STAND. COM. REP. NO. 470

Honolulu, Hawaii

RE:    S.B. No. 502

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2013

State of Hawaii

Madam:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 502 entitled:

"A BILL FOR AN ACT RELATING TO REAL ESTATE SELLER DISCLOSURE,"

begs leave to report as follows:

     The purpose and intent of this measure is to establish a uniform standard for disclosure for condominium projects, cooperative housing corporations, and other community associations.

     Your Committee received testimony in support of this measure from the Hawai‘i Association of REALTORS.

     Your Committee finds that under existing law, because there are several definitions of a planned community association, the nature and extent of document disclosures required of the seller is uncertain.  A seller who has property that falls within the definition of a planned community is also required under chapter 508D, Hawaii Revised Statutes, to provide prospective buyers with planned community association declaration and association documents at the time of the disclosure statement.

     Your Committee further finds that sellers may not know whether their property is subject to a planned community regime and may not have the requisite documents during the early stages of the transaction when initial disclosures are provided.  Your Committee has heard testimony that sellers are occasionally unaware their property is located in a planned community regime if the planned community is loosely planned or not well organized.  In these situations, the first indication that a property is subject to planned community governance may be upon receipt of the title report.  This measure addresses these concerns by clarifying the documentation that is subject to disclosure, focusing upon the recorded restrictions that affect the property, and requiring a list of documents that must be disclosed under chapter 508D, Hawaii Revised Statutes.

     Your Committee notes that this measure provides for a right of rescission by the buyer upon receipt of a current title report.  The right of rescission in this measure would cover situations where a prospective buyer of a property does not discover the property is subject to planned community governance until receipt of the title report.  The prospective buyer would then have fifteen days to rescind the real estate purchase contract.  Your Committee also notes that the right of rescission in this measure is in addition to rights of rescission set forth in sections 508D‑5, 508D-6, and 508D-13, Hawaii Revised Statutes.

     Your Committee has amended this measure by:

     (1)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 502, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 502, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

____________________________

ROSALYN H. BAKER, Chair