SB169 SD1 SSCR834

STAND. COM. REP. NO.834

Honolulu, Hawaii

, 2001

RE: S.B. No. 169

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committees on Commerce, Consumer Protection and Housing and Judiciary, to which was referred S.B. No. 169 entitled:

"A BILL FOR AN ACT RELATING TO REAL ESTATE,"

beg leave to report as follows:

The purpose of this measure is to clarify the disclosure requirements for the sale of residential real property.

The Real Estate Commission and Hawaii Association of Realtors testified in support of this measure with amendments.

Your Committees find that clarification of the mandatory seller disclosures law, chapter 508D, Hawaii Revised Statutes (HRS), is necessary in order to facilitate an understanding of and compliance with the seller disclosure requirements. For instance, the current requirement that a disclosure statement contain material facts disclosed in conveyancing documents is unnecessary because material facts contained in these documents are subject to disclosure in a title search.

Additionally, the circular nature of the definition of "material fact" makes it difficult to determine what facts are material and, thereby, subject to disclosure. Another shortcoming in the existing law is the broad exemption from disclosure granted to absentee owner-sellers who may have personal knowledge of material facts, but presently have no duty to disclose them.

This measure, as received, addresses these deficiencies and makes additional clarifications to the seller disclosure requirements by:

(1) Further defining a "material fact" as a fact that is specific to the property and that directly, substantially, or adversely affects the value of the property;

(2) Limiting a seller's or seller's agent's duty to examine public records as part of the disclosure process to the examination of certain maps such as maps designating hazard, disaster, and noise exposure areas, as referenced in section 508D-15, HRS;

(3) Making the "good faith and with due care" requirement for the preparation of disclosure statements stricter by disallowing disclosures based on approximations of information;

(4) Requiring an absentee owner-seller to disclose material facts known to the absentee owner-seller;

(5) Precluding the rescission of a sale by a buyer based on an amended disclosure statement if the sale has already been recorded; and

(6) Deeming real estate licensees to be in compliance with a licensee's duty of disclosure as to residential real property listings if the licensee is in compliance with chapter 508D, HRS.

Your Committees received testimony recommending against the adoption of seller disclosure standards for real estate licensees based on chapter 508D, HRS, because real estate licensees, by virtue of their education, training and experience, are already held to higher standards of disclosure than those established in chapter 508D, HRS. Therefore, your Committees have amended this measure by deleting the amendments to section 467-14, HRS, relating to real estate licensees.

Upon further consideration, your Committees have also amended this measure by:

(1) Further amending the definition of "material fact" to incorporate a "reasonable person" standard;

(2) Repealing the disclosure exemption for absentee owner-sellers;

(3) Adding a new subsection to section 508D-15, HRS, to conform to the amended definition of "disclosure statement" that limits a seller's duty to examine public records for disclosure purposes;

(4) Deleting the reference to "seller's agent" in the definition of "disclosure statement" to conform to the language of section 508D-15, HRS.

Your Committees have also made technical, formatting amendments to reflect preferred drafting style.

As affirmed by the records of votes of the members of your Committees on Commerce, Consumer Protection and Housing and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 169, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 169, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committees on Commerce, Consumer Protection and Housing and Judiciary,

____________________________ BRIAN KANNO, Chair		____________________________ RON MENOR, Chair