REPORT TITLE: 
Real estate licenses; managing
agents
DESCRIPTION:
Requires the disclosure of prior criminal and civil history or
background of managing agent applicants.  Requires the real
estate commission to conduct background checks, investigate
complaints and assess administrative fines for conduct that
endangers the safety and welfare of residents or adversely affect
property values under the care, custody and control of an
offending managing agent.

 
HB HMIA 2000-104
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2882
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO MANAGING AGENTS.



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


 1      SECTION 1.  Section 467-4, Hawaii Revised Statutes, is
 
 2 amended to read:
 
 3      "§467-4  Powers and duties of commission.  In addition to
 
 4 any other powers and duties authorized by law, the real estate
 
 5 commission shall:
 
 6      (1)  Grant licenses, registrations, and certificates
 
 7           pursuant to this chapter;
 
 8      (2)  Adopt, amend, or repeal rules as it may deem proper to
 
 9           effectuate this chapter and carry out its purpose,
 
10           which is the protection of the general public in its
 
11           real estate transactions.  All rules shall be approved
 
12           by the governor and the director of commerce and
 
13           consumer affairs, and when adopted pursuant to chapter
 
14           91 shall have the force and effect of law.  The rules
 
15           may forbid acts or practices deemed by the commission
 
16           to be detrimental to the accomplishment of the purpose
 
17           of this chapter, and the rules may require real estate
 
18           brokers and salespersons to complete educational
 
19           courses or to make reports to the commission containing
 

 
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 1           items of information as will better enable the
 
 2           commission to enforce this chapter and the rules, or as
 
 3           will better enable the commission from time to time to
 
 4           amend the rules to more fully effect the purpose of
 
 5           this chapter, and, further, the rules may require real
 
 6           estate brokers and salespersons to furnish reports to
 
 7           their clients containing matters of information as the
 
 8           commission deems necessary to promote the purpose of
 
 9           this chapter.  This enumeration of specific matters
 
10           that may properly be made the subject of rules shall
 
11           not be construed to limit the commission's broad 
 
12           general power to make all rules necessary to fully     
 
13      effectuate the purpose of this chapter;
 
14      (3)  Enforce this chapter and rules adopted pursuant
 
15           thereto;
 
16      (4)  Suspend, fine, terminate, or revoke any license,
 
17           registration, or certificate for any cause prescribed
 
18           by this chapter, or for any violation of the rules, and
 
19           may also require additional education or re-
 
20           examination, and refuse to grant any license,
 
21           registration, or certificate for any cause that would
 
22           be a ground for suspension, fine, termination, or
 
23           revocation of a license, registration, or certificate;
 

 
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 1      (5)  Actively investigate and verify the criminal and civil
 
 2           background or history of every applicant for managing
 
 3           agent under section 514A-95 and take all appropriate
 
 4           disciplinary action as provided in this chapter.
 
 5      [(5)] (6) Report to the governor and the legislature
 
 6                relevant information that shall include but not be
 
 7                limited to a summary of the programs and financial
 
 8                information about the trust funds, including
 
 9                balances and budgets, through the director of
 
10                commerce and consumer affairs annually, before the
 
11                convening of each regular session, and at other
 
12                times and in other manners as the governor or the
 
13                legislature may require concerning its activities;
 
14      [(6)] (7) Publish and distribute pamphlets and circulars,
 
15                produce seminars and workshops, hold meetings in
 
16                all counties, and require other education
 
17                regarding any information as is proper to further
 
18                the accomplishment of the purpose of this chapter;
 
19      [(7)] (8) Enter into contract or contracts with qualified
 
20                persons to assist the commission in effectuating
 
21                the purpose of this chapter; and
 
22      [(8)] (9) Establish standing committees to assist in
 
23                effectuating this chapter and carry out its
 

 
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 1                purpose, which shall meet not less often than ten
 
 2                times annually, and shall from time to time meet
 
 3                in each of the counties. "
 
 4      SECTION 2.  Chapter 467, Hawaii Revised Statutes, is amended
 
 5 by adding a new section to be appropriately designated and to
 
 6 read:
 
 7      "§467-     Suspension, revocation of managing agent's
 
 8 activity, and other penalties.  (a)  If a criminal or civil legal
 
 9 background investigation, pursuant to sections 467-4, and 514A-
 
10 95, discloses evidence of prior conduct that, if repeated, would
 
11 endanger the safety, welfare, or property values of the residents
 
12 or managed property, the commission shall deny or revoke the
 
13 application, and authorization to engage in the practice of
 
14 property management and all appropriate real estate licenses of
 
15 the managing agent applicant.
 
16      (b)  All complaints concerning property managing agents that
 
17 involve conduct endangering the safety, welfare, or property
 
18 values of the property and residents under the property managing
 
19 agent's care, custody, or control, shall be investigated by the
 
20 commission within five years of the filing of such complaint.
 
21      (c)  The commission shall assess administrative fines of not
 
22 less than $5,000 and not more than $50,000 against the offending
 
23 property managing agent for every conduct determined to endanger
 

 
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 1 the safety and welfare of residents or adversely affect property
 
 2 values of the residents and property under the managing agent's
 
 3 care, custody or control."
 
 4      SECTION 3.  Section 514A-95, Hawaii Revised Statutes, is
 
 5 amended to read:
 
 6      "§514A-95  Managing agents.(a)  Every managing agent
 
 7 shall:
 
 8      (1)  Be licensed as a real estate broker in compliance with
 
 9           chapter 467 and the rules of the commission or be a
 
10           corporation authorized to do business under article 8
 
11           of chapter 412;
 
12      (2)  Register with the commission prior to conducting
 
13           managing agent activity through approval of a completed
 
14           registration application, payment of fees, and
 
15           submission of any other additional information set
 
16           forth by the commission.  Beginning December 31, 1996,
 
17           the registration shall be for a biennial period with
 
18           termination on December 31 of an even-numbered year.
 
19           The commission shall prescribe a deadline date prior to
 
20           the termination date for the submission of a completed
 
21           reregistration application, payment of fees, and any
 
22           other additional information set forth by the
 
23           commission.  Any managing agent who has not met the
 

 
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 1           submission requirements by the deadline date shall be
 
 2           considered a new applicant for registration and subject
 
 3           to initial registration requirements.  The information
 
 4           required to be submitted with any application shall
 
 5           include but not be limited to evidence of and
 
 6           information on fidelity bond coverage, name, business
 
 7           address, phone number, the applicant's criminal and
 
 8           civil history or background, and names of association
 
 9           of apartment owners managed;
 
10      (3)  Provide evidence with the initial registration
 
11           application and reregistration application of a current
 
12           fidelity bond in an amount equal to $500 multiplied by
 
13           the aggregate number of apartments of the association
 
14           of apartment owners managed by the managing agent;
 
15           provided that the amount of the bond shall not be less
 
16           than $20,000 nor greater than $100,000.  Current
 
17           evidence of a fidelity bond includes a certification
 
18           statement from an insurance company registered with the
 
19           insurance division of the department of commerce and
 
20           consumer affairs certifying that the bond is in effect
 
21           and meets the requirement of this section and the rules
 
22           adopted by the commission.  The managing agent shall
 
23           permit only employees covered by the fidelity bond to
 

 
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 1           handle or have custody or control of any association of
 
 2           apartment owners funds, except any principals of the
 
 3           managing agent that cannot be covered by the fidelity
 
 4           bond.  The bond shall protect the managing agent
 
 5           against the loss of any association of apartment
 
 6           owners' moneys, securities, or other properties caused
 
 7           by the fraudulent or dishonest acts of employees of the
 
 8           managing agent.  Failure to obtain or maintain a
 
 9           fidelity bond in compliance with this chapter and the
 
10           rules adopted pursuant thereto, including failure to
 
11           provide evidence of the fidelity bond coverage in a
 
12           timely manner to the commission, shall result in non-
 
13           registration or the automatic termination of the
 
14           registration, unless an approved exemption or a bond
 
15           alternative is presently maintained.  A managing agent
 
16           who is unable to obtain a fidelity bond may seek an
 
17           exemption from the fidelity bond requirement from the
 
18           commission.  The commission shall adopt rules
 
19           establishing the conditions and terms by which it may
 
20           grant an exemption or a bond alternative, or permit
 
21           deductibles;
 
22      (4)  Act promptly and diligently to recover from the bond,
 
23           if the fraud or dishonesty of the managing agent's
 

 
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 1           employees causes a loss to an association of apartment
 
 2           owners, and apply the bond proceeds, if any, to reduce
 
 3           the association of apartment owners' loss.  If more
 
 4           than one association of apartment owners suffers a
 
 5           loss, the managing agent shall divide the proceeds
 
 6           among the associations of apartment owners in
 
 7           proportion to each association of apartment owners'
 
 8           loss.  An association of apartment owners may request a
 
 9           court order requiring the managing agent to act
 
10           promptly and diligently to recover from the bond.  If
 
11           an association of apartment owners cannot recover its
 
12           loss from the bond proceeds of the managing agent, the
 
13           association of apartment owners may recover by court
 
14           order from the real estate recovery fund established
 
15           under section 467-16, provided that:
 
16           (A)  The loss is caused by the fraud,
 
17                misrepresentation, or deceit of the managing agent
 
18                or its employees;
 
19           (B)  The managing agent is a licensed real estate
 
20                broker; and
 
21           (C)  The association of apartment owners fulfills the
 
22                requirements of sections 467-16 and 467-18 and any
 
23                applicable rules of the commission;
 

 
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 1      (5)  Pay a nonrefundable application fee and, upon approval,
 
 2           an initial registration fee, and subsequently pay a
 
 3           reregistration fee, as prescribed by rules adopted by
 
 4           the director of commerce and consumer affairs pursuant
 
 5           to chapter 91.  A compliance resolution fee shall also
 
 6           be paid pursuant to section 26-9(o) and the rules
 
 7           adopted pursuant thereto; and
 
 8      (6)  Report immediately in writing to the commission any
 
 9           changes to the information contained on the
 
10           registration application, the fidelity bond, or any
 
11           other documents provided for registration.  Failure to
 
12           do so may result in termination of registration and
 
13           subject the managing agent to initial registration
 
14           requirements.
 
15      (b)  The commission may deny any registration or
 
16 reregistration application or terminate a registration without
 
17 hearing if the fidelity bond and its evidence fail to meet the
 
18 requirements of this chapter and the rules adopted pursuant
 
19 thereto.
 
20      (c)  Every managing agent shall be considered a fiduciary
 
21 with respect to any property managed by that managing agent."
 
22      SECTION 4.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
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 1      SECTION 5.  This Act shall take effect upon its approval.
 
 2 
 
 3                         INTRODUCED BY:___________________________
 
 4 
 5 

 
HB HMIA 2000-104