Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 929 entitled:

begs leave to report as follows:

The purpose of this bill is to establish the time at which the purchaser of a condominium unit in a nonjudicial foreclosure is considered to have acquired title to the apartment and becomes responsible for paying condominium association common assessments and expenses.

Testimony in support of the bill was submitted by the Hawaii Council of Associations of Apartment Owners, Hawaii Independent Condominium & Cooperative Owners, and Community Associations Institute. Hawaii Financial Services Association supported the intent of this measure. The Mortgage Bankers Association of Hawaii commented and suggested amendments.

Your Committee finds that the Legislature amended section 514A-90, Hawaii Revised Statutes, in 1999 to specify that the purchaser of an apartment at a judicial foreclosure acquires title to the apartment and becomes responsible for maintenance fees on the earlier of 36 days after the order confirming the sale is filed with the court, or 60 days after the court grants the motion to confirm the sale.

Before the section was amended to specify these cutoffs, lenders participating in the judicial foreclosure of a condominium unit could avoid an apartment owner's liability for maintenance fees by delaying the recording of a foreclosure deed or the entry of an order to confirm foreclosure. As a result, the condominium association would have no choice but to absorb the unpaid maintenance fees.

This bill would provide the same clear cutoff for nonjudicial foreclosures, by specifying that a purchaser of an apartment in a nonjudicial foreclosure becomes liable for maintenance fees 30 days after the auction in the nonjudicial power of sale foreclosure.

Your Committee has amended this bill to include language developed by the Mortgage Bankers Association and condominium association representatives. The amendments provide exceptions to liability under several of the statutory cutoffs. The exceptions include instances when a party to the hearing or the foreclosure action:

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 929, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 929, H.D. 1, and be referred to the Committee on Judiciary.