STAND. COM. REP. NO. 2688

Honolulu, Hawaii

RE:    S.B. No. 2661

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2016

State of Hawaii

Sir:

     Your Committee on Judiciary and Labor, to which was referred S.B. No. 2661, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUMS,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Amend section 667-94, Hawaii Revised Statutes (HRS), to:

          (A)  Clarify that when a unit owner and association reach a payment plan to cure a nonjudicial foreclosure, completion of the payment plan is required to cure the default;

          (B)  Specify that if a unit owner and an association have agreed on a payment plan to prevent a nonjudicial foreclosure from proceeding, any association fines imposed while the payment plan is in effect shall not be deemed a default under the payment plan; and

          (C)  Clarify the obligations of a unit owner and an association while a unit owner is not otherwise in default under a payment plan;

     (2)  Make various amendments to chapters 514A and 514B, HRS, to:

          (A)  Clarify that the pay first, dispute later provisions in Hawaii's condominium law apply only to common expense assessments claimed by an association of apartment owners;

          (B)  Specify that a unit or apartment owner who disputes the amount of an assessment may request a written statement about the assessment from the association, including that a unit or apartment owner may demand mediation prior to paying contested charges, other than common expense assessments;

          (C)  Specify requirements for mediation on contested charges, except for common expense assessments; and

          (D)  Repeal language that permitted associations to convert delinquent fines and late fees into delinquent common expense assessments, if certain conditions were met; and

     (3)  Make conforming amendments to reflect the amendments made to chapters 514A and 514B, HRS.

     Your Committee received testimony in support of this measure from two individuals.

     Your Committee finds that under existing law, if an association of apartment owners starts a nonjudicial foreclosure against a unit owner and the owner pays off the delinquency or proposes a payment plan that the association accepts, the association is supposed to rescind the notice of foreclosure and not proceed.  However, proposing a payment plan is not sufficient on its own to cure a default.  This measure clarifies that if an owner merely proposes a payment plan, the notice of nonjudicial foreclosure is not rescinded, but rather put on hold until the owner completes the payment plan.

     Your Committee further finds that existing law states that an association cannot pursue nonjudicial foreclosure against any unit solely due to fines, penalties, legal fees, or late fees.  Encouraging mediation when association assessments other than common expense assessments are in dispute, and prior to any foreclosure process being initiated, would be beneficial to associations and condominium owners.  This measure assists condominium owners and associations when there are issues regarding nonpayment or disputes regarding penalties or fines, late fees, late filing fees, or other charges in an assessment, including common expense assessments.  Your Committee further finds that this measure is intended to amend Hawaii's pay first, dispute later provisions within the State's condominium code, to make it clear that common area maintenance fees, also known as common expense assessments, are the only fees that must be paid prior to initiating a dispute.  All other penalties or fines, late fees, lien filing fees, or other charges in an assessment can be submitted to mediation prior to payment.

     As affirmed by the record of votes of the members of your Committee on Judiciary and Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2661, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Judiciary and Labor,

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GILBERT S.C. KEITH-AGARAN, Chair