REPORT TITLE:
Condo; Assmt; Delinq.


DESCRIPTION:
Permits special assessment on purchaser of delinquent apartment
for unpaid assessments for common expenses accrued during 6
months immediately preceding acquisition of title.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2217
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO COLLECTION OF DELINQUENT CONDOMINIUM ASSESSMENTS.



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

 1      SECTION 1.  Due to the current economic situation in Hawaii,
 
 2 many condominium owners have been unable to meet payments for
 
 3 either their mortgage or maintenance expenses.  Mortgagees have
 
 4 lost significant amounts during this period.  Homeowners'
 
 5 associations likewise have lost much during this period.  Both
 
 6 are innocent victims of these economic times.  Homeowners'
 
 7 associations and mortgage lenders have participated in many
 
 8 hearings and discussions with the legislature over the past
 
 9 years.  Attempts to find a solution have been hampered because
 
10 both parties are innocent victims.  Although a solution has been
 
11 elusive in the past, this Act goes a long way towards solving the
 
12 issue in a creative and fair manner.  This Act allows for the
 
13 assessment of purchasers of delinquent units for unpaid common
 
14 expenses by the homeowners' association.  The assessment is
 
15 limited to the amount accrued within six months of the
 
16 acquisition of title by the purchaser and is further limited to
 
17 one per cent of the original amount of the then existing first
 
18 mortgage.  In order to make the assessment, homeowners'
 
19 associations must file a foreclosure action before the purchaser
 

 
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 1 acquires title.  The legislature finds it is only fair to provide
 
 2 the purchaser with actual notice of the total amount of the
 
 3 delinquencies prior to acquiring title.  The legislature also
 
 4 finds that reports from the State's council on revenues indicate
 
 5 that the State is on the road to economic recovery.  Therefore,
 
 6 this Act provides for a sunset date of January 1, 2002, or at an
 
 7 earlier date, if it appears the provision is being under used by
 
 8 homeowners' associations.
 
 9      SECTION 2.  Section 514A-90, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§514A-90  Priority of lien.(a)  All sums assessed by the
 
12 association of apartment owners but unpaid for the share of the
 
13 common expenses chargeable to any apartment constitute a lien on
 
14 the apartment prior to all other liens, except:
 
15      (1)  Liens for taxes and assessments lawfully imposed by
 
16           governmental authority against the apartment; and
 
17      (2)  All sums unpaid on any mortgage of record that was
 
18           recorded prior to the recordation of a notice of a lien
 
19           by the association of apartment owners, and costs and
 
20           expenses including attorneys' fees provided in such
 
21           mortgages. 
 
22 The lien of the association of apartment owners may be foreclosed
 
23 by action or by nonjudicial or power of sale foreclosure
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 procedures set forth in chapter 667, by the managing agent or
 
 2 board of directors, acting on behalf of the association of
 
 3 apartment owners, in like manner as a mortgage of real property.
 
 4 In any [such] foreclosure, the apartment owner shall be required
 
 5 to pay a reasonable rental for the apartment, if so provided in
 
 6 the bylaws, and the plaintiff in the foreclosure shall be
 
 7 entitled to the appointment of a receiver to collect the rental
 
 8 owed.  The managing agent or board of directors, acting on behalf
 
 9 of the association of apartment owners, unless prohibited by the
 
10 declaration, may bid on the apartment at foreclosure sale, and
 
11 acquire and hold, lease, mortgage, and convey the apartment.
 
12 Action to recover a money judgment for unpaid common expenses
 
13 shall be maintainable without foreclosing or waiving the lien
 
14 securing the unpaid common expenses owed.
 
15      (b)  [Where] Except as provided in subsection (g), when the
 
16 mortgagee of a mortgage of record or other purchaser of an
 
17 apartment obtains title to the apartment as a result of
 
18 foreclosure of the mortgage, the acquirer of title and the
 
19 acquirer's successors and assigns shall not be liable for the
 
20 share of the common expenses or assessments by the association of
 
21 apartment owners chargeable to the apartment [which] that became
 
22 due prior to the acquisition of title to the apartment by the
 
23 acquirer.  The unpaid share of common expenses or assessments
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 shall be deemed to be common expenses collectible from all of the
 
 2 apartment owners, including the acquirer and the acquirer's
 
 3 successors and assigns.  The mortgagee of record or other
 
 4 purchaser of the apartment shall be deemed to acquire title and
 
 5 shall be required to pay the apartment's share of common expenses
 
 6 and assessments beginning:
 
 7      (1)  Thirty-six days after the order confirming the sale to
 
 8           the purchaser has been filed with the court;
 
 9      (2)  Sixty days after the hearing at which the court grants
 
10           the motion to confirm the sale to the purchaser; or
 
11      (3)  Upon the recording of the deed,
 
12 whichever occurs first.
 
13      (c)  No apartment owner shall withhold any assessment
 
14 claimed by the association.  An apartment owner who disputes the
 
15 amount of an assessment may request a written statement clearly
 
16 indicating:
 
17      (1)  The amount of common expenses included in the
 
18           assessment, including the due date of each amount
 
19           claimed;
 
20      (2)  The amount of any penalty, late fee, lien filing fee,
 
21           and any other charge included in the assessment;
 
22      (3)  The amount of attorneys' fees and costs, if any,
 
23           included in the assessment;
 

 
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 1      (4)  That under Hawaii law, an apartment owner has no right
 
 2           to withhold assessments for any reason;
 
 3      (5)  That an apartment owner has a right to demand mediation
 
 4           or arbitration to resolve disputes about the amount or
 
 5           validity of an association's assessment, provided the
 
 6           apartment owner immediately pays the assessment in full
 
 7           and keeps assessments current; and
 
 8      (6)  That payment in full of the assessment does not prevent
 
 9           the owner from contesting the assessment or receiving a
 
10           refund of amounts not owed.
 
11 Nothing in this section shall limit the rights of an owner to the
 
12 protection of all fair debt collection procedures mandated under
 
13 federal and state law.
 
14      (d)  An apartment owner who pays an association the full
 
15 amount claimed by the association may file in small claims court
 
16 or require the association to mediate to resolve any disputes
 
17 concerning the amount or validity of the association's claim.  If
 
18 the apartment owner and the association are unable to resolve the
 
19 dispute through mediation, either party may file for arbitration
 
20 under part VII; provided that an apartment owner may only file
 
21 for arbitration if all amounts claimed by the association are
 
22 paid in full on or before the date of filing.  If the apartment
 
23 owner fails to keep all association assessments current during
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 the arbitration, the association may ask the arbitrator to
 
 2 temporarily suspend the arbitration proceedings.  If the
 
 3 apartment owner pays all association assessments within thirty
 
 4 days of the date of suspension, the apartment owner may ask the
 
 5 arbitrator to recommence the arbitration proceedings.  If the
 
 6 owner fails to pay all association assessments by the end of the
 
 7 thirty-day period, the association may ask the arbitrator to
 
 8 dismiss the arbitration proceedings.  The apartment owner shall
 
 9 be entitled to a refund of any amounts paid to the association
 
10 [which] that are not owed.
 
11      (e)  As an alternative to foreclosure proceedings under
 
12 subsection (a), where an apartment is owner-occupied, the
 
13 association of apartment owners may authorize its managing agent
 
14 or board of directors [to], after sixty days' written notice to
 
15 the apartment owner and to the apartment's first mortgagee of the
 
16 nonpayment of the apartment's share of the common expenses, to
 
17 terminate the delinquent apartment's access to the common
 
18 elements and cease supplying a delinquent apartment with any and
 
19 all services normally supplied or paid for by the association of
 
20 apartment owners.  Any terminated services and privileges shall
 
21 be restored upon payment of all delinquent assessments.
 
22      (f)  Before the board of directors or managing agent may
 
23 take the actions permitted under subsection (e), the board [must]
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 shall adopt a written policy providing for [such] the actions and
 
 2 have the policy approved by a majority vote of the apartment
 
 3 owners at an annual or special meeting of the association or by
 
 4 the written consent of a majority of the apartment owners.
 
 5      (g)  Subject to the provisions of this subsection, the board
 
 6 of directors of the association of apartment owners may authorize
 
 7 a special assessment on a purchaser of a delinquent apartment for
 
 8 unpaid assessments for common expenses chargeable to the
 
 9 delinquent apartment that have accrued or come due during the six
 
10 months immediately preceding the acquisition of title by the
 
11 purchaser and for which payment has not been made or received;
 
12 provided, however, that a purchaser who acquires title to the
 
13 delinquent apartment shall not be liable for this special
 
14 assessment unless the association of apartment owners has filed
 
15 an action to foreclose on the lien for unpaid common area
 
16 expenses that have been assessed prior to the purchaser's
 
17 acquisition of title to the delinquent apartment.  In no event
 
18 shall the purchaser be liable for an amount that exceeds one per
 
19 cent of the original amount of the first mortgage debt then
 
20 existing or $1,500, whichever is less.  The special assessment
 
21 allowed under this subsection shall not include any other special
 
22 assessment, late charges, fines, penalties, interest assessed by
 
23 the association of apartment owners, or any fees or costs for the
 

 
Page 8                                                     2217
                                     H.B. NO.           
                                                        
                                                        


 1 collection or enforcement of the assessment or any lien arising
 
 2 out of the assessment, including attorney's fees and court costs.
 
 3 A person who:
 
 4      (1)  Holds a mortgage of record that was recorded prior to
 
 5           the recordation of a notice of lien by the association
 
 6           of apartment owners;
 
 7      (2)  Acquires a delinquent apartment through a nonjudicial
 
 8           or judicial foreclosure proceeding;
 
 9      (3)  Purchases a delinquent apartment at a foreclosure
 
10           auction; or
 
11      (4)  Acquires the delinquent apartment by a deed in lieu,
 
12           devise, or descent
 
13 shall not be obligated to make, nor be liable for, the payment of
 
14 the special assessment.  Notwithstanding the provision of any
 
15 other law to the contrary, this subsection shall not apply to a
 
16 delinquent apartment that has a combined mortgage debt exceeding
 
17 $379,050 or that exceeds $1,000,000 in assessed value or
 
18 appraised value."
 
19      SECTION 3.  The department of commerce and consumer affairs
 
20 shall submit a report annually to the legislature prior to the
 
21 beginning of the legislative session that shall identify the
 
22 total number of foreclosures for nonpayment of common expenses by
 
23 Hawaii condominium associations, the total number of apartments
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 for which there is nonpayment of common expenses, and the total
 
 2 amount of common expenses that have not been paid or for which
 
 3 payment has not been received by condominium associations.  This
 
 4 information shall be identified by each association.  If the
 
 5 total number of foreclosures for nonpayment of common expenses is
 
 6 less than fifty per cent of the total number of apartments for
 
 7 which there is nonpayment of common expenses in any calendar
 
 8 year, this Act shall be repealed on January 15th of the following
 
 9 calendar year.
 
10      SECTION 4.  This Act does not affect rights and duties that
 
11 matured, penalties that were incurred, and proceedings that were
 
12 begun, before its effective date.
 
13      SECTION 5.  Statutory material to be repealed is bracketed.
 
14 New statutory material is underscored.
 
15      SECTION 6.  This Act shall take effect upon its approval and
 
16 shall be repealed on January 1, 2002, or at an earlier date as
 
17 provided in section 3.
 
18 
 
19                           INTRODUCED BY:  _______________________