HB1499 HD1.DOC

SECTION 1. The legislature finds condominium disputes can be more efficiently resolved through the use of alternative dispute resolution, such as mediation and arbitration, rather than the generally costly and contentious judicial system. However, numerous complaints have been made about the unwillingness of parties involved in a condominium dispute to participate in alternative dispute resolution despite the express statutory requirements regarding mediation and arbitration contained in Hawaii's condominium law.

The legislature affirms its intent that parties to condominium disputes must participate in mediation or arbitration as required under Hawaii law and that the dispute resolution process should be expeditious and economical for all parties.

SECTION 2. Section 514B-69, Hawaii Revised Statutes, is amended to read as follows:

"§514B-69 Penalties. (a) Any person who violates or fails to comply with this part, part V, section 514B‑103, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, or section 514B‑154.5, shall be guilty of a misdemeanor and shall be punished by a fine not exceeding $10,000, or by imprisonment for a term not exceeding one year, or both. Any person who violates or fails to comply with any rule, order, decision, demand, or requirement of the commission under this part, part V, section 514B‑103, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, or section 514B‑154.5, shall be punished by a fine not exceeding $10,000.

(b) In addition to any other actions authorized by law, any person who violates or fails to comply with this part, part V, section 514B‑103, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, section 514B‑154.5, or the rules of the commission adopted pursuant thereto, shall also be subject to a civil penalty not exceeding $10,000 for any violation. Each violation shall constitute a separate offense.

(c) In addition to any other actions authorized by law, any person who violates or fails to comply with section 514B-161 or section 514B-162 shall be guilty of a misdemeanor and shall be punished by a fine not exceeding $10,000."

SECTION 3. Section 514B-71, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The commission shall establish a condominium education trust fund that the commission shall use for educational purposes. Educational purposes shall include financing or promoting:

(1) Education and research in the field of condominium management, condominium project registration, and real estate, for the benefit of the public and those required to be registered under this chapter;

(2) The improvement and more efficient administration of associations;

(3) Expeditious and inexpensive procedures for resolving association disputes; [~~and~~]

(4) Support for mediation of condominium related disputes[.]; and

(5) Arbitration of condominium related disputes pursuant to section 514B-162."

SECTION 4. Section 514B-162, Hawaii Revised Statutes, is amended to read as follows:

"[[]§514B-162[]] Arbitration. (a) At the request of any party, any dispute concerning or involving one or more unit owners and an association, its board, managing agent, or one or more other unit owners relating to the interpretation, application, or enforcement of this chapter or the association's declaration, bylaws, or house rules adopted in accordance with its bylaws shall be submitted to arbitration. The arbitration shall be conducted, unless otherwise agreed by the parties, in accordance with the rules adopted by the commission and of chapter 658A; provided that the rules of the arbitration service conducting the arbitration shall be used until the commission adopts its rules; provided further that where any arbitration rule conflicts with chapter 658A, chapter 658A shall prevail; and provided further that notwithstanding any rule to the contrary, the arbitrator shall conduct the proceedings in a manner [~~which~~] that affords substantial justice to all parties. The arbitrator shall be bound by rules of substantive law and shall not be bound by rules of evidence, whether or not set out by statute, except for provisions relating to privileged communications. The arbitrator shall permit discovery as provided for in the Hawaii rules of civil procedure; provided that the arbitrator may restrict the scope of [~~such~~] the discovery for good cause to avoid excessive delay and costs to the parties or the arbitrator may refer any matter involving discovery to the circuit court for disposition in accordance with the Hawaii rules of civil procedure then in effect.

(b) Nothing in subsection (a) shall be interpreted to mandate the arbitration of any dispute involving:

(1) The real estate commission;

(2) The mortgagee of a mortgage of record;

(3) The developer, general contractor, subcontractors, or design professionals for the project; provided that when any person exempted by this paragraph is also a unit owner, a director, or managing agent, [~~such~~] the person in those capacities, shall be subject to [~~the provisions of~~] subsection (a);

(4) Actions seeking equitable relief involving threatened property damage or the health or safety of unit owners or any other person;

(5) Actions to collect assessments [~~which~~] that are liens or subject to foreclosure; provided that a unit owner who pays the full amount of an assessment and fulfills the requirements of section 514B‑146 [~~shall have the right to~~] may demand arbitration of the owner's dispute, including a dispute about the amount and validity of the assessment;

(6) Personal injury claims;

(7) Actions for amounts in excess of $2,500 against an association, a board, or one or more directors, officers, agents, employees, or other persons, if insurance coverage under a policy or policies procured by the association or its board would be unavailable because action by arbitration was pursued; or

(8) Any other cases [~~which~~] that are determined, as provided in subsection (c), to be unsuitable for disposition by arbitration.

