, buyers, sellers, property owners, or the courts with an objective standard to determine if discrimination has occurred in the housing marketplace.

There was an issue whether this bill could be legally vetoed by the Governor because of a typo in the notice of intent to veto the Bill. However, on July 11, 2005, the Governor signed the bill and it became Act 214 effective on July 11, 2005.

A related bill, HB1450, relating to sexual orientation and gender identity discrimination in employment was also on the Governor's list of bills she is considering for veto. On July 11, 2005, the Governor vetoed the bill. The Legislature did not vote to override the veto.

Fee Conversion Tax Credit Bill Vetoed

2005-07-13T18:48:00.000-10:00

On June 29, 2005, I reported on HB1554 relating to a tax credit for Leased Fee Conversions. The Governor has notified the Legislature that she is considering vetoing the bill. In her message announcing her intent to veto the bill, she stated:

This bill provides a tax credit for one person in that it excludes from taxable income 50% of the capital gains realized, not to exceed $75,000 in the aggregate for all taxpayers. In effect this amounts to a tax credit of $5,438 ($75,000 x 7.25%), providing an incentive for virtually only a single seller to sell their leased fee interest.

On July 11, 2005, the Governor formallyvetoed the bill. The legislature did not vote to override the veto.

Hawaii Bankruptcies Spike

2005-07-02T17:02:00.000-10:00

On May 9, 2005, I posted a FAQ on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The article stated a spike of bankruptcies might occur because individuals would be trying to beat the October 17, 2005 effective date for many of the provisions of the new bankruptcy law. After October 17, 2005, it will be more difficult for individuals to have their debts discharged in bankruptcy. Yesterday, the Honolulu Star-Bulletin reported that bankruptcy filings spiked in Hawaii in the second quarter of 2005. This is the first quarter after adoption of the new bankruptcy law on April 20, 2005.

Can Condominium Associations restrict Smoking in the Units?

2005-06-30T13:47:00.000-10:00

On June 27, 2005, I posted an article on whether a condominium association can restrict smoking in the common elements. Under Hawaii Condo Law, a Board of Directors normally has more limited ability to regulate conduct in the units when compared to the common elements. Under Section 105(b) of the Recodification, house rules may affect the use of or behavior in units that may be used for residential purposes only to:

Prevent any use of a unit which violates the declaration or bylaws;

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 elements by other unit owners; or

Restrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders who regularly lend money secured by first mortgages on units in condominiums or regularly purchase those mortgages.

Recently a California law firm has suggested that a condominium association can prohibit smoking inside units. The article suggests that nuisance law may give associations the right to regulate smoking in units. Nuisance is the interference with the reasonable use and enjoyment of land. "Unreasonable interference with the use and enjoyment of the unit or the common elements" under the Recodification is substantially same as the definition of nuisance.

My friends, Colorado Condo Attorneys, Tom Hindman and Loura Sanchez have summarized the factors considered by the courts in determining whether a nuisance exists. Their article about smoking and condominium associations states:

Case law instructs that the following factors play into whether a given activity qualifies as a nuisance: 1) type of neighborhood; 2) the nature of the wrong complained of; 3) proximity of those alleging injury; 4) frequency/duration; 5) continuity; 6) damage or degree of injury; and 7) number of complaining parties.

As noted by Tom and Loura, nuisance lawsuits are difficult to prove. In a smoking case, this is made even more difficult because smoking is something that one would normally consider appropriate behaviour in one's own home. Courts will often consider whether something is a traditionally accepted use when determining whether a nuisance exists.

Despite this, a Massachusetts Housing Court jury ruled that a tenants' smoking was so significant and unreasonable that it constituted a nuisance in Harwood Capital Corp. v. Carey. As a result of this recent ruling, the eviction of the smoking tenants was was upheld even though the landlord was aware that the tenants were smokers when the tenancy began. Associations should not consider this a sign that courts would be willing to allow them to prohibit smoking in units. First, the Massachusetts Housing Court decision cannot be cited in any other case because it is a trial court decision. The fact that it is a Massachusetts case only further removes it from Hawaii condominiums. Second, the jury was dealing with the termination of a lease, not an ownership interest. While it is hard to predict how juries will act, it is likely that a jury would treat an owner smoking in his unit differently from a tenant that might have to move to another unit. Third, the ruling does not mean that an association could adopt house rules that contain a blanket prohibition against smoking in the units. Whether smoking in a unit constitutes a nuisance will depend on a variety of factors that would be unique to each situation. The factors described above would have to be considered to determine whether the specific facts present were sufficient to prove a nuisance.

It is possible, however, for associations to adopt By-Laws that would prohibit smoking. In addition, in extreme cases, a particular resident's smoking may constitute a nuisance. Even if a particular situation constitutes a nuisance, an association would need to consider whether it is willing to expend common funds to stop a resident from smoking in their unit. Absent unusual circumstances, an association is not required to file a lawsuit for every violation.

Governor Indicates Veto of Bills Affecting Community Associations

2005-06-29T11:00:00.000-10:00

On April 30, 2005, I reported on HB1554 relating to a tax credit for Leased Fee Conversions. The Governor has notified the Legislature that she is considering vetoing the bill. In the message, she stated:

This bill provides a tax credit for one person in that it excludes from taxable income 50% of the capital gains realized, not to exceed $75,000 in the aggregate for all taxpayers. In effect this amounts to a tax credit of $5,438 ($75,000 x 7.25%), providing an incentive for virtually only a single seller to sell their leased fee interest.

On May 3, 2005, I reported on HB1715 relating to sexual orientation and gender identity discrimination in real property transactions. The Governor has notified the Legislature that she is considering vetoing the bill. In the message, she stated:

The bill poses complex issues of application and enforcement given the ambiguous and vague nature of its language and fails to provide the public, renters, buyers, sellers, property owners, or the courts with an objective standard to determine if discrimination has occurred in the housing marketplace.

However, because of a typo in the Governor's message, there is an issue whether this bill may be legally vetoed by the Governor. A related bill, HB1450, relating to sexual orientation and gender identity discrimination in employment was also on the Governor's list of bills she is considering for veto. The related bill does not have the issue about a typographical error in the Governor's notice of intent to veto.

Can Condominium Associations restrict Smoking in the Common Elements?

2005-06-27T08:20:00.000-10:00

Under Hawaii Condo Law, most condominium associations can prohibit smoking in the common elements. Hawaii Revised Statutes §514A-82(a)(9) states that the By-Laws must provide for the method of adopting and amending house rules detailing the operation and use of the common elements. Most By-Laws allow the Board of Directors to adopt house rules. That means that the Board can normally adopt or amend house rules regulating smoking in the common elements.

In addition, county ordinances may require associations to prohibit smoking in some of the common elements. The Honolulu smoking ordinance is located in Chapter 41, Article 21 of the Revised Ordinances of Honolulu. The Maui smoking ordinance is located in Chapter 8.20 of the Maui County Code. The Kauai smoking ordinance is located in Section 22-8.2 of the Kauai County Ordinances. The Big Island smoking ordinance is not available online, but is located in Chapter 14 of the Hawaii County Code.

Smoking in prohibited in elevators that are generally open to and used by the public in all counties. Smoking is also prohibited in enclosed or partially enclosed areas within the condominium that are open to residents (excluding the units) in all counties. These areas can include the lobbies, hallways, stairways and waiting areas. The counties define enclosed or partially enclosed areas slightly differently. In Honolulu and Kauai, an area that has one wall and one roof or overhand is enclosed or partially enclosed. In Maui, an area with a permanent or temporary covering including a roof, awning, canvas or overhand is enclosed or partially enclosed. On the Big Island, an area with a roof or overhang and at least two walls is enclosed or partially enclosed. "No Smoking" signs must be placed in the areas where smoking is prohibited by ordinance.

I discuss whether condominium associations can restrict smoking in the units in this article.

Revised 6/30/2005 to add information about Big Island definition of enclosed or partially enclosed and to include the link to the article on smoking in units.

Governor Signs Solar Energy Bill

2005-06-25T11:24:00.000-10:00

On April 30, 2005, I reported on HB1017 relating to solar energy devices on townhouses. Act 157 was signed by the Governor on June 24, 2005.

City & County of Honolulu Telecommunications Law

2005-06-25T11:15:00.000-10:00

The City and County of Honolulu adopted Ordinance 05-020 relating to telecommunications facilities on City property. The ordinance provides for monthly rent between $1,000.00 and $2,325.00 depending on the square footage to be used for the antenna and the type of antenna. Many condominium associations and community associations enter into licenses with cellular phone companies for the placement of antennas on the property. Under Hawaii Condominium law (HRS §514A-13.4), most association boards are empowered to enter into these telecommunications licenses without owner approval. While the City and County Ordinance does not apply to condominium or community associations, it does provide an independent benchmark for reasonable rent for telecommunications antenna facilities.

Hawaii Federal District Court to Rule on Repeal of the Mandatory Conversion Law

2005-06-24T22:34:00.000-10:00

Joe West in his Community Associations Network Daily News cited to an article on the KITV News website about a federal district court case involving the repeal of the Mandatory Fee Conversion law by the City and County of Honolulu by Ordinance 05-001. Video of the news story is located at the KITV website.

The case arose because apartment owners in the middle of the condemnation process were prevented by the City from continuing the process. Although Federal District Court Judge Ezra did not issue his decision, he criticized the City Council saying that it made a "bad mistake by not letting those with pending condemnations go on." He called it "unfair to the apartment owners and highly unwise . . . because the costly litigation will cost taxpayers money."

Governor Signs New Cumulative Voting Law

2005-06-23T21:47:00.000-10:00

On April 30, 2005, I reported on SB1798 CD1 relating to cumulative voting and removal. Act 155 was signed by the Governor on June 23, 2005.

CAI Hawaii Chapter's Legislative Update on July 9, 2005

2005-06-23T02:03:00.000-10:00

On July 9, 2005, the CAI Hawaii Chapter will be holding a special Legislative Update Seminar at the Japanese Cultural Center from 8:30 a.m. to 12:00 noon. The speakers are John Morris, Gordon Arakaki, Steve Glanstein and myself.

Normally, the Legislative Update Seminar is about an hour and a half lunch session, but in light of the passage of the Recodification, a longer session will be held to discuss the details of the new law that will be effective on July 1, 2006. In addition, the new Bankruptcy law, the solar energy bill, the condominium records bills, the cumulative voting bill, the leasehold conversion tax credit bill, the leased fee interest right of first refusal bill, the sexual orientation and gender identity discrimination bill, the Condominium Association Manager Certification Sunrise Review, the study of naturally occurring retirement communities, the public nuisance law and toughening of the unlicensed contractor law.

The registration fee is $55.00 for member ($45 if postmarked by June 30, 2005) and $65.00 for non-members ($55 if postmarked by June 30, 2005) which can be sent to CAI Hawaii Chapter, P.O. Box 976, Honolulu, HI 96808 along with your name, membership number and payment.

Public Nuisance Law Expanded to Allow Abatement of Prostitution, Obscenity, Gambling and Illegal Drugs

2005-06-22T09:03:00.000-10:00

Those of you familiar with my annual legislative update know that I often discuss new laws that can affect Hawaii community associations even though they may not strictly be community association law. A few years ago, the legislature adopted a provision that allowed citizens and organizations to bring an action to abate nuisances involving prostitution, promoting prostitution, obscenity, gambling and illegal drugs. Act 123 amends Part V of Chapter 712 by clarifying that the standard of proof in these type of actions is preponderance of the evidence. In other words, the plaintiff is only requied to show that it is more likely than not that these type of nuisance exists. It also allows the court to issue a protective order to keep the identity of any witnesses secret if there have been prior threats or acts of violence by the defendant. The Act also clarifies the scope of injunctive relief that may be awarded to include enjoining the maintaining, aiding, abetting, or permitting a covered nuisance. The law originally allowed an injunction for causing the nuisance. For those associations that have problems with prostitution, obscenity, gambling or illegal drugs in their project, a nuisance abatement suit is a possibility.

Status of Condominium Legislation

2005-06-06T19:25:00.000-10:00

The Governor has signed several bills relating to condominium and community associations:

On April 30, 2005, I reported on SB1348 CD1 and SB1349 CD relating to condominium records. Act 89 and 90 were signed by the Governor on June 2, 2005.

On April 14, 2005, I reported on SB 1336 HD1 relating to the right of first refusal for leased fee interests. Act 91 was signed by the Governor on June 2, 2005.

On April 7, 2005, I reported on SB1345 SD1 relating to Condo court. Act 92 was signed by the Governor on June 2, 2005.

On April 30, 2005, I reported on SB1132 CD1 relating to the Recodification. Act 93 was signed by the governor on June 2, 2005.

What is a notice of proxy distribution?

2005-06-02T07:41:00.000-10:00

Under Hawaii Condo Law (HRS §514A-82(b)(4)), if the Association uses Association funds to distribute proxies, it must first post notice of its intent to use association funds to distribute proxies at least 30 days before the distribution. The notice must be posted in prominent locations on the project. Owners have 7 days after posting of the notice to request that their proxy solicitation statement be included with the Association's distribution of proxies. Under Hawaii Condo Law (HRS §514A-83.2(c))the Board or any Board member is prohibited from using Association funds to solicit proxies, although they may respond to the notice of proxy distribution like any other owner. There are a number of misconceptions about the statute:

The notice applies to distribution of proxies not the solicitation of proxies. The law was changed to apply to distribution of proxies rather than solicitation. If the Association uses Association funds to distribute proxies including enclosing the standard form proxy with the notice of meeting, it must first post the notice.

There is no legal requirement that the Association distribute proxies. Although it is unlikely that the meeting would meet the quorum requirements, the Association could legally send a notice of the meeting without a standard form proxy. For some associations where everyone is distributing their own proxies, this may not be a problem.

Since the statute refers to "prominent locations," the notice should probably be posted in at least two locations.

While the statute provides that those timely responding to the notice can include a 100 word statement to be sent out with the proxy distribution, Associations through their Boards can permit longer statements provided it treats everyone the same. Under the Recodification, the 100 word requirement will change to a single side of an 8½ x 11 sheet of paper.

Technical Amendments to Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

2005-05-25T16:25:00.000-10:00

On May 9, 2005, I provided a FAQ on the Act as it relates to community associations. Since then, the answer to the last question has been updated (although the date of the article has not been changed) to reflect that one technical amendment has already been made to the Act. The Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005 includes in on page 67, technical amendments for bankruptcy fees. Effective on October 17, 2005, the following bankruptcy fees will change:

The Chapter 7 filing fee will be increased to $220. With the trustee fee of $15 and the $39 administrative fee, the total Chapter 7 filing fee will be $274.

The Chapter 13 filing fee will be reduced from $155 to $150. Thus, the total filing fee for Chapter 13 will go from the current $194 to $189.

Congress apparently decided not to increase the fees retroactively. Other bills to amend the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 have been introduced.

Watch Out for Evergreen Clauses

2005-05-24T10:54:00.000-10:00

Ed Foster of InfoWorld has a blog on gripes about computers and computer vendors. Today, he wrote about an issue that commonly arises for community associations -- Evergreen clauses. You're probably familiar with them. They're automatic renewal clauses that extends the contract for a year or more unless one party cancels. With the change over of board members, site managers and managing agents, it is often difficult for community associations to remember to cancel the agreement. As Ed Foster points out, even normal businesses can fall prey to these types of clauses. The best thing to do is to write them out of all your contracts. The last thing you need is suddenly finding out that your landscaping contract has been automatically extended for another 3 years. If you vendor refuses, consider getting another vender. Do you really want a vendor that has to rely on tricks to make sure you remain their customer?

If you have existing contracts with Evergreen clauses or you can't get the vendor to eliminate them and you feel the vendor is still the best choice, see if you can immediately exercise your right to cancel. If the contract does not require that the notice of cancellation for the additional term be made within so many days before the end of the existing term, you can give notice of cancellation of the additional term immediately upon signing the contract. For example, an Evergreen clause might read, "This contract is automatically extended for an additional three year term unless either party gives notification of cancellation at least 60 days before the end of the initial or renewal term." Since the clause permits you to cancel 60 days or more before the end of the term, you can cancel the day you sign the contract. On the other hand, if you have to give notice, say within 60 days of the end of the existing term, you're going to need to implement a calendaring or tickling system for your contracts so that you don't miss the cancellation period by accident.

Finally, community associations should also consider reviewing their contracts to determine if they have Evergreen clauses.

Sex Offender Registry Updated

2005-05-10T15:07:00.000-10:00

Yesterday, the Governor signed into law Act 45 which allows the criminal justice center to expand the sex offenders that are listed on its website as sex offenders.

The Hawaii Supreme Court in State v. Bani, 97 Haw. 285, 36 P.3d 1255 (2001), overturned a prior statute that required that all sex offenders registration information be made available to the public. A constitutional amendment was passed last year permitting the legislature to make the information public. Act 45 implements the constitutional amendment and allows most of the sex offender registery information to be available online. According to the Attorney General, the online registry does not list the following sex offenders:

About 300 whose offenses are less serious and whose information is available at the attorney general's Criminal Justice Data Center and police stations.

About 300 others whose cases are being worked on to determine if they meet the new standards for having their information posted. These cases include mostly people who moved to Hawaii.

About 100 who have committed only single misdemeanor offenses and are not required to have their information made public.

Many community associations are faced with issue of whether it has a duty to inform residents whether a sex offender is living in the community. While an association will normally have the power to inform its members of a sex offender in the community, it probably does not have a duty. For most associations, however, it makes sense if they are aware of a sex offender in their community to inform their residents of the fact. We normally recommend, however, that instead of identifying the individual, the community simply inform residents where the information may be located.

FAQ on Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

2005-05-09T10:59:00.000-10:00

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("the Act"), community associations can expect to be able to obtain judgments for more delinquent common assessments than they did under the old law. In large part, this is because the Act makes it more difficult for anyone to eliminate their personal obligation to pay debts through bankruptcy ("discharge").

The Act also includes a specific provision for the protection of community associations. Bankruptcy courts across the country have had different rules for delinquent assessments after an owner files bankruptcy. Some courts have said that the right to assessments arise at the creation of the community and when the bankruptcy filing occurs, assessments after the bankruptcy filing can be discharged. A few courts said that assessments after the bankruptcy cannot be discharged. A 1994 law made assessments after the bankruptcy filing non-dischargeable in a residential condominium or cooperative if the owner resided in or rented out the unit. However, the different rules continued to exist for many planned community associations and commercial condominiums or cooperatives. The 1994 law also meant that if the owner moved out or stopped renting the unit, the post-petition delinquencies could be discharged. The Act makes all post-petition common assessments non-dischargeable.

What is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?

This law has been considered by Congress for 8 years. The Act includes some of these key provisions:

Adopts a means test for bankruptcy

Mandates financial counseling before filing

Mandates financial management course after filing as a condition to obtaining a discharge

Increases the time periods that debtors must wait between bankruptcies if they obtain a discharge

Increases the amounts paid in Chapter 13 cases

Automatically terminates the automatic stay in some refiled cases

Increases the amounts to be repaid to creditors

Toughens homestead exemptions

Grants additional rights to secured creditors

Grants post-petition relief to community associations

Grants higher priority to child and spousal support obligations

Requires the debtor to provide tax returns or tax transcripts to any requesting party

Permits relief from the automatic stay in favor of a real property secured creditor when the bankruptcy petition is part of a scheme to delay, hinder and defraud creditors involving either (i) a transfer of the real property without the secured creditor’s or court’s consent, or (ii) multiple bankruptcy filings affecting the real property

When will the Act be effective?

Most of the Act will be effective on October 17, 2005. The effective date for most provisions of the Act is 180 days after April 20, 2005, the day the President signed the bill. Except for a few provisions, the new Act will not apply to any bankruptcy cases that were filed before October 17, 2005. Many people expect there to be a spike of bankruptcy filings before October 17, 2005 to take advantage of the more lenient old law.

Is financial counseling required before an individual can file for bankruptcy?

Yes, once sufficient non-profit credit counseling agencies have been approved, the Act will require that before anyone files for bankruptcy, they must be certified by an approved non-profit credit counseling agency to have been briefed on opportunities for available credit counseling and to have received assistance in preparing an individual budget analysis. The U.S. Bankruptcy Trustee's Office is charged with approving non-profit credit counseling agencies. This requirement can be waived if the debtor submits a certification describing exigent circumstances and stating that he or she requested credit counseling services but was unable to receive it within 5-days from the request. However, even if waived, the debtor must undergo counseling within 30 days of filing the petition unless the court grants a 15 day extension.

Is a financial management course required after filing for bankruptcy?

Yes, once sufficient financial management course providers have been approved, debtors must complete the course prior to any discharge under either Chapter 7 or 13. The U.S. Bankruptcy Trustee's Office is charged with approving financial management course providers based on criteria contained in the Act.

When does a debtor's income and expenses have to qualify under the means test?

If a debtor's average gross family income 6 months before the bankruptcy filing exceeds the median for families in the debtor's state, the debtor's income and expenses must meet the means test. If the income and expenses do not meet the means test, the debtor must file a Chapter 13 bankruptcy rather than a Chapter 7 bankruptcy. The Bureau of the Census publishes charts with the median family income by state and American Bankruptcy Institute has more specific information on how median income is determined.

What is a Chapter 7 bankruptcy filing?

Chapter 7 is a liquidation proceeding. Under Chapter 7, the debtor turns over all non-exempt assets to the Bankruptcy Trustee. The Trustee liquidates the assets and pays the creditors. All unpaid debts are discharged other than those few that are exempt from the bankruptcy laws.

What is a Chapter 13 bankruptcy filing?

Chapter 13 is a reorganization proceeding. Under Chapter 13, the debtor pays some or all of the debts over a period of 3 to 5 years to the Chapter 13 Trustee who distributes the funds according to a plan approved by the Bankruptcy Court. The amount of the debts paid under the plan will vary but only needs to be more than what unsecured creditors would have received under a Chapter 7 filing. During the repayment period, creditors are prevented from requiring payment directly from the debtor for debts incurred before the bankruptcy filing ("pre-petition debt").

What is the Means Test for filing a Chapter 7 bankruptcy?

The difference between the debtor's monthly qualified expenses (less secured payments) and income is multiplied by 60. If that amount is less than $6,000.00, the debtor may file a Chapter 7 bankruptcy. If that amount is greater than $10,000.00, the debtor is prohibited from filing a Chapter 7 bankruptcy. If that amount falls between $6,000.00 and $10,000.00, the debtor may file a Chapter 7 only if that amount is less than 25% of the non-priority unsecured claims. There are provisions to allow additional expenses or adjustments to the income in special circumstances. In most instances, however, if the debtor's gross family income exceeds the median for families in the debtor's state, the debtor will probably need to file under Chapter 13 rather than under Chapter 7. The U.S. trustee, bankruptcy administrator or judge can challenge a debtor's bankruptcy filing in any case where the totality of the debtor’s financial circumstances indicates abuse of the bankruptcy system.

How were pre-petition common assessments handled before the Act?

The unsecured debts are handled differently under Chapter 7 and Chapter 13. In a Chapter 7 case, the mortgages, taxes, pre-petition delinquent common assessments and other secured debts would be paid from the sale of the real property in order of the priorities established by state law. Any secured pre-petition debts not paid through the liquidation of the property would become unsecured debts. The unsecured debts are handled differently under Chapter 7 and Chapter 13. Under Chapter 7, if there are assets remaining in the bankruptcy estate, they are liquidated and used to pay the unsecured debts. If not all the unsecured debts can be paid, the remaining unsecured debts would be discharged unless the debt is exempt from the bankruptcy laws. Under a Chapter 13 filing, all or part of the unsecured debts would be paid over 3 to 5 years. The amount of the unsecured debt to be paid is determined by the bankruptcy court.

How will pre-petition common assessments be handled under the Act?

The new means test will mean that more debtors will file Chapter 13 bankruptcies rather than Chapter 7 bankruptcies. That means that fewer debts will be discharged. In addition, the Act increases the amounts debtors pay in Chapter 13 filings, so associations will receive more of their pre-petition common assessments than they do under current law. However, there is no provisions in the Act which specifically addresses pre-petition common assessment debts. The changes, while significant, are due to the provisions of the Act favoring creditors generally.

How were post-petition delinquent common assessments handled before the Act?

Delinquent common assessments incurred after the bankruptcy filing are treated differently depending on the type of community association and the location of the bankruptcy. This is because courts in various locations have treated delinquent common assessments differently. For many associations, the post-petition delinquent common assessments are discharged unless the debtor is residing in the unit or renting the unit.

How will post-petition delinquent common assessments be handled under the Act?

Regardless of the type or location of the community association, post-petition delinquent common assessments will not be discharged as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in the unit.

Will there be any other changes to the Act?

Congress has already adopted and the President signed an amendment that will change the bankruptcy filing fees effective October 17, 2005. A number of bills amending the Act have been introduced. Other technical corrections remain possible. It is even possible that Congress will make substantive changes to the Act.

For more information, you may wish to review articles by Eugene R. Wedoff, United States Bankruptcy Court, Northern District of Illinois, Thomas J. Yerbich, Esq. or Doney & Associates.

Status of Sexual Orientation and Gender Identity Bill

2005-05-03T08:45:00.000-10:00

On April 6, 2005, I reported on a Conference Committee being assigned on the Sexual Orientation and Gender Identity Bill. However, the House reconsidered its decision to disagree with the Senate Amendments. The Senate amendments were adopted by the House and the bill has been transmitted to the Governor.

HB 1715 SD1 This bill adds sexual orientation and gender identity to the category of protected classifications in the residential real property transactions. Sexual orientation is currently a protected classification under the State fair employment laws. The bill would mean that Hawaii condo associations would be subject to claims for discrimination on the basis of sexual orientation or gender identity. The bill continues to vaguely define gender identity.

Status of Resolution to Establish Task Force on Naturally Occurring Retirement Communities

2005-05-03T08:35:00.000-10:00

On April 16, 2005, I reported on Hearings on the resolution to establish a Task Force on Naturally Occurring Retirement Communities. The committees passed out amended version of the resolution and was also approved by the House Finance Committee in the same form. The Senate later agreed to the House amendments. Therefore, the resolution is adopted.

SCR 79 HD1 This Resolution would establish a task force that would identify issues and problems that inhibit the establishment of naturally occurring retirement communities and provide potential solutions on how condominium and housing associations and other real property organizations may be able to most expediently and cost-effectively resolve these issues and problems. The task force would include members from he Elderly Affairs Division of the City and County of Honolulu, The Assisted Living Options Hawaii, Catholic Charities Elderly Services, The Hawaii Council of Associations of Resident Managers; The Community Association Institute; The Hawaii Council of Association of Apartment Owners;The Hawaii Long Term Care Association;The Healthcare Association of Hawaii;Hawaii Independent Condominium and Cooperative Owners; and Association of American Retired Persons.

Status of Condominium Association Manager Certification Sunrise Review

2005-05-03T08:19:00.000-10:00

On April 22, 2005, I reported on a Hearing on the resolution for sunrise review of mandatory condominium association manager certification. The resolution passed out of committee, was approved by the Senate. Since the resolution was previously approved by the House, the resolution is adopted.

HCR 204 Under Hawaii law, before the state can implement a new scheme regulating a profession, it must first have the Auditor conduct a sunrise review. A sunrise review is a study evaluating the need for the regulation of the profession.

This resolution would direct the Auditor to conduct a sunrise review of condominium association managers based on a bill introduced in 2003. SB 1454 contemplated a scheme for certification of condominium association managers. Under the bill, the Real Estate Commission would be authorized to designate an entity to certify condominium association managers. Under the bill, certain condominium association managers would be grandfathered. I believe that the only certification program for community association managers is the Certified Manager of Community Associations® (CMCA®) which is offered by the National Board of Certification for Community Association Managers (NBC-CAM).

At this point, however, all that the resolution would do is direct the Legislative Auditor to conduct a sunrise review. After the review, the legislature would need to consider whether it would approve a bill mandating certification of condominium association managers.

Status of Cumulative Voting Bill

2005-04-30T10:07:00.000-10:00

On April 20, 2005, I reported on a Conference Committee Hearing on the cumulative voting bill. The committee passed out an amended version of the bill and it will be going to House and Senate floors for final vote next week.

SB1798 CD1 This bill would provide that the removal of directors would require the approval of owners holding a majority of the common interest in the condominium association. The percentage would not change depending on whether cumulative voting was used to elect the director. The bill also provides that if the bylaws provide for cumulative voting by the owners, the owners may so vote if an owner gives notice of the owner's intent to cumulatively vote before voting commences. The Conference Draft represents a major improvement over earlier versions of the bill.

Status of Leased Fee Conversion Tax Credit Bill

2005-04-30T09:53:00.000-10:00

On April 22, 2005, I reported on a Conference Committee Hearing on the leased fee conversion tax credit bill. The committee passed out an amended version of the bill and it will be going to House and Senate floors for final vote next week.

HB 1554 CD1 This bill will exempt from taxation 50% 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.

Status of Condominium Records Bills

2005-04-30T09:49:00.000-10:00

On April 22, 2005, I reported on a Conference Committee Hearing on bills relating to condominium records. The committee passed out amended versions of the bills and they will be going to House and Senate floors for final vote next week.

SB 1348 CD1 This bill requires that board of director minutes for the current and prior year be made available either at: (a) no cost or on 24 hour loan to all members at the project; or (b) mailed, faxed or emailed to the owner within 15 days of the request. If the owner indicates a preference for mail, fax or email in his or her request, the association must use that method of transmission. Any costs incurred by the Association must be revealed to the owner prior to the assessment of the fee. The bill makes changes to Chapter 514A and the Recodification. The Conference Draft represents a major improvement over earlier versions of the bill.

SB 1349 CD1 This bill would change the law so that associations would need to make financial statements, general ledgers, the accounts receivable ledger, accounts payable ledgers, check ledgers, insurance policies, contracts, and invoices available to its members for as long as the Association keep those records. Currently, owners have a right to those for 2 years and may request them thereafter. I have concerns about this bill because it attempts to micromanage condominium associations. However, the amended bill has addressed the concern that the bill requires associations to keep these types of documents for five years. Once again, the Conference Draft represents a major improvement over earlier versions of the bill.

Status of Solar Energy Bill

2005-04-30T09:39:00.000-10:00

On April 21, 2005, I reported on a Conference Committee Hearing on the solar energy bill. The committee passed out an amended version of the bill and it will be going to House and Senate floors for final vote next week.

HB 1017 CD1 This bill would require townhouse associations to permit solar energy devices and require the association to adopt rules regarding the placement of solar energy devices. As we reported, the bill had some practical problems. It did not address the common situation where the Association's roof warranty may be voided by the penetration of pipes through the roof. It also did not require the owner of the unit to remove the solar energy device if it is necessary or convenient for the orderly maintenance of the common elements. These practical problems were addressed in a compromise version of the bill. I still believe that the bill is unconstitutional because the U.S. Supreme Court has ruled in a similar situation that any physical taking of real property under laws of this type requires just compensation. The common elements in a condominium are jointly owned by all the members of a condominium and the roof of a townhouse is normally a common element. Although the constitutional problem remains, it is likely that the bill will address most of the practical issues that associations would have. It is imperative, however, that condominium associations adopt rules addressing solar energy devices by the effective date of the bill (September 1, 2005).

Status on Condominium Recodification and Investment Bills

2005-04-30T09:29:00.000-10:00

On April 21, 2005, I reported on a Conference Committee Hearing on Recodification bill and investment bill. The committee passed out amended versions of the bills and they will be going to House and Senate floors for final vote next week.

SB 1132 CD1 This is the second part of the Recodification. Although there are issues with the Recodification, it is better than the current law.

SB1137 CD1 This bill will eliminate the prohibition on purchasing CDs through a securities broker from the Recodification. The prohibition was added at the last minute in the last legislative session 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. Substantially the same language is in SB 1132 CD1, so the issue appears to be resolved.

Where does an association's funds come from?

2005-04-27T20:20:00.000-10:00

Joe West in his Community Associations Network recently wrote about the stupid legislative amendment of the year. The proposed amendment would require associations in Arizona to have a website with current rules and schedule of fees and fines. Failure to do so would require the Association to pay $1,000 per violation (plus $100 per day) to each member. Of course, the Association's funds come from the owners. So, the association would assess each owner for the fine that they would pay to the owner. Although this is a more extreme example of misunderstanding the source of an association's funds, we see variations of this all the time. In one case, some homeowners demanded that they should be reimbursed for their hotel expenses when the project was undergoing necessary repairs. Even if the association were obligated to reimburse those expenses, it would mean that all the other owners could have made the same demand. The result would be the same -- the association assessing all owners the hotel expenses to pay the expenses.

Going back to legislation, bills often propose expanding the obligations of associations without regard to the fact that these new obligations cost money. Often these bills claim to help homeowners but they do not always consider the association's cost is paid by those same homeowners. The fact that an association is made up of the homeowners is hidden by the fact that the association is an entity.

Solar Bill Conference Committee Hearing

2005-04-27T16:51:00.000-10:00

On April 21, 2005, I reported on the conference committee on the solar energy bill. The hearing notice states that the conference committee will reconvene on Thursday, April 28, 2005 at 11:00 a.m. in Conference Room 212.

Solar Bill Conference Committee Hearing

2005-04-26T16:35:00.000-10:00

On April 21, 2005, I reported on the conference committee on the solar energy bill. The hearing notice states that the conference committee will reconvene on Wednesday, April 27, 2005 at 2:00 p.m. in Conference Room 212.

Recodification and Investment Bills Conference Committee Hearing

2005-04-26T12:23:00.000-10:00

On April 21, 2005, I reported on the conference committee on the Recodification bill and the investment bill. The hearing notice states that the conference committee will reconvene on Thursday, April 28, 2005 at 10:00 a.m. in Conference Room 016.

Condominium Records Bills Conference Committee Hearing

2005-04-26T11:15:00.000-10:00

On April 22, 2005, I reported on the conference committee on the condominium records bill. The hearing notice states that the conference committee will reconvene on Wednesday, April 27, 2005 at 10:00 a.m. in Conference Room 016 to discuss SB 1348 HD1.

Leased Fee Conversion Tax Credit Bill Conference Committee Hearing

2005-04-25T19:02:00.000-10:00

On April 22, 2005, I reported on the conference committee on the Leased Fee Conversion Tax Credit Bill. The hearing notice states that the conference committee will reconvene on Thursday, April 28, 2005 at 3:00 p.m. in Conference Room 312.

Solar Bill Conference Committee Hearing

2005-04-25T18:58:00.000-10:00

On April 21, 2005, I reported on the conference committee on the solar energy bill. The hearing notice states that the conference committee will reconvene on Tuesday, April 26, 2005 at 2:30 p.m. in Conference Room 212.

Condominium Records Bills Conference Committee Hearing

2005-04-25T12:00:00.000-10:00

On April 22, 2005, I reported on the conference committee on the condominium records bill. The hearing notice states that the conference committee will reconvene on Tuesday, April 26, 2005 at 9:00 a.m. in Conference Room 016 to discuss SB 1348 HD1.

The conference committee voted to report out a CD1 that incorporates the SB 1349 HD1 langugage. This bill would change the law so that associations would need to make financial statements, general ledgers, the accounts receivable ledger, accounts payable ledgers, check ledgers, insurance policies, contracts, and invoices available to its members for as long as the Association keep those records. Currently, owners have a right to those for 2 years and may request them thereafter. While I have concerns about this bill because it attempts to micromanage condominium associations, the House Consumer Protection Committee eliminated the primary concern that the bill would have required associations to keep these types of documents for five years.

Cumulative Voting Bill Conference Committee Hearing

2005-04-22T19:39:00.000-10:00

On April 20, 2005, I reported on the conference committee on the cumulative voting bill. The hearing notice states that the conference committee will reconvene on Tuesday, April 26, 2005 at 10:30 a.m. in Conference Room 016.

Recodification and Investment Bills Conference Committee Hearing

2005-04-22T19:38:00.000-10:00

On April 21, 2005, I reported on the conference committee on the Recodificationbill and the investment bill. The hearing notice states that the conference committee will reconvene on Tuesday, April 26, 2005 at 10:30 a.m. in Conference Room 016.

Solar Bill Conference Committee Hearing

2005-04-22T19:35:00.000-10:00

On April 21, 2005, I reported on the conference committee on the solar energy bill. The hearing notice states that the conference committee will reconvene on Monday, April 25, 2005 at 2:45 p.m. in Conference Room 212.

Leased Fee Conversion Tax Credit Bill Conference Committee Hearing

2005-04-22T19:24:00.000-10:00

There is a hearing on Monday, April 25, 2005 at 3:00 p.m. in room 312 on some bills of interest to community associations before a Conference Committee.

House Conferees: Representatives Kanoho/Kahikina/Hiraki/Nishimoto, Co-Chairs; Fox
Senate Conferees: Senators Menor, Chair; Taniguchi, Co-Chair; Espero, Tsutsui, Hogue

The hearing notice discusses the following bills of interest to community associations:

HB 1554 SD2 This bill would exempt from taxation 50% 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. Unfortunately, the Senate reduced the amount that would be exempt from 75% to 50%. In addition, it inserted a defective effective date of July 1, 2050.

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

Condominium Records Bills Conference Committee Hearing

2005-04-22T19:22:00.000-10:00

There is a hearing on Monday, April 25, 2005 at 9:00 a.m. in room 016 on some bills of interest to community associations before a Conference Committee.

House Conferees: Representatives Hiraki, Chair; Schatz, Stonebraker
Senate Conferees: Senators Menor, Chair; Espero, Hogue

The hearing notice discusses the following bills of interest to community associations:

SB 1348 HD1 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 or residence. Currently, only the current minutes are available at no cost or 24 hour loan. In addition, the bill will require that the agendas for the current and prior year must also be made available at the resident manager's office or residence.
I have concerns about the bill because it micromanages condominium associations. There is no value in making the old agendas available at the manager's office since an agenda only is a proposal for what is to be discussed at a meeting. Once the meeting is over, no one really needs to see it. There is also a serious issue about whether a resident manager's home should be invade to make minutes available to the members. The Association should be free to make the documents available on site or in other locations when it makes sense.

SB 1349 HD1 This bill would change the law so that associations would need to make financial statements, general ledgers, the accounts receivable ledger, accounts payable ledgers, check ledgers, insurance policies, contracts, and invoices available to its members for as long as the Association keep those records. Currently, owners have a right to those for 2 years and may request them thereafter. I have concerns about this bill because it attempts to micromanage condominium associations. However, the House Consumer Protection Committee has addressed the concern that the bill requires associations to keep these types of documents for five years.

CAI and the sponsor of the bill appear to have reached a compromise on these bills.

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

Hearing on Sunrise Review of Condominium Association Manager Certification

2005-04-22T19:13:00.000-10:00

There is a hearing on Thursday, April 28, 2005 at 9:30 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:

HCR 204 On March 21, 2005, I reported on HCR 204. The same bill is being heard by the Senate Commerce, Consumer Protection and Housing Committee. Under Hawaii law, before the state can implement a new scheme regulating a profession, it must first have the Legislative Auditor conduct a sunrise review. A sunrise review is a study evaluating the need for the regulation of the profession.

