Requires planned community association (PCA) boards to give notice of the formation of a committee or subcommittee in meeting minutes, provide PCA members with better access to records, give members requesting information notice of intent to assess the cost of duplicating or producing association records, and annually audit association accounts and provide copies to members. Prohibits board members with a conflict of interest from voting. Authorizes DCCA to study PCA issues and propose legislation to protect member interests, and hear and resolve complaints. (HB1936 HD1)

A BILL FOR AN ACT

SECTION 1. The legislature finds that planned community associations can have a major impact on the planned community and its members. Members of planned communities are not only subject to the restrictions and obligations in the recorded declarations and bylaws of the association, they are also subject to the decisions and actions of the association's board of directors and its agents. These boards and their agents may sometimes conduct the business of the association in an inconsistent manner, or without the knowledge and consent of the members of the association.

The purpose of this Act is make the actions of board members of planned community associations more transparent, and to increase the accountability of the board to the association.

SECTION 2. Chapter 421J, Hawaii Revised Statutes, is amended by adding three new sections to be appropriately designated and to read as follows:

"§421J-A Member's information request; written notice of assessment of the cost. (a) No member who pursuant to section 421J-7 requests copies of records or documents of the association or to examine records or documents of the association shall be charged for the cost of providing the information unless the association within ten days of receiving the request provides written notice to the member that it intends to charge the member for the cost of providing the information and of the amount to be charged; provided that no notice shall be required before assessing the cost of providing information on delinquent assessments or in connection with proceedings to enforce the law or the association's governing documents.

(b) A member within ten days of being notified of the cost of providing information shall notify the association in writing if the member wishes to continue with the request for information or withdraw the request. A member who withdraws a request pursuant to this subsection shall not be charged for the cost of providing the information.

§421J-B Association fiscal matters; annual audits. (a) The association shall obtain an annual audit of the association's financial accounts and no less than one annual unannounced verification of the association's cash balance by a certified public accountant licensed pursuant to section 466-5; provided that if the association is comprised of less than twenty units, the annual audit and the annual unannounced cash balance verification may be waived by a majority vote of all members taken at an association meeting.

(b) The board shall make available a copy of the annual audit to each member at least thirty days prior to the annual meeting that follows the end of the fiscal year. The board shall not be required to submit a copy of the annual audit to a member if the proxy form issued pursuant to section 421J-4 is not marked to indicate that the member wishes to obtain a copy of the report.

(c) If the annual audit has not been completed and made available pursuant to subsection (b), the board shall make available:

§421J-B Planned community members' interest. (a) The director of commerce and consumer affairs may:

(b) The director of commerce and consumer affairs, pursuant to chapter 91 shall adopt rules to effectuate this section."

SECTION 3. Section 421J-5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§421J-5[]] Meetings of the board of directors[.]; conflict of interest; committee or subcommittee. (a) [Whenever practicable, all] All meetings of the board of directors, other than executive sessions, shall be open to all members. Members who are not on the board of directors may participate in any deliberation or discussion, other than executive sessions, unless a majority of a quorum of the board of directors votes otherwise.

(b) The board of directors shall meet at least once each year.

(c) Minutes of the meetings of the board of directors shall include the recorded vote of each board member on all motions except motions voted upon in executive session.

(d) The board of directors, with the approval of a majority of a quorum of its members, may adjourn any meeting and reconvene in executive session to discuss and vote upon matters concerning personnel, litigation in which the association is or may become involved, or as may be necessary to protect the attorney-client privilege of the association. The general nature of any business to be considered in executive session shall be first announced in the regular session.

(e) No board member shall vote by proxy at board meetings.

(f) A director who has a conflict of interest on any issue before the board shall disclose the nature of the conflict of interest prior to a vote on that issue at the board meeting, and the minutes of the meeting shall record the fact that a disclosure was made. A director shall not vote at any board meeting on any issue in which the director has a conflict of interest.

(g) The board may appoint committees or subcommittees to review and consider any specific matters, and alter or eliminate the committees or subcommittees; provided the board in the minutes of the meeting at which the action was taken to appoint the committee or subcommittee shall:

(h) As used in this section, "conflict of interest" means an issue in which a director has a direct personal or pecuniary interest not common to other members of the association."

SECTION 4. Section 421J-7, Hawaii Revised Statutes, is amended to read as follows:

"[[]§421J-7[]] Documents of the association. (a) [Upon approval by the board,] Association documents, the most current financial statement of the association, and the minutes of the most recent meeting of the board of directors (other than minutes of executive sessions) shall be made available for examination by any member at no cost, on twenty-four-hour loan or during reasonable hours, at a location within the planned community designated by the board.

(b) [The approved minutes of other meetings of the board, other than executive sessions, and the approved meetings of the association for the current and prior year, shall be made available for examination by members during reasonable hours at a location designated by the board. Copies of those meeting minutes shall be provided to any member upon the member's request if the member pays a reasonable fee for duplication, postage, stationery, and other administrative costs associated with handling the request.] The minutes of board meetings other than executive sessions, once approved, for the current and prior year shall be:

(c) Financial statements, general ledgers, accounts receivable ledgers, accounts payable ledgers, check ledgers, insurance policies, contracts, invoices of the association for the [current and prior year,] duration those records are kept by the association, and any documents regarding delinquencies of ninety days or more[,] shall be made available for examination by members at reasonable hours at a location designated by the board; provided that members shall pay for all costs associated with the examination of these documents. The board may require members to furnish the association with an affidavit stating that the foregoing information is requested in good faith for the protection of the interests of the association, its members, or both. [Copies] After notice of the assessment of costs is made pursuant to section 421J-A, copies of these documents shall be provided to any member upon the member's request if the member pays a reasonable fee for duplication, postage, stationery, and other administrative costs associated with handling the request.

(d) Members may view proxies, tally sheets, ballots, members' check-in lists, and the certificates of election, if any, for a period of thirty days following any association meeting; provided that after notice of the assessment of costs is made pursuant to section 421J-A, members [shall pay] may be charged for [all] any costs associated with the examination of the documents. The board may require members to furnish to the association an affidavit stating that the foregoing information is requested in good faith for the protection of the interests of the association, its members, or both. Proxies and ballots may be destroyed following the thirty-day period. [Copies] After notice of assessment of the cost is made pursuant to section 421J-A, copies of tally sheets, members' check-in lists, and the certificates of election from the most recent association meeting shall be provided to any member upon the member's request if the member pays a reasonable fee for duplication, postage, stationery, and other administrative costs associated with handling the request.

(e) Members may file a written request with the board to examine other documents of the association. The board shall give written authorization, or written refusal with an explanation of the refusal, for the examination within sixty calendar days of receipt of the request. [The] Section 421J-A notwithstanding, the board may condition its approval of any such request upon payment of reasonable fees[.], and shall notify the member in writing of the intent to charge fees and the amount of the fees at the time of the authorization. Without limitation, books and records kept by or on behalf of an association may be withheld from inspection and copying to the extent that they concern:

SECTION 5. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 6. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval.