Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred S.B. No. 111 entitled:

begs leave to report as follows:

The purpose of this measure is to exempt from the registration and filing requirements of the securities law the offer or sale by a licensed real estate salesperson or broker of a rental management contract under an apartment rental program.

Chun, Kerr, Dodd, Beaman and Wong and Outrigger Resorts testified in support of this measure. The Commissioner of Securities presented comments.

Currently, the securities law exempts from registration and filing requirements a transaction involving the offer or sale by a licensed real estate salesperson or broker of a condominium apartment, coupled with a rental management contract under an apartment rental program. This measure broadens the exemption to apply to the offer and sale of a rental management contract under an apartment rental program, regardless of whether the management contract offer or sale is made in conjunction and concurrently with an offer or sale of an apartment.

Your Committee finds that after the sale of a condominium apartment has been transacted, it is common practice for the apartment's owner, especially an absentee owner with a unit located in a resort area, to make the unit available for inclusion in a short-term rental pool. This measure would relieve rental pool operators from the burdensome requirements of registering and filing the management contract offer or sale with the Securities Division so long as the transaction is conducted by a licensed real estate salesperson or broker. Your Committee further finds that broadening the exemption will not weaken consumer protection since these transactions are still subject to regulatory oversight under the real estate licensing law and the anti-fraud provisions of the securities law.

Your Committee has amended this measure by:

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 S.B. No. 111, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 111, S.D. 1, and be placed on the calendar for Third Reading.