This resolution would direct the Legislative Auditor to conduct a sunrise review of condominium association managers based on a bill introduced in 2003. SB 1454 contemplated a scheme for certification of condominium association managers. Under the bill, the Real Estate Commission would be authorized to designate an entity to certify condominium association managers. Under the bill, certain condominium association managers would be grandfathered. I believe that the only certification program for community association managers is the Certified Manager of Community Associations® (CMCA®) which is offered by the National Board of Certification for Community Association Managers (NBC-CAM).

At this point, however, all that the resolution would do is direct the Legislative Auditor to conduct a sunrise review. After the review, the legislature would need to consider whether it would approve a bill mandating certification of condominium association managers.

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.

Cumulative Voting Bill Conference Committee Hearing

2005-04-21T15:14:00.000-10:00

On April 20, 2005, I reported on the conference committee on the cumulative voting bill. The hearing notice states that the conference committee will reconvene on Friday, April 22, 2005 at 10:30 a.m. in Conference Room 016.

Solar Bill Conference Committee Hearing

2005-04-21T10:55:00.000-10:00

There is a hearing on Friday, April 22, 2005 at 1:00 p.m. in room 016 on some bills of interest to community associations before a Conference Committee.

House Conferees: Representatives Morita/Hiraki/Luke/Yamashita, Co-Chairs; Thielen
Senate Conferees: Senators English, Chair; Menor/Taniguchi, Co-Chairs; Espero, Hanabusa, Hemmings

The hearing notice discusses the following bills of interest to community associations:

HB 1017 SD2 This bill would require townhouse associations to permit solar energy devices and require the association to adopt rules regarding the placement of solar energy devices. The proposed law is probably unconstitutional as the U.S. Supreme Court has ruled in a similar situation that any physical taking of real property under laws of this type requires just compensation. The common elements in a condominium are jointly owned by all the members of a condominium and the roof of a townhouse is normally a common element. The proponents of this bill fail to understand that the roof that they want to use is not owned by the owner of the unit, but owned by all the members of the condominium. The bill also has practical problems. It does not address the common situation where the Association's roof warranty may be voided by the penetration of pipes through the roof. It also does not require the owner of the unit to remove the solar energy device if it is necessary or convenient for the orderly maintenance of the common elements. The Senate added an effective date of July 1, 2050 to allow further review and discussion of the bill.

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

Recodification and Investment Bills Conference Committee Hearing

2005-04-21T10:46:00.000-10:00

There is a hearing on Friday, April 22, 2005 at 10:30 a.m. in room 016 on some bills of interest to community associations before a Conference Committee.

The hearing notice discusses the following bills of interest to community associations:

SB 1132 HD1 This is the second part of the Recodification. Although there are issues with the Recodification, it is better than the current law.

House Conferees: Representatives Hiraki/Takamine, Co-Chairs; Wakai, Fox
Senate Conferees: Senators Menor, Chair; Taniguchi, Co-Chair; Baker, Espero, Hogue

SB1137 HD1 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. The bill has a defective effective date of July 1, 2010, so it will be necessary to fix that.

House Conferees: Representatives Hiraki/Takamine, Co-Chairs; Wakai, Fox
Senate Conferees: Senators Menor, Chair; Espero, Hogue

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

Cumulative Voting Bill Conference Committee Hearing

2005-04-20T19:52:00.000-10:00

There is a hearing on Thursday, April 21, 2005 at 2:00 p.m. in room 016 on some bills of interest to community associations before a Conference Committee.

House Conferees: Representatives Kahikina/Nishimoto, Co-Chairs; Moses
Senate Conferees: Senators Menor, Chair; Espero, Hogue

The hearing notice discusses the following bills of interest to community associations:

SB1798 HD1 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. The House placed an effective date of 2099 to insure that further discussion is held on the bill.

AS THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED. You can of course contact any of the conferees.

President Signs Bankruptcy Bill

2005-04-20T08:52:00.000-10:00

On April 14, 2005, I reported on passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Today at 2:35 EST, President Bush signed the bill into law. Most of the provisions of the law will be effective on October 17, 2005, 180 days after today. Except for a few provisions of the bill, the new law will not affect bankruptcies filed before October 17, 2005. Under the Act, community associations can expect to collect more delinquent common assessments than they did under the old law. In large part, this is because the Act makes it more difficult for anyone to eliminate their personal obligation to pay debts through bankruptcy ("discharge").

The Act also includes a specific provision for the protection of community associations. Bankruptcy courts across the country have had different rules for delinquent assessments after an owner files bankruptcy. Some courts said that the right to assessments arise at the creation of the community and when the bankruptcy filing occurs, assessments after the bankruptcy filing can be discharged. A few courts said that assessments after the bankruptcy cannot be discharged. A 1994 law made assessments after the bankruptcy filing non-dischargeable in a residential condominium or cooperative if the owner resided in or rented out the apartment. However, the different rules continued to exist for many planned community associations and commercial condominiums or cooperatives. The 1994 law also meant that if the owner moved out or stopped renting the apartment, the post-petition delinquencies could be discharged. The Act makes all post-petition common assessments non-dischargeable.

I will be posting a short FAQ about the law and how it affects community associations shortly.

House Passes Bankruptcy Bill

2005-04-18T09:34:00.000-10:00

On April 14, 2005, I reported on passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

President Bush has issued a news release commending Congress and indicating that he will be signing the bill.

The bill contains language that would clarify that community associations, including homeowner associations and commercial condominiums are entitled to post-petition assessments as long as the debtor owns the property. Specifically, it would expand the bankruptcy exemption contained in 11 U.S.C. 523(a)(16) to read as follows:

for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or posessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case. . . .

I will be posting a short FAQ about the law and how it affects community associations once the President signs it.

Hearing on Resolution to Establish Task Force on Naturally Occurring Retirement Communities

2005-04-16T07:17:00.000-10:00

There is a hearing on Tuesday, April 19, 2005 at 9:00 a.m. in room 329 on some bills of interest to community associations before the House Human Services Committee before Chair Rep.Alex M. Sonson and the House Health Committee before Chair Rep. Dennis A. Arakaki. The hearing notice discusses the following bills of interest to community associations:

SCR 79 SD1 This Resolution would establish a task force that would identify issues and problems that inhibit the establishment of naturally occurring retirement communities and provide potential solutions on how condominium and housing associations and other real property organizations may be able to most expediently and cost-effectively resolve these issues and problems. The task force would include members from he Elderly Affairs Division of the City and County of Honolulu, The Assisted Living Options Hawaii, Catholic Charities Elderly Services, The Hawaii Council of Associations of Resident Managers; The Community Association Institute; The Hawaii Council of Association of Apartment Owners;The Hawaii Long Term Care Association;The Healthcare Association of Hawaii;Hawaii Independent Condominium and Cooperative Owners; and Association of American Retired Persons.

PERSONS WISHING TO TESTIFY ARE REQUESTED TO SUBMIT 35 COPIES OF THEIR TESTIMONY AT LEAST 24 HOURS PRIOR TO THE HEARING TO: (1) THE HUS COMMITTEE'S VICE CHAIR IN ROOM 303, 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.

IT IS ALSO REQUESTED THAT THE COPIES BE ON ONE SIDE OF AN 8-1/2" X 11" SHEET WITH TWO HOLES PUNCHED AT THE TOP. FOR FURTHER INFORMATION, PLEASE CALL THE HUS COMMITTEE CLERK AT 586-6520.

What is a 1120-H filing? (In honor of tax day)

2005-04-15T00:26:00.000-10:00

There are normally two options for most community associations to file their federal tax returns. The 1120-H tax form is a special filing available only for certain homeowner associations. The 1120-H tax form is authorized under Internal Revenue Code §528 (26 U.S.C. §528). Only certain homeowner associations qualify to file an 1120-H tax form. A homeowner association qualifies if:

it is organized and operated to provide for the acquisition, construction, management, maintenance, and care of association property;

substantially all of the units (85%) must be used for residential purposes.

it elects to have the section apply for the taxable year;

no part of the net earnings of the association inures to any private shareholder or individual;

60% or more of the association's gross income consists solely of amounts received as membership dues, fees, or assessments from owners of residential units, residences or residential lots (exempt function income); and

90%or more of the association's expenditures for the taxable year are expenditures for the acquisition, construction, management, maintenance, and care of association property.

If the homeowners association qualifies under Section 528, the dues or assessments received from property owner-members of the association are exempt from taxation if the dues and assessments are used for the maintenance and improvement of its property. All non-exempt income is taxed at the 30% tax rate from the first dollar of income.

If the association does not elect to file an 1120-H tax form or is not qualified, it must file an 1120 tax form. Under Internal Revenue Code §277 (26 U.S.C. §277), the income of homeowner associations are treated the same as a corporation. Membership dues or assessments are taxable subject to applicable deductions and adjustments.

Status on Leased Fee Conversion Tax Credit Bill

2005-04-14T22:10:00.000-10:00

On April 6, 2005, I reported on a Senate Ways and Means Committee Hearing on bills relating to leased fee conversion tax credits. The committee passed out amended version of the bills and the bills will be going to conference committee.

HB 1554 SD2 This bill would exempt from taxation 50% 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. Unfortunately, the Senate reduced the amount that would be exempt from 75% to 50%. In addition, it inserted a defective effective date of July 1, 2050.

If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.

Status on Leased Fee Interest Right of First Refusal Bill

2005-04-14T21:58:00.000-10:00

On March 29, 2004, I reported on a House Judiciary Committee Hearing on a bill relating to the right of first refusal for leased fee interests. The committee passed out amended version of the bills and the bills will be going to conference committee.

