REPORT TITLE:
Condo Reserves, Where Held


DESCRIPTION:
Permits condominium reserves to be held in a federal credit union
or insured financial institution in the United States.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           372
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO CONDOMINIUM RESERVES.



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

 1      SECTION 1.  Section 514A-97(c), Hawaii Revised Statutes,
 
 2 should be revised to allow condominium associations to comply
 
 3 with their fiduciary duty to ensure that association deposits are
 
 4 covered by federal insurance.  Currently there are eight
 
 5 financial institutions in the State that offer Federal Deposit
 
 6 Insurance Corporation protection up to a limit of $100,000 per
 
 7 account.  Due to the enactment in 1991 of the budget and reserves
 
 8 law, section 514A-83.6, Hawaii Revised Statutes, condominium
 
 9 associations have been required to build up their reserves
 
10 through the collection of maintenance fees to ensure the
 
11 availability of funds for repair and improvement of their aging
 
12 buildings.  This has resulted in substantial sums in reserve
 
13 accounts -- some associations have reserve accounts in excess of
 
14 $1,000,000 -- and due to the limited number of financial
 
15 institutions in the State, associations are facing problems as to
 
16 where to deposit their funds so as to comply with section
 
17 514A-97(c).
 
18      SECTION 2.  Section 514A-97, Hawaii Revised Statutes, is
 
19 amended by amending subsection (c) to read as follows:
 

 
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 1      "(c)  All funds, except as otherwise provided in this
 
 2 subsection, collected by an association, or by a managing agent
 
 3 for any association, shall be:
 
 4      (1)  Deposited in a financial institution, including a
 
 5           credit union, located in the [State] United States,
 
 6           whose deposits are insured by an agency of the United
 
 7           States government;
 
 8      (2)  Held by a corporation authorized to do business under
 
 9           article 8 of chapter 412; or
 
10      (3)  Invested in the obligations of the United States
 
11           government.
 
12      Records of the deposits and disbursements shall be disclosed
 
13 to the commission upon request.  All funds collected by an
 
14 association shall only be disbursed by employees of the
 
15 association under the supervision of the association's board of
 
16 directors.  All funds collected by a managing agent from an
 
17 association shall be held in a client trust fund account and
 
18 shall be disbursed only by the managing agent or the managing
 
19 agent's employees under the supervision of the association's
 
20 board of directors.  The commission may draft rules governing the
 
21 handling and disbursement of condominium association funds."
 
22      SECTION 3.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
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                                     S.B. NO.           372
                                                        
                                                        

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