REPORT TITLE:
Condos; Sales; Own/Occ. Rqmts


DESCRIPTION:
Streamlines owner-occupancy sales requirements for condominiums.
(HB2310 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2310
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE SALE OF RESIDENTIAL CONDOMINIUM APARTMENTS TO
   OWNER-OCCUPANTS.



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

 1      SECTION 1.  The legislature finds that certain governmental
 
 2 regulations pertaining to the sale of residential condominium
 
 3 apartments in Hawaii unnecessarily add to the time, cost, and
 
 4 efficiency of selling those apartments, all of which negatively
 
 5 impact the consumer.  Of particular concern is part VI of chapter
 
 6 514A, Hawaii Revised Statutes, which sets forth procedures to be
 
 7 followed in the sale of residential condominium apartments to
 
 8 prospective owner-occupants.
 
 9      The legislature finds that procedures governing the sale of
 
10 condominium apartments to owner-occupants were initially imposed
 
11 in 1980 when real estate prices in Hawaii were rising rapidly and
 
12 speculative purchasing limited the number of homes available to
 
13 bona fide owner-occupants, or resulted in an owner-occupant
 
14 paying more for an apartment.  The presale notice and other,
 
15 restrictive sales procedure requirements were seen as ways to
 
16 offer a bona fide owner-occupant their first opportunity to
 
17 purchase a condominium apartment at its initial offering price.
 
18      The real estate market has drastically changed since these
 
19 presale notice and restrictive sales practice requirements were
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 enacted.  Speculative investment is no longer a reality, and the
 
 2 skyrocketing real estate prices of the late 1970s and early 1980s
 
 3 no longer exist.  The large number of condominium apartments
 
 4 available for sale and healthy competition in the marketplace
 
 5 have resulted in competitive prices and an environment in which
 
 6 an owner-occupant buyer may make a selective purchase.  The
 
 7 legislature therefore finds that some of the owner-occupancy
 
 8 sales requirements of part VI of chapter 514A, Hawaii Revised
 
 9 Statutes, are no longer relevant in today's market.  Certain of
 
10 the statutory requirements are confusing and cumbersome, and
 
11 often inhibit sales and discourage buyers, especially first-time
 
12 homebuyers who are not familiar with condominiums and related
 
13 statutory requirements.  The requirements are also difficult to
 
14 monitor and regulate.  Accordingly, the legislature believes that
 
15 changes to chapter 514A, Hawaii Revised Statutes, are warranted
 
16 to facilitate the marketing and sale of condominium apartments.
 
17      The purpose of this Act is to amend part VI of chapter 514A,
 
18 Hawaii Revised Statutes, to provide marketing requirements that
 
19 give the sale of residential condominium apartments to owner-
 
20 occupants priority, without hampering a developer's need to
 
21 maintain flexibility in an ever-changing market.
 
22      SECTION 2.  Section 514A-101, Hawaii Revised Statutes, is
 
23 amended as follows:
 

 
Page 3                                                     2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      1.  By adding a new definition, to be appropriately inserted
 
 2 and to read:
 
 3      ""Initial date of sale" means the date of the first
 
 4 publication of the announcement or advertisement required by
 
 5 section 514A-102."
 
 6      2.  By amending the definition of "chronological system" to
 
 7 read:
 
 8      ""Chronological system" means a system in which the
 
 9 residential [units] apartments designated for sale to prospective
 
10 owner-occupants are offered for sale to prospective owner-
 
11 occupants in the chronological order in which the prospective
 
12 owner-occupants deliver to the developer or the designated real
 
13 estate broker completed owner-occupant affidavits, executed sales
 
14 contracts[,] or reservations, and earnest money deposits."
 
15      3.  By amending the definitions of "owner-occupant" and
 
16 "residential unit" to read as follows:
 
17      ""Owner-occupant" means any individual in whose name sole or
 
18 joint legal title is held in a residential [unit] apartment
 
19 which, simultaneous to such ownership, serves as the individual's
 
20 principal residence, as defined by the [state] department of
 
21 taxation, for a period of not less than three hundred and sixty-
 
22 five consecutive days; provided that the individual retains
 
23 complete possessory control of the premises of the residential
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 [unit] apartment during this period.  An individual shall not be
 
 2 deemed to have complete possessory control of the premises if the
 
 3 individual rents, leases, or assigns the premises for any period
 
 4 of time to any other person in whose name legal title is not
 
 5 held[.]; except that an individual shall be deemed to have
 
 6 complete possessory control even when the individual conveys or
 
 7 transfers the apartment into a trust for estate planning purposes
 
 8 and continues in the use of the premise as the individual's
 
 9 principal residence during this period.
 