(c) At any time within twenty days of being served with a written demand for arbitration, any party so served may apply to the circuit court in the judicial circuit in which the condominium is located for a determination that the subject matter of the dispute is unsuitable for disposition by arbitration.

In determining whether the subject matter of a dispute is unsuitable for disposition by arbitration, a court may consider:

(1) The magnitude of the potential award, or any issue of broad public concern raised by the subject matter underlying the dispute;

(2) Problems referred to the court where court regulated discovery is necessary;

(3) The fact that the matter in dispute is a reasonable or necessary issue to be resolved in pending litigation and involves other matters not covered by or related to this chapter;

(4) The fact that the matter to be arbitrated is only part of a dispute involving other parties or issues [~~which~~] that are not subject to arbitration under this section; and

(5) Any matters of dispute where disposition by arbitration, in the absence of complete judicial review, would not afford substantial justice to one or more of the parties.

Any [~~such~~] application to the circuit court made pursuant to this subsection shall be made and heard in a summary manner and in accordance with procedures for the making and hearing of motions. The prevailing party shall be awarded its attorneys' fees and costs in an amount not to exceed $200.

(d) [~~In the event of~~] If a dispute [~~as to~~] arises on whether a claim shall be excluded from mandatory arbitration under subsection (b)(7), any party to an arbitration may file a complaint for declaratory relief against the involved insurer or insurers for a determination of whether insurance coverage is unavailable due to the pursuit of action by arbitration. The complaint shall be filed with the circuit court in the judicial circuit in which the condominium is located. The insurer or insurers shall file an answer to the complaint within twenty days of the date of service of the complaint and the issue shall be disposed of by the circuit court at a hearing to be held at the earliest available date; provided that the hearing shall not be held within twenty days from the date of service of the complaint upon the insurer or insurers.

(e) Notwithstanding any provision in this chapter to the contrary, the declaration, or the bylaws, the award of any costs, expenses, and legal fees by the arbitrator shall be in the sole discretion of the arbitrator and the determination of costs, expenses, and legal fees shall be binding upon all parties.

(f) The award of the arbitrator shall be in writing and acknowledged or proved in like manner as a deed for the conveyance of real estate, and shall be served by the arbitrator on each of the parties to the arbitration, personally or by registered or certified mail. At any time within one year after the award is made and served, any party to the arbitration may apply to the circuit court of the judicial circuit in which the condominium is located for an order confirming the award. The court shall grant the order confirming the award pursuant to section 658A-22, unless the award is vacated, modified, or corrected, as provided in sections 658A-20, 658A-23, and 658A‑24, or a trial de novo is demanded under subsection (h), or the award is successfully appealed under subsection (h). The record shall be filed with the motion to confirm award, and notice of the motion shall be served upon each other party or their respective attorneys in the manner required for service of notice of a motion.

(g) Findings of fact and conclusions of law, as requested by any party prior to the arbitration hearing, shall be promptly provided to the requesting party upon payment of the reasonable cost thereof.

(h) Any party to an arbitration under this section may apply to vacate, modify, or correct the arbitration award for the grounds set out in chapter 658A. All reasonable costs, expenses, and attorneys' fees on appeal shall be charged to the nonprevailing party.

(i) The condominium education trust fund under section 514B-71 shall be used to pay the arbitrator's fees only if all parties to the arbitration agree that the arbitrator's decision shall be binding and the parties waive their rights to trial de novo under section 514B-163."

SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2112.

HOUSE OF REPRESENTATIVES	H.B. NO.	1499
TWENTY-NINTH LEGISLATURE, 2017		H.D. 1
STATE OF HAWAII