SB 1336 HD1 This bill would reduce the right of first refusal that condominium associations and residential cooperatives have when the owner of the leased fee interest sells to a third-party. When the leased fee interest is owned by more than one owner, the bill would give a superior right of first refusal to one of the co-owners if both co-owners are tax exempt under IRS Code §501(c)(3). What this means is if one of the co-owners wants to sell to the Association, the co-owner of the leased fee interest would have a superior right to purchase the share if both are tax exempt.

We have serious concerns about this bill. The right of first refusal law was intended to address the situation where a lessor is selling the leased fee interest. If there is going to be a sale, the legislature determined that it is fair that the association be able to purchase it at the same price. The intent was to permit the lessees to own their apartments in fee simple rather than being thrown on the street at the end of the lease. There is no similar interest for co-owners of lease fee interests. As a co-owner of real property, there was always the possibility that their other co-owners may chose to sell their interest to someone else, including the lessees or the Association.

If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.

Status on Solar Energy Bill

2005-04-14T21:42:00.000-10:00

On April 7, 2004, I reported on a Senate Commerce, Consumer Protection and Housing Committee Hearing on a bill relating to solar energy. The committee passed out amended version of the bills and the bills will be going to conference committee.

HB 1017 SD2 This bill would require townhouse associations to permit solar energy devices and require the association to adopt rules regarding the placement of solar energy devices. The proposed law is probably unconstitutional as the U.S. Supreme Court has ruled in a similar situation that any physical taking of real property under laws of this type requires just compensation. The common elements in a condominium are jointly owned by all the members of a condominium and the roof of a townhouse is normally a common element. The proponents of this bill fail to understand that the roof that they want to use is not owned by the owner of the unit, but owned by all the members of the condominium. The bill also has practical problems. It does not address the common situation where the Association's roof warranty may be voided by the penetration of pipes through the roof. It also does not require the owner of the unit to remove the solar energy device if it is necessary or convenient for the orderly maintenance of the common elements. The Senate added an effective date of July 1, 2050 to allow further review and discussion of the bill.

If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.

House Passes Bankruptcy Bill

2005-04-14T09:38:00.000-10:00

Just moments ago, I watched the U.S. House of Representatives on CSPAN pass S.256, the bankruptcy bill without any amendments. This is the same bill that I reported on in an article on March 18, 2005.

The bill continues to contain the language that would clarify that community associations, including homeowner associations and commercial condominiums are entitled to post-petition assessments as long as the debtor owns the property. Specifically, it would expand the bankruptcy exemption contained in 11 U.S.C. 523(a)(16) to read as follows:

for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or posessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case. . . .

The President is expected to sign the bill and would become effective 180 days thereafter. However, there are some rumours that a "technical corrections" bill will be considered to fix certain problems before the effective date.

New City & County of Honolulu Leash Law for Dangerous Dogs

2005-04-13T17:09:00.000-10:00

On March 31, 2005, the Mayor of the City and County of Honolulu signed into law Ordinance 05-007. The new law deals with dangerous dogs. Sec. 7-7.1 of the Honolulu Revised Ordinances defines "Dangerous dog" as any dog which, without provocation, attacks a person or animal. A dog’s breed shall not be considered in determining whether or not it is dangerous.

If a dangerous dog injures someone other than the dog's owner, special conditions are placed on the dog and the dog owner. One of the new conditions is that when outside the owner’s premises, the dog shall be attended and kept on a leash no longer than four feet in length and under the control of a person eighteen years of age or older. It is likely that a court would treat the common elements of a condominium project as "outside the owner's premises". Therefore, if there is a dangerous dog in your project the City Ordinance will require that the dog be kept on a short leash.

Hearing on Sunrise Review of Condominium Association Manager Certification

2005-04-13T04:11:00.000-10:00

There is a hearing on Wednesday, April 13, 2005 at 3:00 p.m. in room 308 on some bills of interest to community associations before the House Finance Committee before chair, Rep. Dwight Y. Takamine. The hearing notice discusses the following bills of interest to community associations:

HCR 204 On March 21, 2005, I reported on HCR 204. The same bill is being heard by the House Finance Committee. Under Hawaii law, before the state can implement a new scheme regulating a profession, it must first have the Legislative Auditor conduct a sunrise review. A sunrise review is a study evaluating the need for the regulation of the profession.

This resolution would direct the Legislative Auditor to conduct a sunrise review of condominium association managers based on a bill introduced in 2003. SB 1454 contemplated a scheme for certification of condominium association managers. Under the bill, the Real Estate Commission would be authorized to designate an entity to certify condominium association managers. Under the bill, certain condominium association managers would be grandfathered. I believe that the only certification program for community association managers is the Certified Manager of Community Associations® (CMCA®) which is offered by the National Board of Certification for Community Association Managers (NBC-CAM).

At this point, however, all that the resolution would do is direct the Legislative Auditor to conduct a sunrise review. After the review, the legislature would need to consider whether it would approve a bill mandating certification of condominium association managers.

THIS IS A DECISION MAKING MEETING ONLY, NO PUBLIC TESTIMONY WILL BE ACCEPTED.

Senate Commerce, Consumer Protection and Housing Committee Hearing

2005-04-07T15:42:00.000-10:00

There is a hearing on Friday, April 8, 2005 at 11:00 a.m. in room 211 on some bills of interest to community associations before the Senate Commerce, Consumer Protection and Housing Committee before Chair Sen. Ron Menor and Senate Ways and Means Committee before Chair Sen. Brian T. Taniguchi. The hearing notice discusses the following bills of interest to community associations:

HB 1017 SD1 This bill would require townhouse associations to permit solar energy devices and require the association to adopt rules regarding the placement of solar energy devices. The proposed law is probably unconstitutional as the U.S. Supreme Court has ruled in a similar situation that any physical taking of real property under laws of this type requires just compensation. The common elements in a condominium are jointly owned by all the members of a condominium and the roof of a townhouse is normally a common element. The proponents of this bill fail to understand that the roof that they want to use is not owned by the owner of the unit, but owned by all the members of the condominium. The bill also has practical problems. It does not address the common situation where the Association's roof warranty may be voided by the penetration of pipes through the roof. It also does not require the owner of the unit to remove the solar energy device if it is necessary or convenient for the orderly maintenance of the common elements

Persons wishing to testify should submit 40 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.

Condo Court Bill Hearing

2005-04-07T13:17:00.000-10:00

There is a hearing on Thursday, April 7, 2005 at 1:30 p.m. in room 308 on some bills of interest to community associations before the House Finance Committee before chair, Rep. Dwight Y. Takamine. The hearing notice discusses the following bills of interest to community associations:

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.

PERSONS WISHING TO TESTIFY ARE REQUESTED TO SUBMIT 45 COPIES OF THEIR TESTIMONY AT LEAST 24 HOURS PRIOR TO THE HEARING TO: (1) ROOM 306, 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.

Status on Recodification Bill

2005-04-07T06:14:00.000-10:00

On March 28, 2004, I reported on a House Finance Committee Hearing on the Recodification bill. The committee passed out the bill unamended and the bill will be probably be going to conference committee.

SB 1132 HD1 This is the second part of the Recodification. Although there are issues with the Recodification, it is better than the current law.

If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.

Status on Sexual Orientation and Gender Identity Bill

2005-04-06T20:31:00.000-10:00

On March 18, 2004, I reported on a Senate Judiciary Hearing on bills relating to sexual orientation discrimination. The committee passed out amended version of the bills and the bills will be going to conference committee.

HB 1715 SD1 This bill adds sexual orientation and gender identity to the category of protected classifications in the residential real property transactions. Sexual orientation is currently a protected classification under the State fair employment laws. The bill would mean that Hawaii condo associations would be subject to claims for discrimination on the basis of sexual orientation or gender identity. The bill continues to vaguely define gender identity.

Conference committee members have not been selected.

Hearing on Leased Fee Conversion Tax Credit Bill

2005-04-06T10:13:00.000-10:00

There is a hearing on Friday April 8, 2005 at 10:00 a.m. in room 211 on some bills of interest to community associations before the Senate Ways & Means Committee before chair Sen. Brian T. Taniguchi. The hearing notice discusses the following bills of interest to community associations:

HB 1554 SD1 This bill would exempt from taxation 100% 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.

ONLY WRITTEN COMMENTS SHOULD BE SUBMITTED, NO ORAL TESTIMONY WILL BE ACCEPTED.

Persons wishing to submit written comments should submit 35 copies of their comments to the committee clerk, Room 210, State Capitol during regular business hours, or outside the Senate Sergeant-at-Arms Office, Room 015, State Capitol for all other times, 24 hours prior to the hearing. Comments 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 that the comments are to be submitted for this particular decision making and the required number of copies needed for submittal.

Status on Non-Judicial Foreclosure Bill

2005-04-05T11:38:00.000-10:00

On March 16, 2004, I reported on a Senate Commerce, Consumer Protection and Housing Hearing on a bill relating to non-judicial foreclosure. The committee held the bill and absent something unusual, the bill is dead for this year.

HB 783 HD2 Various versions of the bill attempted to address issues with the 1874 nonjudicial (power of sale) foreclosure law which contains no consumer protection provisions and the 1998 alternate power of sale foreclosure process which was never used because no one would go through the process in the hopes that the delinquent party would sign the conveyance document after the foreclosure. Currently, non-judicial foreclosures are handled under the 1874 law although title companies require that the foreclosing party follow the consumer protection requirements in the 1998 law (but do not require that the delinquent party sign the foreclosure deed). That practice will likely continue since the bill appears to be dead.

Status on Bill to Remove Sunset Date for Family Child Care Law

2005-04-05T11:18:00.000-10:00

On March 17, 2004, I reported on a House Finance Committee Hearing on a bill relating to family child care. The committee passed out the bill and it is pending before the Governor.

SB 1210 This bill would eliminate the repeal date for the provisions relating to family child care homes in condominium associations and community associations. In 1999, a law was adopted which permitted family child care homes in associations provided that certain protections for the associations were met. The 1999 law had a provision that the law would automatically lapse on June 30, 2005. The bill would eliminate the automatic repeal provision.

Status on Cumulative Voting Bill

2005-04-05T11:08:00.000-10:00

On March 11, 2004, I reported on a House Consumer Protection Hearing on a bill relating to cumulative voting. The committee passed out amended version of the bill and the bill will be going to conference committee.

SB1798 HD1 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. The House placed an effective date of 2099 to insure that further discussion is held on the bill.

If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.

Status of Bills on Condominium Records

2005-04-05T10:58:00.000-10:00

On March 11, 2004, I reported on a House Consumer Protection Hearing on bills relating to records. The committee passed out amended version of the bills and the bills will be going to conference committee.

SB 1348 HD1 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 or residence. Currently, only the current minutes are available at no cost or 24 hour loan. In addition, the bill will require that the agendas for the current and prior year must also be made available at the resident manager's office or residence.
I have concerns about the bill because it micromanages condominium associations. There is no value in making the old agendas available at the manager's office since an agenda only is a proposal for what is to be discussed at a meeting. Once the meeting is over, no one really needs to see it. There is also a serious issue about whether a resident manager's home should be invade to make minutes available to the members. The Association should be free to make the documents available on site or in other locations when it makes sense.

SB 1349 HD1 This bill would change the law so that associations would need to make financial statements, general ledgers, the accounts receivable ledger, accounts payable ledgers, check ledgers, insurance policies, contracts, and invoices available to its members for as long as the Association keep those records. Currently, owners have a right to those for 2 years and may request them thereafter. I have concerns about this bill because it attempts to micromanage condominium associations. However, the House Consumer Protection Committee has addressed the concern that the bill requires associations to keep these types of documents for five years.

If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.

Hearing on Leased Fee Interest Right of First Refusal Bill

2005-03-29T16:50:00.000-10:00

There is a hearing on Thursday, March 31, 2005 at 1:30 p.m. in room 325 on some bills of interest to community associations before the House Judiciary Committee before Chair Rep. Sylvia J. Luke and House Consumer Protection Committee before Chair Rep. Kenneth T. Hiraki. The hearing notice discusses the following bills of interest to community associations:

SB 1336 SD1 This bill would reduce the right of first refusal that condominium associations and residential cooperatives have when the owner of the leased fee interest sells to a third-party. When the leased fee interest is owned by more than one owner, the bill would give a superior right of first refusal to one of the co-owners. What this means is if one of the co-owners wants to sell to the Association, the co-owner of the leased fee interest would have a superior right to purchase the share.

We have serious concerns about this bill. The right of first refusal law was intended to address the situation where a lessor is selling the leased fee interest. If there is going to be a sale, the legislature determined that it is fair that the association be able to purchase it at the same price. The intent was to permit the lessees to own their apartments in fee simple rather than being thrown on the street at the end of the lease. There is no similar interest for co-owners of lease fee interests. As a co-owner of real property, there was always the possibility that their other co-owners may chose to sell their interest to someone else, including the lessees or the Association.

PERSONS WISHING TO TESTIFY ARE REQUESTED TO SUBMIT 40 COPIES OF THEIR TESTIMONY AT LEAST 24 HOURS PRIOR TO THE HEARING TO: (1) THE JUD COMMITTEE'S VICE CHAIR IN ROOM 422, 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.

What should be in minutes?

2005-03-29T16:07:00.000-10:00

I'm often asked what should be included in the meeting minutes. My wife, Lois Ekimoto is a Profession Registered Parliamentarian as well as a PCAM. She provides this list of items to be included in the minutes pursuant to Robert's Rules of Order, Newly Revised (10th Edition):

The name of the organization (name of the association);

The type of meeting (e.g., regular or special board meeting);

Date and time of the meeting and the place, if it is not always the same;

The presence of the president and secretary, or their substitute if they are absent. Note: meetings covered by HRS Chapters 514A (condominiums), 421I (cooperatives) and 421J (planned communities) have special legal requirements concerning the recorded vote of each board member;

Whether the minutes of the preceding meeting were approved, and how (e.g., adopted as written, or as corrected);

All main motions, including the exact wording of the motion as it was finally adopted and whether it was adopted, lost, or temporarily set aside Note: meetings covered by HRS Chapters 514A (condominiums), 421I (cooperatives) and 421J (planned communities) have special legal requirements concerning the recorded vote of each board member);

Notices of motions (This does not usually apply to association meetings);

Points of order and appeals, whether sustained or lost and the chair’s ruling and reasons for the ruling; and

The time of adjournment.

Lois also lists the items not included in the minutes according to Robert's:

The name of the person who seconded the motion;

Points of information and parliamentary inquires;

Rational for making the motion;

Discussion or debate about the motion;

Withdrawn motions;

Secondary motions (e.g. recess, amend, limit debate, etc.), unless they are necessary for clarity;

Copies or summaries of reports (e.g. from officers, managing agents, auditors, etc.); and

Copies or summaries of speeches and reports (although they can be referenced -- for example: Mr. Smith presented a report on parking security.

Remember that the purpose of minutes is not to record what was said at the meeting, but only the major decisions. These lists are generally applicable to both Board minutes and Association minutes. As Lois notes in items 4 & 6, under Hawaii condominium law, the vote of each director is required to be placed in the board minutes. Although the statute requires the same information for association meetings, it is unlikely that a court would rule that the statute overrides the secret ballot requirements in Bylaws. The Hawaii Planned Community Association Act and the Hawaii Residential Cooperative Act also require that the vote of board members be included in the board minutes.

Hearing on Recodification & Investment Bills

2005-03-28T12:01:00.000-10:00

There is a hearing on Thursday, March 31, 2005 at 2:00 p.m. in room 308 on some bills of interest to community associations before the House Finance Committee before chair, Rep. Dwight Y. Takamine. The hearing notice discusses the following bills of interest to community associations:

SB 1132 HD1 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.

PERSONS WISHING TO TESTIFY ARE REQUESTED TO SUBMIT 45 COPIES OF THEIR TESTIMONY AT LEAST 24 HOURS PRIOR TO THE HEARING TO: (1) ROOM 306, 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.

Proposed Ban on Gated Communities

2005-03-28T07:59:00.000-10:00

The Sunday Star-Bulletin reported that "Kauai Mayor Brian Baptiste wants to ban gated communities as part of his plan to build stronger communities on the Garden Island." Mayor Baptiste said that he will be submitting a bill to the Kauai County council that would ban future gated communities. The Star-Bulletin reports that there are only two gated communities on Kauai. Mayor Baptiste said, "I envision our island with integrated communities where people of various socio-economic levels and cultures can live together without gates or barriers that hinder access."

Government encourages community associations because associations allows government to shift certain costs and responsibilities to the communities. Counties typically require that developers build parks for the community and require the community associations to maintain them. This not only reduces the need for the county to build more parks, it eliminates the requirement that the county maintain them. The county does not provide trash services to many community associations even though there is no reduction in the property tax rate for associations. The shift of other costs and responsibilities are less overt. Many community associations provide security and enforcement of activities that might otherwise become police matters, thereby reducing the demand on overworked police officers.

While I'm not sure that gated communities promote the general good of the community at large, it appears to me unfair that the government would seek to ban them while at the same time shifting these costs and responsibilities to community associations. Moreover, why is it permissible for an owner of a single-family home to put up a fence and gate, but impermissible for a community to do the same thing? After all, the park located on private property that is paid for and maintained by the community association should be protected from trespass just like the swing set in my back yard. Rather than banning gated communities, it would be better to address some of the inequities I mentioned and address the problems that lead people to want to live in gated communities.

What is the College of Community Association Lawyers?

2005-03-26T17:20:00.000-10:00

The College of Community Association Lawyers is a group of attorneys that practice community association law. Members have distinguished themselves through contributions to the evolution or practice of community association law. Admission requirements includes: (1) a minimum of 10 years of practice in community association law; (2) substantial writing in the area of community association law; (3) significant teaching on community association law; and (4) community service or legislative activity. The College plans and presents what many consider the best educational program on community associations. Hundreds of attorneys, managers and others attend the CAI Law Seminar each year.

I've written this article for two reasons. First, I want to encourage any attorneys that meet the requirements of the College to apply for membership. Second, I want you to know that I'll be in Washington, DC from April 8 to 12, 2005 to attend strategic planning for the Board of Governors of the College of Community Association Lawyers. While I will continue to post updates while I'm away from the office, there may be some delays particularly while I'm traveling.

What is a PCAM?

2005-03-25T21:55:00.000-10:00

A PCAM is a manager that has earned the highest designation available to a community association manager, the Professional Community Association Manager® designation. Managers that earn the PCAM® designation have, among other things, taken and passed six 200 level courses on Facilities Management, Association Communication, Community Leadership, Community Governance, Risk Management, and Financial Management. After passing the courses, the manager must successfully complete the Case Study, which includes a substantial paper on community association management.

The courses are taught by the National Faculty for the Community Associations Institute. I'm fortunate to be one of CAI's National Faculty, teaching the course on Community Governance two or three times a year. While this means that I must occasionally travel to the mainland to teach courses (in addition to classes in Hawaii), it is fun teaching and learning from the managers taking the course.

Hearing on Sunrise Review of Condominium Association Managers

2005-03-24T15:09:00.000-10:00

There is a hearing on Wednesday, March 30, 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:

SCR 167 On March 21, 2005, I reported on a hearing on House Concurrent Resolution 204. SCR 167 is identical to HCR 204. HCR 204 passed out of the House Consumer Protection Committee unamended. It is not unusual for two measures to move through both houses of the legislature at the same time.

Both resolutions would direct the Legislative Auditor to conduct a sunrise review of condominium association managers based on a bill introduced in 2003. SB 1454 contemplated a scheme for certification of condominium association managers. Under the bill, the Real Estate Commission would be authorized to designate an entity to certify condominium association managers. Under the bill, certain condominium association managers would be grandfathered. I believe that the only certification program for community association managers is the Certified Manager of Community Associations® (CMCA®) which is offered by the National Board of Certification for Community Association Managers (NBC-CAM).