10      "Residential [unit"] apartment" means "apartment" as defined
 
11 in section 514A-3, but excludes:
 
12      (1)  Any apartment intended for commercial use; and
 
13      (2)  Any apartment designed and constructed for hotel or
 
14           resort use which is located on any parcel of real
 
15           property designated and governed by a county for hotel
 
16           or resort use pursuant to:
 
17           (A)  Section 46-4; or
 
18           (B)  Any other authority granted by law to a county."
 
19      SECTION 3.  Section 514A-102, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "§514A-102  Announcement[,] or advertisement; publication.
 
22 [(a)  At least once in each of the two successive weeks following
 
23 the issuance of an effective date of the first public report for
 

 
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 1 the condominium project, the developer shall cause to be
 
 2 published in the classified section of at least one newspaper
 
 3 published daily in the State with a general circulation in the
 
 4 county in which the project is to be located, and, if the project
 
 5 is located other than on the island of Oahu, in at least one
 
 6 newspaper which is published at least twice weekly in the county
 
 7 in which the project is to be located, an announcement containing
 
 8 a summary of at least the following information:
 
 9      (1)  The location of the project; 
 
10      (2)  A statement of:
 
11           (A)  The total number of apartments to be included in
 
12                the project; 
 
13           (B)  The number of apartments designated as residential
 
14                units;
 
15           (C)  The price range of the units; 
 
16           (D)  The approximate size of the units; and 
 
17           (E)  A designation whether the units are fee simple or
 
18                leasehold;
 
19      (3)  A statement of the intended use, such as, but not
 
20           limited to, commercial, time sharing, or vacation
 
21           rental, of any apartment in the project other than a
 
22           residential unit designated for use by an owner-
 
23           occupant;
 

 
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 1      (4)  A statement of the residential units by apartment
 
 2           numbers that have been designated by the developer
 
 3           pursuant to section 514A-103, and that such apartments
 
 4           shall initially be offered for a thirty-day period
 
 5           after the first publication of the announcement to only
 
 6           prospective owner-occupants who will use the
 
 7           residential units as their principal residences for a
 
 8           period of not less than three hundred sixty-five
 
 9           consecutive days;
 
10      (5)  A statement of the availability and number of
 
11           residential units in the project that are "accessible"
 
12           and "adaptable," as those terms are defined and
 
13           interpreted in 24 Code of Federal Regulations §100 et
 
14           seq., for persons with disabilities;
 
15      (6)  A statement that the residential units that have been
 
16           designated by the developer pursuant to section
 
17           514A-103 shall be offered to prospective purchasers:
 
18           (A)  Chronologically in the order in which the
 
19                purchasers submit to the developer a completed
 
20                owner-occupant affidavit, an executed sales
 
21                contract, and an earnest money deposit in a
 
22                reasonable amount designated by the developer; or
 

 
 
 
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 1           (B)  In an order determined by a public lottery, to be
 
 2                held at a date, time, and place specified in the
 
 3                announcement; provided that any person interested
 
 4                in participating in the lottery shall submit a
 
 5                completed owner-occupant affidavit to the
 
 6                developer or designated real estate broker by a
 
 7                date designated by the developer;
 
 8           and
 
 9      (7)  The name, telephone number, and address of the
 
10           developer or the real estate broker, who shall be
 
11           designated by the developer, whom any interested
 
12           individual may contact to secure an owner-occupant
 
13           affidavit, public report, and to obtain further
 
14           information on the project.
 
15      (b)  Within thirty days of the issuance of an effective date
 
16 of the first public report for the condominium project, the
 
17 developer shall file with the commission proof of publication of
 
18 the announcement required under subsection (a).
 
19      (c)  The developer or the developer's broker shall also
 
20 provide a copy of the announcement and the first public report
 
21 for the condominium project to each prospective purchaser and by
 
22 certified mail, delivered to the addressee only, return receipt
 
23 requested, to any individual occupying such unit immediately
 

 
Page 8                                                     2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 prior to any conversion.] At least once in each of two successive
 
 2 weeks, and at any time following the issuance of an effective
 
 3 date of the first public report for the condominium project, the
 
 4 developer shall cause to be published in at least one newspaper
 
 5 published daily in the State with a general circulation in the
 
 6 county in which the project is to be located, and, if the project
 
 7 is located other than on the island of Oahu, in at least one
 
 8 newspaper that is published at least weekly in the county in
 
 9 which the project is to be located, an announcement or
 
10 advertisement containing at least the following information:
 
11      (1)  The location of the project;
 
12      (2)  The starting price of the residential apartments;
 
13      (3)  A designation as to whether the residential apartments
 
14           are to be sold in fee simple or leasehold;
 
15      (4)  A statement that for a thirty-day period following the
 
16           initial date of sale of the condominium project, at
 
17           least fifty per cent of the residential apartments
 
18           being marketed in the project shall be offered only to
 
19           prospective owner-occupants;
 
20      (5)  The name, telephone number, and address of the
 
21           developer or other real estate broker designated by the
 
22           developer, that an interested individual may contact to
 

 
 
 
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 1           secure an owner-occupant affidavit, public report, and
 
 2           any other information concerning the project; and
 
 3      (6)  If applicable, a statement that the residential
 
 4           apartments will be offered to prospective purchasers
 
 5           through a public lottery."
 
 6      SECTION 4.  Section 514A-103, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "§514A-103  Designation of residential [units.] apartments.
 
 9 (a)  The developer of any project containing residential [units]
 
10 apartments shall designate at least fifty per cent of such
 
11 [units] apartments for sale to prospective owner-occupants
 
12 pursuant to section 514A-105.  Such designation shall be set
 
13 forth in the public report, and may be set forth in the
 
14 announcement or advertisement required by section 514A-102.  Such
 
15 [units] apartments shall constitute a proportionate
 
16 representation of all the residential [units] apartments in the
 
17 project with regard to factors of square footage, number of
 
18 bedrooms and bathrooms, floor level, and whether or not such
 
19 [unit] apartment has a lanai.
 
20      (b)  A developer shall have the right to substitute an
 
21 apartment designated for owner-occupants with an apartment that
 
22 is not so designated; provided that the apartments are similar
 
23 with regard to factors enumerated in subsection (a).  Such a
 

 
Page 10                                                    2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 substitution shall not require the issuance of an effective date
 
 2 for a supplementary public report."
 
 3      SECTION 5.  Section 514A-104, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§514A-104  [Unit] Apartment selection, requirements.(a)
 
 6 When the chronological system is used, the developer or the
 
 7 developer's real estate broker, as the case may be, shall offer
 
 8 the residential [units] apartments that have been designated
 
 9 pursuant to section 514A-103 as follows:
 
10      (1)  For thirty days from the date of the first published
 
11           announcement or advertisement required under section
 
12           514A-102, the developer or developer's real estate
 
13           broker shall offer the residential [units] apartments
 
14           that have been designated pursuant to section 514A-103
 
15           to prospective purchasers chronologically in the order
 
16           in which [they] prospective purchasers submit to the
 
17           developer or the developer's real estate broker, a
 
18           completed owner-occupant affidavit, an executed sales
 
19           contract[,] or reservation, and an earnest money
 
20           deposit in a reasonable amount designated by the
 
21           developer.  The developer or the developer's real
 
22           estate broker shall maintain at all times a sufficient
 
23           number of sales contracts and affidavits for
 

 
Page 11                                                    2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           prospective owner-occupants to execute.  Prospective
 
 2           purchasers who do not have the opportunity to select a
 
 3           residential [unit] apartment during the thirty-day
 
 4           period shall be placed on a back-up reservation list in
 
 5           the order in which they submit a completed owner-
 
 6           occupant affidavit and earnest money deposit in a
 
 7           reasonable amount designated by the developer[.];
 
 8      (2)  If two or more prospective owner-occupants intend to
 
 9           reside jointly in the same residential [unit,]
 
10           apartment, only one residential [unit] apartment
 
11           designated pursuant to section 514A-103 shall be
 
12           offered to them or only one of [them] the prospective
 
13           owner-occupants shall be placed on the back-up
 
14           reservation list[.];
 
