SB1821

relating to planned community associations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that it was the legislature's intent that chapter 421J, Hawaii Revised Statutes (the planned community associations law), and the final paragraph of section 607-14, Hawaii Revised Statutes (which provides for attorneys' fees in association actions), would be construed broadly to apply to all situations in which planned community unit owners and lessees have an express or implied obligation to pay assessments or to comply with covenants related to the use of common areas, architectural control, the maintenance of units, or restrictions on the use of units. However, in Kaanapali Hillside Homeowners Association v. Doran, 112 Hawaii 356, 145 P.3d 899 (2006), the intermediate court of appeals interpreted chapter 421J and section 607-14 restrictively and in a manner contrary to the legislature's intent.

Therefore, the legislature finds that it is necessary to revise and clarify certain statutory provisions to assure that planned community associations are able to effectively enforce their association documents, including but not limited to the enforcement of restrictive covenants and collection of assessments.

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

"§421J- Interpretation. This chapter and any association documents shall be liberally construed to facilitate the operation of the planned community association."

SECTION 3. Section 421J-2, Hawaii Revised Statutes, is amended as follows:

1. By adding a new definition to be appropriately inserted and to read:

""Planned community association" or "association" means a nonprofit, incorporated, or unincorporated homeowners' or community association created and governed by a declaration or other document that imposes responsibilities on and grants authority to the association."

2. By amending the definitions of "declaration" and "planned community" to read:

""Declaration" means any [~~recorded instrument,~~] association document, however denominated, that imposes on an association maintenance or operational responsibilities for the common area and creates the authority in the association to impose on units, or on the owners or occupants of the units, any mandatory payment of money as a regular annual assessment or otherwise in connection with the provisions, maintenance, or services for the benefit of some or all of the units, the owners, or occupants of the units or the common areas. A declaration includes any amendment or supplement to the [~~instruments~~] documents described in this definition.

"Planned community" means a common interest community, other than a condominium or a cooperative housing corporation or a time share plan, which includes all of the following characteristics:

(1) Real property subject to a recorded declaration placing restrictions and obligations on the owners of the real property and providing for rights and responsibilities of a separate entity, the association:

(A) Which owns and maintains certain property within the planned community for the common use or benefit, or both, of the owners of units within the planned community;

(B) Which is obligated to maintain certain property it does not own within the planned community for the common use or benefit, or both, of the owners of units within the planned community; [or]

(D) Which is obligated to maintain certain property it does not own, whether or not such property is within the planned community, pursuant to any agreement with; permit issued by; or statute, ordinance, rule, or regulation of any governmental authority;

(2) Individual owners own separate units which are part of a planned community at least some of which are improved by or are to be improved by residential dwellings;

(3) Owners have automatic and non-severable membership in an association by virtue of ownership of units within the planned community; and

(4) Owners, other than a master developer or declarant, are obligated by any association documents to pay mandatory assessments by virtue of ownership of a unit within the planned community."

3. By repealing the definition of "association".

[""Association" means a nonprofit, incorporated, or unincorporated organization upon which responsibilities are imposed and to which authority is granted in a declaration which governs a planned community."]

SECTION 4. Section 607-14, Hawaii Revised Statutes, is amended to read as follows:

"§607-14 Attorneys' fees in actions in the nature of assumpsit, etc. In all the courts, in all actions in the nature of assumpsit and in all actions on a promissory note or other contract in writing that provides for an attorney's fee, there shall be taxed as attorneys' fees, to be paid by the losing party and to be included in the sum for which execution may issue, a fee that the court determines to be reasonable; provided that the attorney representing the prevailing party shall submit to the court an affidavit stating the amount of time the attorney spent on the action and the amount of time the attorney is likely to spend to obtain a final written judgment, or, if the fee is not based on an hourly rate, the amount of the agreed upon fee. The court shall then tax attorneys' fees, which the court determines to be reasonable, to be paid by the losing party; provided that this amount shall not exceed twenty-five per cent of the judgment.

Where the note or other contract in writing provides for a fee of twenty-five per cent or more, or provides for a reasonable attorney's fee, not more than twenty-five per cent shall be allowed.

Where the note or other contract in writing provides for a rate less than twenty-five per cent, not more than the specified rate shall be allowed.

Where the note or other contract in writing provides for the recovery of attorneys' fees incurred in connection with a prior debt, those attorneys' fees shall not be allowed in the immediate action unless there was a writing authorizing those attorneys' fees before the prior debt was incurred. "Prior debt" for the purposes of this section is the principal amount of a debt not included in the immediate action.

The above fees provided for by this section shall be assessed on the amount of the judgment exclusive of costs and all attorneys' fees obtained by the plaintiff, and upon the amount sued for if the defendant obtains judgment.

Nothing in this section shall limit the recovery of reasonable attorneys' fees and costs by a planned community association and its members in actions for the collection of delinquent assessments, the foreclosure of any lien, or the enforcement of any provision of [~~the association's governing documents,~~] any association documents or affect any right of a prevailing party to recover attorneys' fees in excess of twenty-five per cent of the judgment pursuant to any statute that specifically provides that a prevailing party may recover all of its reasonable attorneys' fees. [~~"Planned community association" for the purposes of this section means a nonprofit homeowners or community association existing pursuant to covenants running with the land.~~] For the purposes of this section, "planned community association" and "association documents" shall have the same meaning as provided in section 421J-2."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.

INTRODUCED BY:

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THE SENATE	S.B. NO.	1821
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII