Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 1471, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to provide for a system of deregistration of title to registered land that is subject to a time share interest.

Your Committee received testimony in support of this measure from Pahio Resorts, American Resort Development Association (ARDA), ARDA Hawaii, Starwood Vacation Ownership, Inc., Title Guarantee Escrow Services, Inc., SVO Pacific, Inc., Embassy Vacation Resort, and Pacific Management Consultants, Inc. Island Title presented oral testimony in support. Testimony in opposition was received from eleven individuals. The Judiciary submitted comments.

Your Committee notes that the Land Court Act adopted in 1903 provided landowners a means to establish clear title to land through a court proceeding. The judicially determined owner is issued a certificate of title to the land that cannot be encumbered unless the encumbrance is filed in the land court and noted on the certificate of title. This system has worked well with land parcels having one or just a few owners on each parcel. With the advent of horizontal property regimes (HPR) and multiple owners on a single parcel or combined parcels of land, the land court system, though initially faced with difficulty adapted well and continues to issue a certificate of title to each fee simple condominium apartment owner.

With fee simple time-share, the number of owners of a parcel of land increases from a few hundred owners under an HPR to literally thousands of owners, each having a small undivided percentage interest in the HPR land. For these thousands of owners of the parcel of land, the issuance of a certificate of title for each one, and whenever there is a change in ownership, is cumbersome, costly, and time consuming.

This measure is designed to deregister or take lands that are subject to an HPR fee time-share project out of the land court system to eliminate the need to issue a certificate of title for each fee time-share unit for each owner and whenever a change in ownership occurs. The measure retains title rights that were secured by the original registration of the land, establishes a new chain of record title from the date of deregistration, and provides a means of recording fee time-share units in the bureau of conveyances, eliminating the need to issue a certificate of title for each fee time-share unit. Your Committee is aware of a similar process for leasehold time-share units, but understands that from a land court perspective the difference between a fee time-share unit and leasehold time-share unit is substantial.

Your Committee believes that a process for deregistering lands by law is in the public's interest for HPR fee time-share projects, but acknowledges that the deregistration may have unanticipated legal and practical consequences for land court properties and the land court system that was long ago designed to insure clear title.

Your Committee has amended this measure by:

Your Committee believes that the amended measure, a recommendation of the time share interests, provides greater protections and recourse to the courts than the original version. However, your Committee notes the testimony of the Judiciary that the concept of the land court is sound management, control, and thorough examination of factual evidence, resulting in accurate and complete records of title to the property. The land court systems provides a safety valve that protects the registered title holder. Never in the last 100 years since the Torrens system was established in Hawaii has interests in land been deregistered in land court.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1471, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1471, H.D. 1, S.D. 1, and be referred to the Committee on Judiciary and Hawaiian Affairs.