REPORT TITLE:
Time Share Plans


DESCRIPTION:
Provides disclosure statement requirements for time share plans
in which all accommodations are out-of-state.  Allows director to
issue six-month preliminary permit to allow developer to begin
public offerings, subject to conditions.  Requires director to
accept the plan for registration if developer meets criteria.
(HB657 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        657
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TIME SHARING PLANS.



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

 1      SECTION 1.  Section 514E-9, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§514E-9 Disclosure [statement.] statements.  (a)  Any
 
 4 offering of a time sharing plan to the public shall disclose:
 
 5      (1)  The name and address of the developer and of the time
 
 6           share units;
 
 7      (2)  The name and address of the plan manager, if any, and a
 
 8           description of the plan manager's responsibilities and
 
 9           authority;
 
10      (3)  A description of the time share units, including the
 
11           developer's schedule for completion of all buildings,
 
12           units and amenities, and dates of availability;
 
13      (4)  If the time share plan is located in a condominium
 
14           property regime, a description of the project and any
 
15           pertinent provisions of the project instruments;
 
16      (5)  Any restraints on the transfer of the buyer's time
 
17           share interest in the time share units or plan;
 

 
 
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 1      (6)  Whether the time share plan is a time share ownership
 
 2           plan or a time share use plan, along with a description
 
 3           of the rights and responsibilities under [said] the
 
 4           plan;
 
 5      (7)  A statement that there is a seven-calendar-day period
 
 6           of mutual rescission;
 
 7      (8)  A statement that, pursuant to section 514E-11.3, every
 
 8           sale or transfer[,] made in violation of this chapter
 
 9           is voidable at the election of the purchaser;
 
10      (9)  Notice of any liens, title defects, or encumbrances on
 
11           or affecting the title to the units or plan;
 
12     (10)  Notice of any pending or anticipated suits that are
 
13           material to the time share units or plan, of which the
 
14           developer has, or should have, knowledge;
 
15     (11)  The total financial obligation of the purchaser, which
 
16           shall include the initial price and any additional
 
17           charges to which the purchaser may be subject;
 
18     (12)  An estimate of the dues, maintenance fees, real
 
19           property taxes, and similar periodic expenses, and the
 
20           method or formula by which they are derived and
 
21           apportioned; and
 
22     (13)  Other disclosures required by the director, as provided
 
23           by rules adopted pursuant to chapter 91.
 

 
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 1      (b)  Notwithstanding anything in subsection (a) to the
 
 2 contrary, the director may accept for filing the disclosure
 
 3 statement of a developer of a time share plan in which all
 
 4 accommodations are located outside the State, if the developer
 
 5 provides a certificate of registration or other evidence of
 
 6 registration from the appropriate regulatory agency of any other
 
 7 jurisdiction within the United States in which some or all of the
 
 8 accommodations are located, and the other jurisdiction has
 
 9 disclosure requirements that are substantially equivalent to or
 
10 greater than the information required to be disclosed under state
 
11 law, as determined by the director.  A developer filing a
 
12 disclosure statement under this subsection shall provide to the
 
13 director:
 
14      (1)  The developer's legal name, any assumed names used by
 
15           the developer, principal office location, mailing
 
16           address, primary contact person, and telephone number;
 
17      (2)  The name, location, mailing address, primary contact
 
18           person, and telephone number of the time share plan;
 
19      (3)  The name and address of the plan manager, if any, and a
 
20           description of the plan manager's responsibilities and
 
21           authority;
 
22      (4)  The name and Hawaii address of the authorized agent or
 
23           registered agent in the State upon whom claims or
 

 
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 1           service of process can be served;
 
 2      (5)  The certificate of registration or other evidence of
 
 3           registration from any jurisdiction in which the time
 
 4           share plan is approved or accepted;
 
 5      (6)  A declaration as to whether the time share plan is a
 
 6           time share ownership plan or time share use plan;
 
 7      (7)  Disclosure of each jurisdiction in which the time share
 
 8           plan has applied for registration, and whether the
 
 9           developer was denied registration or was the subject of
 
10           any disciplinary proceeding in such jurisdiction; 
 
