REPORT TITLE:
Condominiums


DESCRIPTION:
Authorizes the condominium association of apartment owners to
withhold common privileges to owner-occupied units that are
delinquent in paying their share of common expenses, so long as
the board of directors has adopted such a written policy that has
been approved by the apartment owners. (HB647 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        647
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO CONDOMINIUM PROPERTY REGIMES.



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

 1      SECTION 1.  The purpose of this Act is to enable condominium
 
 2 associations to prevent owner-occupants from receiving common
 
 3 services without paying for them, the occurrence of which
 
 4 unfairly burdens the other members of the association.  The
 
 5 effect of forcing these expenses on the other members can be
 
 6 devastating, particularly for moderate and lower income owners.
 
 7 Without this legislation, condominium associations are required
 
 8 to continue to provide common services even if the assessments
 
 9 for such services are not being paid.  The provisions of this Act
 
10 for terminating utility services are similar to the guidelines
 
11 adopted by the utility provider and the Public Utilities
 
12 Commission (e.g., Rule 7 of Hawaiian Electric Company, Inc. and
 
13 P.U.C. Order 1849), thereby addressing concerns about terminating
 
14 utility services in special circumstances.
 
15      SECTION 2.  Section 514A-90, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "§514A-90  Priority of lien.(a)  All sums assessed by the
 
18 association of apartment owners but unpaid for the share of the
 
19 common expenses chargeable to any apartment constitute a lien on
 
20 the apartment prior to all other liens, except (1) liens for
 

 
Page 2                                                     647
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1 taxes and assessments lawfully imposed by governmental authority
 
 2 against the apartment, and (2) all sums unpaid on any mortgage of
 
 3 record which was recorded prior to the recordation of a notice of
 
 4 a lien by the association of apartment owners, and costs and
 
 5 expenses including attorneys' fees provided in such mortgages.
 
 6 The lien of the association of apartment owners may be foreclosed
 
 7 by action by the [manager] managing agent or board of directors,
 
 8 acting on behalf of the association of apartment owners, in like
 
 9 manner as a mortgage of real property.  In any such foreclosure
 
10 the apartment owner shall be required to pay a reasonable rental
 
11 for the apartment, if so provided in the bylaws, and the
 
12 plaintiff in the foreclosure shall be entitled to the appointment
 
13 of a receiver to collect the same.  The [manager] managing agent
 
14 or board of directors, acting on behalf of the association of
 
15 apartment owners, [may,] unless prohibited by the declaration,
 
16 may bid on the apartment at foreclosure sale, and acquire and
 
17 hold, lease, mortgage, and convey the same.  Action to recover a
 
18 money judgment for unpaid common expenses shall be maintainable
 
19 without foreclosing or waiving the lien securing the same.
 
20      (b)  Where the mortgagee of a mortgage of record or other
 
21 purchaser of an apartment obtains title to the apartment as a
 
22 result of foreclosure of the mortgage, the acquirer of title and
 
23 the acquirer's successors and assigns shall not be liable for the
 

 
Page 3                                                     647
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1 share of the common expenses or assessments by the association of
 
 2 apartment owners chargeable to the apartment which became due
 
 3 prior to the acquisition of title to the apartment by the
 
 4 acquirer.  The unpaid share of common expenses or assessments
 
 5 shall be deemed to be common expenses collectible from all of the
 
 6 apartment owners, including the acquirer and the acquirer's
 
 7 successors and assigns.
 
 8      (c)  No apartment owner shall withhold any assessment
 
 9 claimed by the association.  An apartment owner who disputes the
 
10 amount of an assessment may request a written statement clearly
 
11 indicating:
 
12      (1)  The amount of common expenses included in the
 
13           assessment, including the due date of each amount
 
14           claimed;
 
15      (2)  The amount of any penalty, late fee, lien filing fee,
 
16           and any other charge included in the assessment;
 
17      (3)  The amount of attorneys' fees and costs, if any,
 
18           included in the assessment;
 
19      (4)  That under Hawaii law, an apartment owner has no right
 
20           to withhold assessments for any reason;
 
21      (5)  That an apartment owner has a right to demand mediation
 
22           or arbitration to resolve disputes about the amount or
 
23           validity of an association's assessment, provided the
 

 
Page 4                                                     647
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1           apartment owner immediately pays the assessment in full
 
 2           and keeps assessments current; and
 
 3      (6)  That payment in full of the assessment does not prevent
 
 4           the owner from contesting the assessment or receiving a
 
 5           refund of amounts not owed.
 
 6 Nothing in this section shall limit the rights of an owner to the
 
 7 protection of all fair debt collection procedures mandated under
 
 8 federal and state law.
 
 9      (d)  An apartment owner who pays an association the full
 
10 amount claimed by the association may file in small claims court
 
11 or require the association to mediate to resolve any disputes
 
12 concerning the amount or validity of the association's claim.  If
 
13 the apartment owner and the association are unable to resolve the
 
14 dispute through mediation, either party may file for arbitration
 
15 under part VII [of this chapter]; provided that an apartment
 
16 owner may only file for arbitration if all amounts claimed by the
 
17 association are paid in full on or before the date of filing.  If
 
18 the apartment owner fails to keep all association assessments
 
19 current during the arbitration, the association may ask the
 
20 arbitrator to temporarily suspend the arbitration proceedings.
 
21 If the apartment owner pays all association assessments within
 
22 thirty days of the date of suspension, the apartment owner may
 
23 ask the arbitrator to recommence the arbitration proceedings.  If
 

 
Page 5                                                     647
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1 the owner fails to pay all association assessments by the end of
 
 2 the thirty-day period, the association may ask the arbitrator to
 
 3 dismiss the arbitration proceedings.  The apartment owner shall
 
 4 be entitled to a refund of any amounts paid to the association
 
 5 which are not owed.
 
 6      (e)  As an alternative to foreclosure proceedings under
 
 7 subsection (a), where an apartment is owner-occupied, the
 
 8 association of apartment owners may authorize its managing agent
 
 9 or board of directors to, after sixty days' written notice to the
 
10 apartment owner and to the apartment's first mortgagee of the
 
11 nonpayment of the apartment's share of the common expenses,
 
12 terminate the delinquent apartment's access to the common
 
13 elements and cease supplying a delinquent apartment with any and
 
14 all services normally supplied or paid for by the association of
 
15 apartment owners.  Any terminated services and privileges shall
 
16 be restored upon payment of all delinquent assessments.
 
17      (f)  Before the board of directors or managing agent may
 
18 take the actions permitted under subsection (e), the board must
 
19 adopt a written policy providing for such actions and have the
 
20 policy approved by a majority vote of the apartment owners at an
 
21 annual or special meeting of the association or by the written
 
22 consent of a majority of the apartment owners."
 
23      SECTION 3.  Statutory material to be repealed is bracketed.
 

 
Page 6                                                     647
                                     H.B. NO.           H.D. 1        
                                                        
                                                        

 
 1 New statutory material is underscored.
 
 2      SECTION 4.  This Act shall take effect upon its approval