Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committees on Consumer Protection and Commerce and Judiciary, to which was referred H.B. No. 1471 entitled:

begs leave to report as follows:

The purpose of this bill is to remove time share properties from the Land Court System.

Testimony in support of this measure was submitted by SVO Pacific, Inc., Hawaii Escrow & Title, Inc. and Island Title. Numerous concerned citizens testified in opposition to this measure. The Hawaii State Judiciary offered comments on this measure.

Your Committees have determined that current Land Court procedures were not designed for time share ownership and fail to accommodate the interests of time share owners and developers.

For example, under the Land Court procedures, each owner in a condominium time share project holds a certificate of title establishing their ownership. When the condominium declaration is amended, the Land Court requires that this amendment be noted on each certificate of title. In the event of an amendment to the condominium declaration, a list showing certificate of title numbers for all owners in the project must be submitted to Land Court. This requires a title search for the thousands of owners in the project, which cannot be completed before additional sales and resales of time shares in the project have taken place, rendering the list inaccurate.

In addition, in some fee simple time share projects, the buyer receives an undivided ownership interest in, and is a co-owner of the whole project. There may be perhaps as many as 50,000 co-owners of the land once the project is completed. Under current law, if a co-owner conveys their interest in the property, the existing certificate of title must be cancelled and a new one issued. Since time share sales take place daily, new certificates of title must be re-issued daily in these types of projects.

Condominium phasing also presents a problem when Land Court title procedures are applied. Since purchasers of a project own an undivided interest in the common elements, these interests must be redistributed when the second phase of the project is sold. For example, to redistribute the common interests of a condominium with 200 units in its first phase, and 300 in its second, involves recording 200 deeds to the developer, and then 200 new deeds to the existing owners and another 300 deeds to the new owners. Placed in the context of a time share plan, where there may be tens of thousands of owners, the cost of recording these deeds could easily run into the hundreds of thousands of dollars.

Your Committees find that this bill seeks to resolve these problems. It allows property developers to perform all necessary amendments and notices outside of Land Court requirements and would offer a less expensive and more appropriate title recording process. In addition, the bill would benefit title and escrow companies by making the processing of time share transactions less time-consuming and complicated. Your Committees believe that these cost reductions would ultimately flow to, and benefit time share purchasers, as well as the time share tourism industry in Hawaii.

Your Committees have amended this bill by:

As affirmed by the records of votes of the members of your Committees on Consumer Protection and Commerce and Judiciary that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 1471, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1471, H.D. 1, and be placed on the calendar for Third Reading.