11      (8)  Copies of any disclosure documents required to be given
 
12           to purchasers or required to be filed with the
 
13           jurisdiction in which the time share plan is approved
 
14           or accepted as may be requested by the director, which
 
15           disclosure documents shall be supplemented, as may be
 
16           required, to meet the requirements of subsection (a);
 
17      (9)  A certification from the developer that the time share
 
18           plan complies with the requirements of chapter 514E, or
 
19           a certification as to the manner in which the time
 
20           share plan does not comply with such requirements, and
 
21           the measures that the developer will be taking to
 
22           satisfy the requirements of Hawaii law or to ensure the
 

 
 
 
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 1           director that the interests of consumers will be
 
 2           adequately protected; and
 
 3     (10)  Any other information reasonably required by the
 
 4           director and established by rule.
 
 5      [(b)] (c)  The requirements of this section shall not apply
 
 6 to the following transactions:
 
 7      (1)  Any transaction pursuant to order of any court;
 
 8      (2)  Any disposition by a government or governmental agency; 
 
 9      (3)  Normal hotel operations; or
 
10      (4)  Any gratuitous transfer.
 
11      [(c)](d)  A developer or sales agent shall promptly amend or
 
12 supplement the disclosure statement to report any material change
 
13 in the information required by this section."
 
14      SECTION 2.  Section 514E-10, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "§514E-10  Registration required:  developer, acquisition
 
17 agent, sales agent, plan manager and exchange agent.(a)  A
 
18 developer shall not offer or dispose of a time share unit or a
 
19 time share interest unless one of the disclosure [statement]
 
20 statements required by section 514E-9 is filed with the director,
 
21 pursuant to the time specified in this chapter, or the
 
22 development is exempt from filing[,] and the time share plan to
 
23 be offered by the developer is accepted by the director for
 

 
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 1 registration under this chapter.  The director shall not accept a
 
 2 developer's time share plan if the developer does not possess a
 
 3 history of honesty, truthfulness, financial integrity, and fair
 
 4 dealing.
 
 5      (b)  Notwithstanding anything in this section to the
 
 6 contrary, the director may issue a preliminary permit that shall
 
 7 be effective for a six-month period, allowing a developer to
 
 8 begin offering and selling time share units or time share
 
 9 interests while the application for registration is undergoing
 
10 review.  The director shall issue the preliminary permit to the
 
11 developer and the developer may commence sales upon submitting to
 
12 the director:
 
13      (1)  A formal written request for a preliminary permit;
 
14      (2)  A substantially complete application for registration,
 
15           including all appropriate fees and exhibits;
 
16      (3)  Evidence acceptable to the director that all funds,
 
17           negotiable instruments, and purchase money contracts
 
18           received by the developer will be placed into an escrow
 
19           account, pursuant to section 514E-16, with instructions
 
20           that the funds, negotiable instruments, and purchase
 
21           money contracts will not be released until the
 
22           application for registration is accepted and the
 
23           requirements of sections 514E-17 and 18 have been met;
 

 
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 1      (4)  A copy of the proposed disclosure statement that shall
 
 2           be given to each purchaser;
 
 3      (5)  Evidence acceptable to the director that each purchaser
 
 4           shall be given the opportunity to cancel the purchase
 
 5           at any time during the term of the preliminary permit
 
 6           and to receive a full refund of all moneys, including
 
 7           interest, and further, the additional opportunity to
 
 8           cancel the purchase in accordance with section 514E-8
 
 9           upon the acceptance of the registration if the director
 
10           determines that there is a material difference in the
 
11           disclosures contained in the approved disclosure
 
12           statement and those given to the purchaser in the
 
13           proposed disclosure statement;
 
14      (6)  A title report, policy of title insurance or any other
 
15           evidence of title acceptable to the director that is
 
16           dated not more than sixty days from the date that the
 
17           developer's request for the preliminary permit is
 
18           delivered to the director;
 
