HB874 HD2.DOC

SECTION 1. Chapter 501, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§501- Prohibition of transfer fees. (a) No deed restriction or other covenant running with the land applicable to the transfer of residential real property shall require a transferee of residential real property, or the transferee's heirs, successors, or assigns, to pay:

(1) A declarant or other person imposing the deed restriction or covenant on the property; or

(2) A third party designated by a transferor of the property,

a fee in connection with a future transfer of the property. A deed restriction or other covenant running with the land that violates this section or a lien purporting to encumber the land to secure a right under a deed restriction or other covenant running with the land that violates this section is void and unenforceable.

(b) This section shall not apply to any of the following fees or charges required by a deed restriction or other covenant running with the land in connection with the transfer of residential real property:

(1) Any interest, charge, fee, or other amounts payable by a borrower to a lender pursuant to a loan secured by residential real property, including any fee payable to the lender for consenting to an assumption of the loan or transfer of the residential real property, for providing an estoppel letter or certificate, or for any shared appreciation interest or profit participation or other consideration payable to the lender in connection with the loan;

(2) Any fee or charge payable to a residential real property homeowners', condominium, cooperative, or property owners' association, pursuant to a declaration, covenant, or law applicable to the association, including a fee or charge to change the association's records as to the owner of the residential real property or to provide an estoppel letter or certificate;

(3) Any fee or charge payable to a landlord under a lease of residential real property, including a fee or charge payable to the landlord for consenting to an assignment of the lease, for providing an estoppel letter or certificate, or to change the landlord's records as to the owner of the lessee's interest in the lease;

(4) Any consideration payable to the holder of an option to purchase an interest in residential real property or the holder of a right of first refusal or first offer to purchase an interest in residential real property for waiving, releasing, or not exercising the option or right upon transfer of the residential real property to another person; or

(5) Any fee or charge payable to a government entity.

(c) As used in this section, unless the context otherwise requires, "residential real property" means fee simple or leasehold property on which is currently situated:

(1) One to four dwelling units; or

(2) A residential condominium or cooperative apartment, the primary use of which is occupancy as a residence."

SECTION 2. Chapter 502, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§502- Prohibition of transfer fees. (a) No deed restriction or other covenant running with the land applicable to the transfer of residential real property shall require a transferee of residential real property, or the transferee's heirs, successors, or assigns, to pay: