HB1500

SECTION 1. Section 514B-105, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Subject to any approval requirements and spending limits contained in the declaration or bylaws, the association may authorize the board to borrow money for the repair, replacement, maintenance, operation, or administration of the common elements and personal property of the project, or the making of any additions, alterations, and improvements thereto; provided that written notice of the purpose and use of the funds is first sent to all unit owners and owners representing fifty per cent of the common interest vote or give written consent to the borrowing. Notwithstanding the foregoing, the board shall be authorized to borrow money solely to pay extraordinary expenses in an emergency situation described in section 514B-148 if an architect or engineer licensed in the state provides a written opinion that a substantial risk to persons or property exists or will imminently exist if the emergency situation is not addressed. The board shall promptly disclose to owners the amount and purpose of the money obtained pursuant to this authority. In connection with the borrowing, the board may grant to the lender the right to assess and collect monthly or special assessments from the unit owners and to enforce the payment of the assessments or other sums by statutory lien and foreclosure proceedings. The cost of the borrowing, including, without limitation, all principal, interest, commitment fees, and other expenses payable with respect to the borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project. For purposes of this section, the financing of insurance premiums by the association within the policy period shall not be deemed a loan and no lease shall be deemed a loan if it provides that at the end of the lease the association may purchase the leased equipment for its fair market value.

SECTION 2. Section 514B-148, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) The budget required under section 514B-144(a) shall include a summary with at least the following[:] details:

(1) The estimated revenues and operating expenses of the association;

(2) [~~Information~~] Disclosure as to whether the budget has been prepared on a cash or accrual basis;

(3) The total replacement reserves fund of the association as of the date of the budget;

(4) The estimated replacement reserves contributions that the association will require to maintain the property based on a reserve study performed by or on behalf of the association; provided that the reserve study, if not prepared by an independent reserve study preparer shall be reviewed by an independent reserve study preparer[~~; provided further that the reserve study shall be reviewed or updated at least~~] not less than every three years;

(5) A general explanation of how the estimated replacement reserves are computed[;] and detailing:

(A) The identity, qualifications, and potential conflicts of interest of the person or entity performing the reserve study, update, or any review thereof;

(B) Disclosure of any component of association property omitted not from the reserve study and the basis for the omission;

(D) Whether the actual estimated replacement reserves contributions for the prior year as defined in the study was less than provided for in the reserve study, and, if so, by how much, and explaining the impact of the lesser contribution of future estimated replacement reserve contributions;

(6) The amount the association must collect for the fiscal year to fund the estimated replacement reserves[;] contributions; and

(7) Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves contributions was calculated using a per cent funded or cash flow plan. The method or plan shall not circumvent the estimated replacement reserves contributions amount determined by the reserve study pursuant to paragraph (4)"

2. By amending subsection (h) to read:

"(h) As used in this section:

"Capital expenditure" means an expense that results from the purchase or replacement of an asset whose life is greater than one year, or the addition of an asset that extends the life of an existing asset for a period greater than one year.

"Cash flow plan" means a minimum thirty-year projection of an association's future income and expense requirements to fund fully its replacement reserves requirements each year during that thirty-year period, except in an emergency; provided that it does not include a projection of special assessments or loans during that thirty-year period, except [in] due to an emergency.

"Emergency situation" means a situation involving any extraordinary expenses:

(1) Required by an order of a court;

(2) Necessary to repair or maintain any part of the property for which the association is responsible where a threat to personal safety on the property is discovered;

(3) Necessary to repair any part of the property for which the association is responsible that could not have been reasonably foreseen by the board in preparing and distributing the annual operating budget;

(4) Necessary to respond to any legal or administrative proceeding brought against the association that could not have been reasonably foreseen by the board in preparing and distributing the annual operating budget; or

(5) Necessary for the association to obtain adequate insurance for the property that the association must insure.

"Major maintenance" means an expenditure for maintenance or repair that will result in extending the life of an asset for a period greater than one year.

"Replacement reserves" means funds for the upkeep, repair, or replacement of those parts of the property, including but not limited to roofs, walls, decks, paving, and equipment, that the association is obligated to maintain."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1500
THIRTY-SECOND LEGISLATURE, 2023
STATE OF HAWAII