At this point, however, all either resolution will do is direct the Legislative Auditor to conduct a sunrise review. After the review, the legislature would need to consider whether it would approve a bill mandating certification of condominium association managers.

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.

Using Discretion When Deciding When to Act

2005-03-24T10:10:00.000-10:00

Mark Speigler, one of the partners at the first firm I worked at, told me that a lot of the advice he gave his clients was not strictly legal, but business advice. I remembered that because to me it represented the difference between a competent attorney and an exceptional attorney. A competent attorney tells you what you are legally authorized to do, an exceptional attorney provides that plus a little more.

In community association law, identifying an association's legal authority is only part of the process. Just because the association has the authority, does not mean it has to use it. Sometimes it makes sense to make a document available to an owner even if you aren't legally required to do so. If the request has a legitimate purpose and it's release would not harm the association or violate any laws or important policies, the board should consider approving the request.

Similarly, just because the association has the power to enforce a violation, does not mean that it should. Sometimes, an alleged violation is just a dispute between two neighbors. The board should consult with its attorney and consider the impact on the association and residents before acting. These types of disputes often have each neighbor pointing their finger at the other. I sometimes have trouble deciding which one of my kids is telling the truth when they're saying that the other one started it. It's even harder when a Board is dealing with bickering neighbors. Even if you can tell which neighbor might be at fault, the Association is not normally a substitute for the police or the court system. If the dispute does not affect anyone else, it may be more appropriate for the two neighbors to resolve the dispute themselves. That is why Hawaii condominium law permits owners to enforce the governing documents and house rules in appropriate cases. One area that the association may wish to be careful about is where there is an allegation of discrimination. I'll explain why in a future article.

Hearing on Sunrise Review of Condominium Association Managers

2005-03-21T15:06:00.000-10:00

There is a hearing on Wednesday, March 23, 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:

HCR 204 This resolution relates to the mandatory certification of condominium association managers. Under Hawaii law, before the state can implement a new scheme regulating a profession, it must first have the Legislative Auditor conduct a sunrise review. A sunrise review is a study evaluating the need for the regulation of the profession.

This resolution would direct the Legislative Auditor to conduct a sunrise review of condominium association managers based on a bill introduced in 2003. SB 1454 contemplated a scheme for certification of condominium association managers. Under the bill, the Real Estate Commission would be authorized to designate an entity to certify condominium association managers. Under the bill, certain condominium association managers would be grandfathered. I believe that the only certification program for community association managers is the Certified Manager of Community Associations® (CMCA®) which is offered by the National Board of Certification for Community Association Managers (NBC-CAM).

At this point, however, all that the resolution would do is direct the Legislative Auditor to conduct a sunrise review. After the review, the legislature would need to consider whether it would approve a bill mandating certification of condominium association managers.

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.

Hearing on Sexual Orientation and Gender Identity Bill

2005-03-18T17:11:00.000-10:00

There is a hearing on Wednesday, March 23, 2005 at 9:30 a.m. in room 229 on some bills of interest to community associations before the Senate Judiciary Committee before Chair, Sen. Colleen Hanabusa. The hearing notice discusses the following bills of interest to community associations:

SB 1715 HD1 This bill adds sexual orientation and gender identity to the category of protected classifications in the residential real property transactions. Sexual orientation is currently a protected classification under the State fair employment laws. The bill would mean that Hawaii condo associations would be subject to claims for discrimination on the basis of sexual orientation or gender identity. The bill vaguely defines gender identity as something that:

includes a person's actual or perceived gender, as well as a person's gender identity, gender-related self-image, gender-related appearance, or gender-related expression, regardless of whether that gender identity, gender-related self-image, gender-related appearance, or gender-related expression is different from that traditionally associated with the person's sex at birth.

Persons wishing to testify should submit 25 copies of their testimony, three-hole punched, to the committee clerk, Room 227, 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.

Hearing on Solar Energy Bill

2005-03-18T17:03:00.000-10:00

There is a hearing on Tuesday, March 22, 2005 at 2:00 p.m. in room 224 on some bills of interest to community associations before the Senate Energy, Environment & International Affairs Committee before Chair,Sen. J. Kalani English and 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 1017 HD3 This bill would require townhouse associations to permit solar energy devices and require the association to adopt rules regarding the placement of solar energy devices. The proposed law is probably unconstitutional as the U.S. Supreme Court has ruled in a similar situation that any physical taking of real property under laws of this type requires just compensation. The common elements in a condominium are jointly owned by all the members of a condominium and the roof of a townhouse is normally a common element. The proponents of this bill fail to understand that the roof that they want to use is not owned by the owner of the unit, but owned by all the members of the condominium. The bill also has practical problems. It does not address the common situation where the Association's roof warranty may be voided by the penetration of pipes through the roof. It also does not require the owner of the unit to remove the solar energy device if it is necessary or convenient for the orderly maintenance of the common elements.

Persons wishing to testify should choose one of the following options; submit 35 copies of their testimony to the committee clerk, Room 205, 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. E-mail testimony will not be accepted. 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.

New Bankruptcy Bill Passes U.S. House Judiciary Committee

2005-03-18T13:35:00.000-10:00

On Friday, March 11, 2005, I reported that the U.S. Senate passed the New Bankruptcy bill. Yesterday on March 17, 2005, the U.S. House of Representatives Judiciary Committee passed the bill without any amendments by a vote of 22 to 13. The bill continues to contain the language that would clarify that community associations, including homeowner associations and commercial condominiums are entitled to post-petition assessments as long as the debtor owns the property. Specifically, it would expand the bankruptcy exemption contained in 11 U.S.C. 523(a)(16) to read as follows:

for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or posessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case. . . .

The bill next goes to the U.S. House Finance Committee. If it passes out of the Finance Committee, it is scheduled to go to the whole U.S. House of Representatives the week after April 5, 2005.

Hearing on Bill to Remove Sunset Date for Family Child Care Law

2005-03-17T18:51:00.000-10:00

There is a hearing on Tuesday, March 22, 2005 at 2:00 p.m. in room 308 on some bills of interest to community associations before the House Finance Committee before chair, Rep. Dwight Y. Takamine. The hearing notice discusses the following bills of interest to community associations:

SB 1210 This bill would eliminate the repeal date for the provisions relating to family child care homes in condominium associations and community associations. In 1999, a law was adopted which permitted family child care homes in associations provided that certain protections for the associations were met. The 1999 law had a provision that the law would automatically lapse on June 30, 2005. The bill would eliminate the automatic repeal provision.

PERSONS WISHING TO TESTIFY ARE REQUESTED TO SUBMIT 45 COPIES OF THEIR TESTIMONY AT LEAST 24 HOURS PRIOR TO THE HEARING TO: (1) ROOM 306, 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.

Hearing on Resolution to Establish Task Force on Naturally Occurring Retirement Communities

2005-03-16T18:14:00.000-10:00

There is a hearing on Monday, March 21, 2005 at 2:45 p.m. in room 016 on some bills of interest to community associations before the Senate Human Services Committee before Chair, Sen. Suzane Chun Oakland and Senate Health Committee before Chair Sen. Rosalyn Baker. The hearing notice discusses the following bills of interest to community associations:

SCR 79 This Resolution would establish a task force that would identify issues and problems that inhibit the establishment of naturally occurring retirement communities and provide potential solutions on how condominium and housing associations and other real property organizations may be able to most expediently and cost-effectively resolve these issues and problems. The task force would include members from he Elderly Affairs Division of the City and County of Honolulu, The Assisted Living Options Hawaii, Catholic Charities Elderly Services, The Hawaii Council of Associations of Resident Managers; and The Community Association Institute.

Persons wishing to testify should submit 27 copies of their testimony to the committee clerk, Room 220, 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.

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

2005-03-16T09:35:00.000-10:00

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.

What is a condominium unit or apartment?

2005-03-15T13:38:00.000-10:00

I was recently talking to a friend of mine that is purchasing a unit in a highrise condominium project that hasn't been built yet. He made the remark that he's only buying air 80 feet in the sky. I said that wouldn't change very much once the building was built.

Under Hawaii condo law a condominium property regime consists of common elements (including limited common elements) and apartments. The condominium declaration defines what part of the project is an apartment, common element or limited common elements. Almost every condominium declaration in Hawaii first defines the apartment and states that everything else is a part of the common elements. Certain designated portions of the common elements are limited common elements.

Most condominium associations use an airspace definition for the apartments. The reason it is called an airspace definition is that the apartment is essentially a bubble made up of air, paint, carpeting and interior non-load-bearing walls. The boundaries of most apartments are the interior decorated surfaces of the perimeter of the apartment. Everything inside the decorated surfaces other than load-bearing walls and utilities that serve more than one apartment are part of the apartment.

The part of the condominium project that my friend is going to own by himself is the apartment, while he'll jointly own the structural elements of the project with the other members, he will mostly own air even after the condominium project is built.

What is the definition of "condominium?"

2005-03-14T09:29:00.000-10:00

This is one of those situations where the legal definition of a word is different than its every day usage. Under Hawaii condominium law, a condominium is a special way of owning property. In the United States, condominiums could not exist until laws were adopted to permit them. Until the condominium statutes were adopted, someone owning the land automatically owned everything on it. If 100 people owned the land, they all jointly owned everything on it.

Hawaii Revised Statutes §514A-3 defines condominium as this special way of owning property. It states that a condominium is, "the ownership of single units, with common elements, located on property within the condominium property regime." In a condominium property regime, every member owns their own apartment or unit and all the members jointly own the common elements.

Even though this is the legal definition of condominium, most people (me included) often use it to refer to the condominium apartment or the condominium project. There's nothing wrong with that and it rarely has any consequences as long as everyone realizes what you're talking about.