19      (7)  The declaration of covenants, conditions, and
 
20           restrictions for the time share plan;
 
21      (8)  The bylaws of the time share owner's association;
 
22      (9)  The program rules for the time share plan;
 

 
 
 
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 1     (10)  Any underlying condominium documents applicable to the
 
 2           time share plan;
 
 3     (11)  A county verification of zoning for the time share plan
 
 4           (Form TS-7), that is dated not more than thirty days
 
 5           from the date that the developer's request for a
 
 6           preliminary permit is delivered to the director;
 
 7     (12)  A specimen copy of the sales contract for the time
 
 8           share plan;
 
 9     (13)  A specimen copy of the conveyance document for the time
 
10           share plan; and
 
11     (14)  Evidence acceptable to the director that the developer
 
12           is duly registered to do business in the State.
 
13     Upon expiration of the six-month preliminary permit period
 
14 without acceptance of the application for registration, or
 
15 rejection of the application for registration, whichever occurs
 
16 first, the developer shall promptly cancel all sales contracts
 
17 and to refund all purchasers' funds together with interest.
 
18 Thirty days prior to the expiration of the six-month preliminary
 
19 permit, the developer may apply to the director for an extension
 
20 of the six-month term of the preliminary permit, which
 
21 application is within the director's sole discretion to grant.
 
22 Should the extension be granted, the developer may continue sales
 
23 under the preliminary permit until expiration of the extended
 

 
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 1 term, acceptance of the application for registration, or
 
 2 rejection of the application for registration, whichever occurs
 
 3 first.  The department is not, by issuance of a preliminary
 
 4 permit to a developer, obligated to accept the developer's
 
 5 application for registration.
 
 6     [(b)](c)  An acquisition agent (including the developer if
 
 7 [it] the developer is also the acquisition agent) shall register
 
 8 under this chapter by filing with the director a statement
 
 9 setting forth the time sharing plan for which [it] the
 
10 acquisition agent is providing prospective purchasers, [its] the
 
11 acquisition agent's address, the telephone number, other
 
12 information required by the director, as provided by rules
 
13 adopted pursuant to chapter 91[,] and, if the acquisition agent
 
14 is not a natural person, the name of the responsible managing
 
15 employee.  All acquisition agents not licensed under chapter 467
 
16 shall be approved by the director.  The director shall not
 
17 approve any acquisition agent who is not of good character and
 
18 who does not possess a reputation for honesty, truthfulness, and
 
19 fair dealing.  The acquisition agent shall furnish evidence that:
 
20      (1)  [the] The acquisition agent is bonded as required by
 
21           rules adopted by the director pursuant to chapter 91 to
 
22           cover any violation by the acquisition agent of any
 
23           solicitation ordinance or other [regulation] rule
 

 
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 1           governing the use of the premise or premises in which
 
 2           the time share plan is promoted; provided that the
 
 3           acquisition agent shall be separately bonded for each
 
 4           time share plan for which it is providing prospective
 
 5           purchasers; or
 
 6      (2)  [that the] The acquisition agent is currently licensed
 
 7           pursuant to chapter 467 as a real estate salesperson or
 
 8           a real estate broker and the acquisition agent's
 
 9           activities as such are covered by the real estate
 
10           recovery fund established pursuant to chapter 467.
 
11      [(c)](d)  A sales agent (including the developer if [it]
 
12 the developer is also the sales agent) shall register under this
 
13 chapter by filing with the director a statement setting forth the
 
14 time sharing plan that [it] the sales agent is selling, [its] the
 
15 sales agent's address, telephone number, other information
 
16 required by the director as provided by rules adopted pursuant to
 
17 chapter 91[,] and, if the sales agent is not a natural person,
 
18 the name of the responsible managing employee[,] and the escrow
 
19 account required under section 514E-16 for the deposit and
 
20 collection of purchasers' funds.  The director shall not approve
 
21 any sales agent who is not of good character and who does not
 
22 possess a reputation for honesty, truthfulness, and fair dealing.
 
