REPORT TITLE:
Condominiums


DESCRIPTION:
Authorizes an association of apartment owners to assess the
purchaser of a delinquent or foreclosed apartment for unpaid
assessments provided the association has previously filed a
foreclosure action.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2333
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO CONDOMINIUMS PROPERTY REGIMES. 


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

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

 
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 1 action before the purchaser acquires title.  This is only fair,
 
 2 providing the purchaser with actual notice of the total amount of
 
 3 the delinquencies.
 
 4      This Act is a comprehensive and reasonable solution to a
 
 5 thorny issue.
 
 6      SECTION 2.  Section 514A-90, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "§514A-90  Priority of lien.(a)  All sums assessed by the
 
 9 association of apartment owners but unpaid for the share of the
 
10 common expenses chargeable to any apartment constitute a lien on
 
11 the apartment prior to all other liens, except:
 
12      (1)  Liens for taxes and assessments lawfully imposed by
 
13           governmental authority against the apartment; and
 
14      (2)  All sums unpaid on any mortgage of record that was
 
15           recorded prior to the recordation of a notice of a lien
 
16           by the association of apartment owners, and costs and
 
17           expenses including attorneys' fees provided in such
 
18           mortgages. 
 
19 The lien of the association of apartment owners may be foreclosed
 
20 by action or by nonjudicial or power of sale foreclosure
 
21 procedures set forth in chapter 667, by the managing agent or
 
22 board of directors, acting on behalf of the association of
 
23 apartment owners, in like manner as a mortgage of real property.
 

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

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

 
Page 5                                                     2333
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 1           or arbitration to resolve disputes about the amount or
 
 2           validity of an association's assessment, provided the
 
 3           apartment owner immediately pays the assessment in full
 
 4           and keeps assessments current; and
 
 5      (6)  That payment in full of the assessment does not prevent
 
 6           the owner from contesting the assessment or receiving a
 
 7           refund of amounts not owed.
 
 8 Nothing in this section shall limit the rights of an owner to the
 
 9 protection of all fair debt collection procedures mandated under
 
10 federal and state law.
 
11      (d)  An apartment owner who pays an association the full
 
12 amount claimed by the association may file in small claims court
 
13 or require the association to mediate to resolve any disputes
 
14 concerning the amount or validity of the association's claim.  If
 
15 the apartment owner and the association are unable to resolve the
 
16 dispute through mediation, either party may file for arbitration
 
17 under part VII; provided that an apartment owner may only file
 
18 for arbitration if all amounts claimed by the association are
 
19 paid in full on or before the date of filing.  If the apartment
 
20 owner fails to keep all association assessments current during
 
21 the arbitration, the association may ask the arbitrator to
 
22 temporarily suspend the arbitration proceedings.  If the
 
23 apartment owner pays all association assessments within thirty
 

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

 
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 1 consent of a majority of the apartment owners.
 
 2      (g)  Subject to the provisions of this subsection, the board
 
 3 of an association of apartment owners may specially assess the
 
 4 amount of the delinquent assessments against a person who, in a
 
 5 judicial or nonjudicial power of sale foreclosure, purchases an
 
 6 apartment that was delinquent in the payment of assessments;
 
 7 provided that:
 
 8      (1)  A purchaser who holds a mortgage that was recorded
 
 9           prior to a notice of lien by the association of
 
10           apartment owners and who acquires the delinquent
 
11           apartment through a judicial or nonjudicial foreclosure
 
12           proceeding, including purchasing the apartment at a
 
13           foreclosure auction, shall not be obligated to make,
 
14           nor be liable for, payment of the association's
 
15           assessment for unpaid common expenses chargeable to the
 
16           delinquent apartment; and
 
17      (2)  A person who subsequently purchases the apartment from
 
18           the mortgagee referred to in paragraph (1) shall be
 
19           obligated to make, and shall be liable for, payment of
 
20           the association's special assessment; provided the
 
21           association of apartment owners has filed a lien for
 
22           the unpaid common expenses prior to that person's
 
23           acquisition of title to the delinquent apartment.
 

 
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 1      (h)  The amount of the special assessment assessed under
 
 2 subsection (g) under no circumstances shall exceed the total
 
 3 amount of regular monthly common assessments that were assessed
 
 4 during the six months immediately preceding the completion of the
 
 5 judicial or nonjudicial power of sale foreclosure, nor shall the
 
 6 amount of the special assessment exceed the amount of the
 
 7 association's delinquent assessment for the apartment.  For
 
 8 purposes of this subsection, "completion" means:
 
 9      (1)  In a nonjudicial power of sale foreclosure, when the
 
10           affidavit required under section 667-5 is filed; and
 
11      (2)  In a judicial foreclosure, when a purchaser is deemed
 
12           to acquire title pursuant to subsection (b)."
 
13      SECTION 3.  Statutory material to be repealed is bracketed.
 
14 New statutory material is underscored.
 
15      SECTION 4.  This Act shall take effect upon its approval.