SB2221.DOC

SECTION 1. Section 514B-3, Hawaii Revised Statutes, is amended by amending the definition of "majority" or "majority of unit owners" to read as follows:

""Majority" or "majority of the unit owners" means the owners of units to which are appurtenant more than fifty per cent of the common interests. Any specified percentage of the unit owners means the owners of units to which are appurtenant such percentage of the common interest."

SECTION 2. Section 514B-23, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) An amendment to the declaration, bylaws, condominium map or other constituent documents authorized by this section may be adopted by the vote or written consent of a majority of the unit owners; provided that any amendment adopted pursuant to this section shall not invalidate the reserved rights of a developer. If an amendment grants to any person any rights, powers, or privileges permitted by this chapter, all correlative obligations, liabilities, and restrictions in this chapter also apply to that person."

SECTION 3. Section 514B-106, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (b) to read:

"(b) The board may not act on behalf of the association to amend the declaration or bylaws (sections 514B‑32(a)(11) and 514B‑108(b)(7)), to remove the condominium from the provisions of this chapter (section 514B‑47), or to elect members of the board or determine the qualifications, powers and duties, or terms of office of board members (subsection (e)); provided that nothing in this subsection shall be construed to prohibit board members from voting proxies (section 514B‑123) to elect members of the board; and [~~provided further that~~] unless otherwise provided in the bylaws, the board may fill vacancies in its membership to serve until the next annual or special association meeting."

2. By amending subsection (f) to read:

"(f) At any regular or special meeting of the association, any member of the board may be removed and successors shall be elected for the remainder of the term to fill the vacancies thus created. The removal and replacement shall be by a vote of a majority of the unit owners and[~~, otherwise,~~] cumulative voting shall not be permitted. Otherwise, the removal and replacement shall be in accordance with all applicable requirements and procedures in the bylaws for the removal and replacement of directors and, if removal and replacement is to occur at a special meeting, section 514B‑121(b)."

SECTION 4. Section 514B-107, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Directors shall not expend association funds for their travel, directors' fees, and per diem, unless owners are informed and a majority approve of these expenses; provided that, with the approval of the board, directors may be reimbursed for actual expenditures incurred on behalf of the association. The board meeting minutes shall reflect in detail the items and amounts of the reimbursements."

SECTION 5. Section 514B-143, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) The board, with the vote or written consent of a majority of the unit owners, may require unit owners to obtain reasonable types and levels of insurance. The liability of a unit owner shall include but not be limited to the deductible of the owner whose unit was damaged, any damage not covered by insurance required by this subsection, as well as the decorating, painting, wall and floor coverings, trim, appliances, equipment, and other furnishings.

If the unit owner does not purchase or produce evidence of insurance requested by the board, the directors may, in good faith, purchase the insurance coverage and charge the reasonable premium cost back to the unit owner. In no event is the association or board liable to any person either with regard to the failure of a unit owner to purchase insurance or a decision by the board not to purchase the insurance for the owner, or with regard to the timing of its purchase of the insurance or the amounts or types of coverages obtained."

SECTION 6. Section 514B-145, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) Before the board may take the actions permitted under subsection (a), the board shall adopt a written policy providing for the actions and have the policy approved by [~~a majority vote of the unit owners at an annual or special meeting of the association or by the written consent of a majority of the unit owners.~~] the vote or written consent of a majority of the unit owners."

SECTION 7. Section 514B-146, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) Before the board or managing agent may take the actions permitted under subsection (e), the board shall adopt a written policy providing for such actions and have the policy approved by [~~a majority vote of the unit owners at an annual or special meeting of the association or by the written consent of a majority of the unit owners.~~] the vote or written consent of a majority of the unit owners."

SECTION 8. Section 514B-149, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) For purposes of subsection (a), lease rent collections and rental operations shall not include the rental or leasing of common elements that is conducted on behalf of the association or the collection of ground lease rents from individual unit owners of a project and the payment of such ground lease rents to the ground lessor if:

(1) The collection is allowed by the provisions of the declaration, bylaws, master deed, master lease, or individual unit leases of the project;

(2) A management contract requires the managing agent to collect ground lease rents from the individual unit owners and pay the ground lease rents to the ground lessor;

(3) The system of lease rent collection has been approved [~~by a majority vote of all unit owners at a meeting of the association;~~] at a meeting of the association by a vote of a majority of the unit owners; and

(4) The managing agent or association does not pay ground lease rent to the ground lessor in excess of actual ground lease rent collected from individual unit owners.

(A) Deposited in a financial institution, including a federal or community credit union, located in the State, pursuant to a resolution adopted by the board, and whose deposits are insured by an agency of the United States government;

(B) Held by a corporation authorized to do business under article 8 of chapter 412;

(D) Purchased in the name of and held for the benefit of the association through a securities broker that is registered with the Securities and Exchange Commission, that has an office in the State, and the accounts of which are held by member firms of the New York Stock Exchange or National Association of Securities Dealers and insured by the Securities Insurance Protection Corporation; or

(E) Placed through a federally insured financial institution located in the State for investment in certificates of deposit issued through the Certificate of Deposit Account Registry Service in federally insured financial institutions located in the United States.

(2) All funds collected by an association, or by a managing agent for any association, shall be invested only in:

(A) Deposits, investment certificates, savings accounts, and certificates of deposit;

(B) Obligations of the United States government, the State of Hawaii, or their respective agencies; provided that those obligations shall have stated maturity dates no more than ten years after the purchase date unless approved otherwise by [~~a majority vote of the unit owners at an annual or special meeting of the association or by written consent of a majority of the unit owners;~~] the vote or written consent of a majority of the unit owners;

(C) Mutual funds comprised solely of investments in the obligations of the United States government, the State of Hawaii, or their respective agencies; provided that those obligations shall have stated maturity dates no more than ten years after the purchase date unless approved otherwise by [~~a majority vote of the unit owners at an annual or special meeting of the association or by written consent of a majority of the unit owners;~~] the vote or written consent of a majority of the unit owners; or

(D) Certificates of deposit issued through the Certificate of Deposit Account Registry Service in an amount at least equal in their market value, but not to exceed their par value, to the amount of the deposit with the depository;

provided that before any investment longer than one year is made by an association, the board must approve the action; and provided further that the board must clearly disclose to owners all investments longer than one year at each year's association annual meeting.

Records of the deposits and disbursements shall be disclosed to the commission upon request. All funds collected by an association shall only be disbursed by employees of the association under the supervision of the association's board. All funds collected by a managing agent from an association shall be held in a client trust fund account and shall be disbursed only by the managing agent or the managing agent's employees under the supervision of the association's board."

SECTION 9. Section 514B-150, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The association shall require an annual audit of the association financial accounts and no less than one annual unannounced verification of the association's cash balance by a public accountant; 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 unit owners taken at an association meeting.~~] at an association meeting by a vote of a majority of the unit owners."

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2221
TWENTY-FIFTH LEGISLATURE, 2010
STATE OF HAWAII