15      (3)  No developer, employee or agent of the developer, or
 
16           any real estate licensee shall, either directly or
 
17           through any other person, release any information or
 
18           inform any prospective owner-occupant about the
 
19           publication announcement or advertisement referred to
 
20           in section 514A-102, including the date it is to appear
 
21           and when the chronological system will be initiated,
 
22           until after the announcement or advertisement is
 
23           published[.]; and
 

 
Page 12                                                    2310
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 1      (4)  The developer shall compile and maintain a list of all
 
 2           prospective purchasers that [submitted] submit a
 
 3           completed owner-occupant affidavit, an executed sales
 
 4           contract[,] or reservation, and an earnest money
 
 5           deposit, and maintain [the] a back-up reservation list,
 
 6           if any.  Upon the request of the commission, the
 
 7           developer shall provide a copy of the list of all
 
 8           prospective purchasers and the back-up reservation
 
 9           list[.];
 
10      (b)  When the public lottery system is used, the developer
 
11 or the developer's broker, as the case may be, shall offer the
 
12 residential [units] apartments that have been designated pursuant
 
13 to section 514A-103 as follows:
 
14      (1)  From the date of the first published announcement or
 
15           advertisement required under section 514A-102[,] until
 
16           five calendar days after the last published
 
17           announcement[,] or advertisement, the developer or
 
18           developer's real estate broker shall compile and
 
19           maintain a list of all prospective owner-occupants who
 
20           have submitted to the developer or the developer's real
 
21           estate broker a duly executed owner-occupant affidavit.
 
22           All prospective owner-occupants on this list shall be
 
23           included in the public lottery described [below.] in
 

 
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 1           paragraph (2).  The [developers] developer and the
 
 2           developer's real estate broker shall maintain at all
 
 3           times sufficient copies of [such] affidavits for
 
 4           prospective owner-occupants to execute.  Upon the
 
 5           request of the commission, the developer shall provide
 
 6           a copy of the lottery list of [those] prospective
 
 7           owner-occupants[.];
 
 8      (2)  The developer or developer's real estate broker shall
 
 9           conduct a public lottery [no later than thirty calendar
 
10           days after the first published announcement, but no
 
11           earlier than six calendar days after the last published
 
12           announcement.  The public lottery shall be held] on the
 
13           date, time, and location as set forth in the published
 
14           announcement.  Any person, including all prospective
 
15           owner-occupants eligible for the lottery, shall be
 
16           allowed to attend the lottery[.];
 
17      (3)  The public lottery shall be conducted [in such a
 
18           manner] so that no prospective owner-occupant shall
 
19           have an unfair advantage, and shall, as to all owner-
 
20           occupants whose affidavits were submitted to the
 
21           developer or the developer's real estate broker within
 
22           the time period referred to in the first sentence of
 
23           subsection (b)(1) above, be conducted without regard to
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           the order in which the affidavits were submitted.  If
 
 2           two or more prospective owner-occupants intend to
 
 3           reside jointly in the same residential [unit,]
 
 4           apartment, only one of them shall be entitled to enter
 
 5           the public lottery[.]; and
 
 6      (4)  [At] After the public lottery, each prospective owner-
 
 7           occupant purchaser, in the order in which they are
 
 8           selected in the lottery, shall be given the opportunity
 
 9           to select one of the residential [units] apartments
 
10           that have been designated pursuant to section 514A-103,
 
11           execute a sales contract, and submit an earnest money
 
12           deposit in a reasonable amount designated by the
 
13           developer.  The developer shall maintain a list, in the
 
14           order of selection, of all prospective purchasers
 
15           selected in the lottery, and maintain a list of all
 
16           prospective purchasers who selected one of the
 
17           residential [units] apartments designated pursuant to
 
18           section 514A-103.  Those prospective purchasers
 
19           selected in the lottery who did not have the
 
20           opportunity to select one of the residential [units]
 
21           apartments designated pursuant to section 514A-103 but
 
22           who submitted an earnest money deposit in a reasonable
 
23           amount designated by the developer shall be placed on a
 

 
Page 15                                                    2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           back-up reservation list in the order in which they
 
 2           were selected in the public lottery.  Upon request of
 
 3           the commission, copies of the aforementioned lists
 
 4           shall be submitted."
 
 5      SECTION 6.  Section 514A-104.5, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "§514A-104.5  Affidavit.(a)  The owner-occupant affidavit
 
 8 required by section 514A-104 shall expire after three hundred
 
 9 sixty-five consecutive days have elapsed after the recordation of
 
10 the instrument conveying the apartment to the affiant.  The
 
11 affidavit shall expire prior to this period upon acquisition of
 
12 title to the property by an institutional lender or investor
 
13 through mortgage foreclosure, foreclosure under power of sale, or
 
14 a conveyance in lieu of foreclosure.
 
15      (b)  The affidavit shall include statements by the affiant
 
16 affirming that[:
 
17      (1)  If the affiant intends to secure financing from a
 
18           financial institution, the financing shall be an owner-
 
19           occupant mortgage loan;
 
20      (2)  At any time after obtaining adequate financing or a
 
21           commitment for adequate financing up until the
 
22           expiration of the affidavit,] the affiant shall notify
 

 
 
 
Page 16                                                    2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           the commission immediately upon any decision to cease
 
 2           being an owner-occupant[; and
 
 3      (3)  At closing of escrow the affiant shall file a claim for
 
 4           an owner-occupant property tax exemption with the
 
 5           appropriate county office].
 
 6      (c)  The affidavit shall be personally executed by all the
 
 7 prospective owner-occupants of the residential [unit] apartment
 
 8 and shall not be executed by an attorney-in-fact.
 
 9      [(d)  The affidavit shall be reaffirmed as provided in
 
10 section 514A-105(c)]."
 
11      SECTION 7.  Section 514A-104.6, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "[[]§514A-104.6[]]  Prohibitions.(a)  No person who has
 
14 executed an owner-occupant affidavit shall sell or offer to sell,
 
15 lease or offer to lease, rent or offer to rent, assign or offer
 
16 to assign, or convey the [unit] apartment until at least three
 
17 hundred sixty-five consecutive days have elapsed since the
 
18 recordation of the purchase[.]; provided that a person who
 
19 continues in the use of the premise as the individual's principal
 
20 residence during this period may convey or transfer the apartment
 
21 into a trust for estate planning purposes.  Any contract or
 
22 instrument entered into in violation of this part shall be
 
23 subject to the remedies provided in section 514A-69.
 

 
Page 17                                                    2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (b)  No developer, employee or agent of a developer, or real
 
 2 estate licensee shall violate or aid any other person in
 
 3 violating this part.  [It is the affirmative duty of any
 
 4 developer, employee or agent of a developer, and real estate
 
 5 licensee to immediately report to the commission any person who
 
 6 violates or attempts to violate this part.]"
 
 7      SECTION 8.  Section 514A-105, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "§514A-105  Sale of residential [units.] apartments;
 
10 developer requirements.  [(a)  From the issuance of an effective
 
11 date of the first public report until the developer has complied
 
12 with section 514A-104, the developer shall offer all the
 
13 residential units designated pursuant to section 514A-103 for
 
14 sale only as set forth in section 514A-104; provided that
 
15 notwithstanding this part, in the case of a project which
 
16 includes one or more existing structures being converted to
 
17 condominium status, each residential unit contained in the
 
18 project shall first be offered for sale to any individual
 
19 occupying the unit immediately prior to the conversion and who
 
20 submits an owner-occupant affidavit and an earnest money deposit
 
21 in a reasonable amount designated by the developer.
 
22      (b)  Each contract for the purchase of a designated
 
23 residential unit by an owner-occupant may be conditioned upon the
 

 
Page 18                                                    2310
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 purchaser obtaining adequate financing, or a commitment for
 
 2 adequate financing, by a date which is no earlier than fifty
 
 3 calendar days after the developer's execution and acceptance of
 
 4 the sales contract, and if the financing or commitment is not
 
 5 obtained, the contract may be canceled by either the developer or
 
 6 the purchaser.  If the sales contract is so canceled, the
 
 7 developer shall re-offer the residential unit first to those
 
 8 prospective owner-occupants on the back-up reservation list who
 
 9 have not executed a sales contract for a residential unit in the
 
10 project in the order in which their names appear on that list.
 
11      (c)  Any prospective owner-occupant who executes an
 
12 affidavit as set forth in section 514A-104.5 and a sales contract
 
13 for the sale of one of the designated residential units shall be
 
14 required to reaffirm the person's intent to be an owner-occupant
 
15 no earlier than the person's receipt for a final public report
 
16 and no later than closing of escrow for the unit.  The developer
 
17 may provide in its sales contract that failure to sign the
 
18 reaffirmation upon reasonable request shall constitute a default
 
19 under the sales contract by the person failing to sign.  The
 
20 developer shall cancel the sales contract or reservation of any
 
21 person failing to make the reaffirmation pursuant to this
 
22 subsection and shall re-offer the residential unit first to those
 
23 prospective owner-occupants on the back-up reservation list who
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 have not executed a sales contract for a residential unit in the
 
 2 project, in the order in which their names appear on that list.
 
 3 If the sales contract has become binding upon the purchaser
 
 4 pursuant to section 514A-62, the developer may exercise the
 
 5 remedies provided for in the sales contract and any other
 
 6 remedies provided by law.
 
 7      (d)  Any prospective owner-occupant on the back-up
 
 8 reservation list, at any time, may be offered any residential
 
 9 unit in the project not subject to the designation required by
 
10 section 514A-103.
 
11      (e)  The developer, escrow agent, or any other party, at the
 
12 direction of the developer, shall mail twice to each owner-
 
13 occupant by registered or certified mail, once by the sixtieth
 
14 day and once by the two hundred seventieth day following the
 
15 conveyance of the first unit to an owner-occupant listed on the
 
16 final reservation list, a complete copy of the executed affidavit
 
17 to inform them of their legal obligations and penalties as
 
18 provided for in this part.
 
19      The developer shall keep records of its notice mailings and
 
20 the owner-occupant affidavits for a period of three years
 
21 starting from the date of its first mailing pursuant to this
 
22 subsection and the date of the conveyance of the first unit to an
 
23 owner-occupant listed on the final reservation list.  Failure of
 

 
Page 20                                                    2310
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 1 the developer to give the notices required by this subsection
 
 2 shall not affect title to the owner-occupant unit or the
 
 3 obligations of the owner-occupant pursuant to this part.] (a)
 
 4 The developer may offer apartments for sale using either a
 
 5 chronological system or a lottery system at any time after
 
 6 issuance of an effective date for a public report for which the
 
 7 effective date has not expired.
 
 8      (b)  For a thirty-day period following the initial date of
 
 9 sale of apartments in a condominium project, at least fifty per
 
10 cent of the apartments being sold shall be offered for sale only
 
11 to prospective owner-occupants; provided that notwithstanding
 
12 this part, in the case of a project that includes one or more
 
13 existing structures being converted to condominium status, each
 
14 residential apartment contained in the project first shall be
 
15 offered for sale to any individual occupying the apartment
 
16 immediately prior to the conversion and who submits an owner-
 
17 occupant affidavit and an earnest money deposit in a reasonable
 
18 amount designated by the developer.
 
19      (c)  Each contract for the purchase of a residential
 
20 apartment by an owner-occupant may be conditioned upon the
 
21 purchaser obtaining adequate financing, or a commitment for
 
22 adequate financing.  If the financing or commitment is not
 
23 obtained within the time set forth in the contract, the contract
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 may be canceled by either the developer or the purchaser.  If the
 
 2 sales contract is so canceled, the developer shall re-offer the
 
 3 residential apartment first to prospective owner-occupants on the
 
 4 back-up reservation list described in section 514A-103, in the
 
 5 order in which the names appear on the reservation list; provided
 
 6 that the prospective owner-occupant has not already executed a
 
 7 sales contract or reservation for a residential apartment in the
 
 8 project.
 
 9      (d)  At any time, any prospective owner-occupant on the
 
10 back-up reservation list may be offered any residential apartment
 
11 in the project that has not been sold or set aside for sale to
 
12 prospective owner-occupants."
 
13      SECTION 9.  Section 514A-107, Hawaii Revised Statutes, is
 
14 amended by amending subsections (b) and (c) to read as follows:
 
15      "(b)  Before the commission brings an action in any court of
 
16 competent jurisdiction pursuant to subsection (a) against any
 
17 person who executed an affidavit pursuant to this part, it may
 
18 consider whether the following extenuating circumstances affected
 
19 the person's ability to comply with the law:
 
20      (1)  Serious illness of any of the owner-occupants who
 
21           executed the affidavit or any other person who was to
 
22           or has occupied the residential [unit;] apartment;
 
23      (2)  Unforeseeable job or military transfer;
 

 
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 1      (3)  Unforeseeable change in marital status, or change in
 
 2           parental status; or
 
 3      (4)  Any other unforeseeable occurrence subsequent to
 
 4           execution of the affidavit.
 
 5 Thereafter, the commission may cease any further action and order
 
 6 release of any net proceeds held in abeyance.
 
 7      (c)  Any individual who executes an affidavit pursuant to
 
 8 this part and who subsequently sells or offers to sell, leases or
 
 9 offers to lease, rents or offers to rent, assigns or offers to
 
10 assign, or otherwise transfers any interest in the residential
 
11 [unit which] apartment that the person obtained pursuant to this
 
12 part, shall have the burden of proving his or her compliance with
 
13 the requirements of this part."
 
14      SECTION 10.  Section 514A-107.5, Hawaii Revised Statutes, is
 
15 amended by amending subsection (a) to read as follows:
 
16      "(a)  Any person who executes an affidavit required by this
 
17 part and violates or fails to comply with any of the provisions
 
18 of this part or any rule adopted by the commission pursuant
 
19 thereto shall be subject to a civil penalty of up to $10,000 or
 
20 fifty per cent of the net proceeds received or to be received by
 
21 the person from the sale, lease, rental, assignment, or other
 
22 transfer of the residential [unit] apartment to which the
 
23 violation relates, whichever is the greater."
 

 
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 1      SECTION 11.  Section 514A-108, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending subsection (a) to read:
 
 4      "(a)  This part shall not apply to [any] a project developed
 
 5 pursuant to section 46-15 or 46-15.1, or chapter 53, 201G, or
 
 6 206[,]; provided that the developer of such [a] project may elect
 
 7 to be subject to this part through a written notification to the
 
 8 commission [with the notification requirements of section
 
 9 514A-102(b).  Disclosure of the election shall be made through an
 
10 additional statement in the announcement pursuant to section
 
11 514A-102(a)]."
 
12      2.  By amending subsection (d) to read:
 
13      "(d)  A developer of a project enumerated in subsection (a)
 
14 electing to be subject to this part or a project developed
 
15 pursuant to an affordable housing condition or provision by a
 
16 state or county governmental agency may elect to waive [certain]
 
17 specific provisions of this part that conflict with the
 
18 eligibility or preference requirements imposed by [such] the
 
19 governmental agency.  The developer of a project enumerated in
 
20 subsection (a) who exercises [such an] the election shall provide
 
21 detailed written notification to the commission of [which] the
 
22 [specified] specific provisions that will be waived, an
 
23 explanation for each waived provision, and a statement from the
 

 
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 1 affected government agency that the project is either an
 
 2 inapplicable project pursuant to subsection (a) or a project
 
 3 whereby a governmental agency has imposed eligibility or
 
 4 preference requirements.  [This] A copy of this notification
 
 5 shall be filed [with the notification requirements of section
 
 6 514A-102(b) and a copy simultaneously filed] with the affected
 
 7 governmental agency.  [Disclosure of the election to waive
 
 8 certain specific provisions of this part shall be made through an
 
 9 additional statement in the announcement pursuant to section
 
10 514A-102(a).]"
 
11      SECTION 12.  Section 514A-106, Hawaii Revised Statutes, is
 
12 repealed.
 
13      ["§514A-106  Financial institutions and escrow companies,
 
14 obligations.  Any person subject to chapter 412 or 454, or who is
 
15 subject to any other law for the purpose of lending money upon
 
16 the security of real property shall:
 
17      (1)  Within forty-five days after receipt of an application
 
18           for credit from any individual for the purpose of
 
19           purchasing a residential unit designated for owner-
 
20           occupants under this part, notify the applicant of the
 
21           action on the application; and
 
22      (2)  Prior to making any commitment to extend credit to any
 
23           individual for the purpose of purchasing a residential
 

 
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 1           unit designated for owner-occupants under this part,
 
 2           take all reasonable steps necessary to determine that
 
 3           the individual, in fact, intends to become an owner-
 
 4           occupant of such residential unit."]
 
 5      SECTION 13.  This Act shall not apply to any condominium
 
 6 project for which the announcement required under section
 
 7 514A-102, Hawaii Revised Statutes, was published prior to the
 
 8 effective date of this Act.
 
 9      SECTION 14.  Statutory material to be repealed is bracketed.
 
10 New statutory material is underscored.
 
11      SECTION 15.  This Act shall take effect on July 1, 2000.