23 The sales agent shall furnish evidence that the sales agent is
 

 
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 1 currently licensed pursuant to chapter 467 as a real estate
 
 2 salesperson or real estate broker and the sales agent's
 
 3 activities as such are covered by the real estate recovery fund
 
 4 established pursuant to chapter 467.
 
 5      [(d)](e)  A plan manager (including the developer if  [it]
 
 6 the developer is also the plan manager) shall register under this
 
 7 chapter by filing with the director a statement setting forth the
 
 8 time sharing plan that [it] the plan manager is managing, [its]
 
 9 the plan manager's principal office address, telephone number,
 
10 and responsible managing employee.  The plan manager shall
 
11 furnish evidence that the plan manager is bonded, as required by
 
12 rules adopted by the director pursuant to chapter 91, to cover
 
13 any default of the plan manager and any of its employees of their
 
14 duties and responsibilities; provided that the plan manager shall
 
15 be separately bonded for each time share plan under the
 
16 management of the plan manager.
 
17      [(e)](f)  An exchange agent (including the developer if [it]
 
18 the developer is also an exchange agent) shall register under
 
19 this chapter by filing with the director a statement setting
 
20 forth the time sharing plan for which [it] the exchange agent is
 
21 offering exchange services, [its] the exchange agent's principal
 
22 office address and telephone number, and [designate its] the
 
23 exchange agent's responsible managing employee.
 

 
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 1      [(f)](g)  Any plan manager or developer registration
 
 2 required in this section shall be renewed by December 31 of each
 
 3 even-numbered year, and any acquisition agent, sales agent, or
 
 4 exchange agent registration required in this section shall be
 
 5 renewed on December 31 of each odd-numbered year; provided that
 
 6 this subsection shall not relieve the person required to register
 
 7 from the obligation to notify the director promptly of any
 
 8 material change in any information submitted to the director, nor
 
 9 shall it relieve the developer of [its] the developer's
 
10 obligation to promptly file amendments or supplements to the
 
11 disclosure statement[,] and to promptly supply the amendments or
 
12 supplements to purchase of time share interests." 
 
13      SECTION 3.  Section 514E-10.5, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "§514E-10.5  Consultant review of developer filing.  The
 
16 director may contract with private consultants in connection with
 
17 the review of the filing required of time share developers
 
18 pursuant to section 514E-10(a) and [(f).](g).  The cost of
 
19 contracting private consultants shall be borne by the developer;
 
20 provided that the consultant review required under this section
 
21 shall not affect the scope of the review under section 514E-27
 
22 that the director may request for filings that encompass
 
23 alternative arrangements for purchaser protection.  The
 

 
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 1 consultant shall be asked to thoroughly review the filing for the
 
 2 purpose of examining its compliance with the requirements of this
 
 3 chapter and any rule adopted by the director, including the
 
 4 documentation and other provided materials.  Upon completing the
 
 5 review, the consultant shall provide a written analysis of the
 
 6 filing and an opinion of the nature and extent to which it
 
 7 complies with this chapter and adopted rules.  The director may
 
 8 adopt rules pursuant to chapter 91 to further delineate the
 
 9 duties of the consultant in undertaking the review and analysis
 
10 required pursuant to this section."
 
11      SECTION 4.  Section 514E-30, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "§514E-30  Scope of chapter.  This chapter applies to the
 
14 offer and sale in Hawaii of time share interests in time share
 
15 units located in Hawaii.  If time share units are located outside
 
16 of Hawaii, but any offer or sale is made within the State, this
 
17 chapter, except for sections 514E-3, 514E-4, 514E-5, 514E-6,
 
18 514E-7, and 514E-14, shall apply.  As to the offer and sale
 
19 outside of Hawaii of time share interest in a time share plan
 
20 [which] that includes time share units located in Hawaii, this
 
21 chapter, except for sections 514E-2.5, [514E-10(b) and (c),]
 
22 514E-10(c) and (d), 514E-11, and 514E-11.1, shall apply."
 

 
 
 
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 1      SECTION 5.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 6.  This Act shall take effect upon its approval.