REPORT TITLE:
Time Share Plans


DESCRIPTION:
Provides disclosure statement requirements for time share plans
in which all accommodations are out-of-state.  Allows director to
issue 6 month preliminary permit to allow developer to begin
public offerings, subject to conditions.  Requires director to
accept the plan for registration if developer meets criteria.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        657
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TIME SHARING PLANS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 514E-9, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "514E-9 Disclosure [statement.] statements.  (a)  Any
 
 4 offering of a time sharing plan to the public shall disclose:
 
 5      (1)  The name and address of the developer and of the time
 
 6           share units;
 
 7      (2)  The name and address of the plan manager, if any, and a
 
 8           description of the plan manager's responsibilities and
 
 9           authority;
 
10      (3)  A description of the time share units, including the
 
11           developer's schedule for completion of all buildings,
 
12           units, and amenities and dates of availability;
 
13      (4)  If the time share plan is located in a condominium
 
14           property regime, a description of the project and any
 
15           pertinent provisions of the project instruments;
 
16      (5)  Any restraints on the transfer of the buyer's time
 
17           share interest in the time share units or plan;
 
18      (6)  Whether the time share plan is a time share ownership
 
19           plan or a time share use plan, along with a description
 

 
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 1           of the rights and responsibilities under [said] the
 
 2           plan;
 
 3      (7)  A statement that there is a seven-calendar-day period
 
 4           of mutual rescission;
 
 5      (8)  A statement that, pursuant to section 514E-11.3, every
 
 6           sale or transfer[,] made in violation of this chapter
 
 7           is voidable at the election of the purchaser;
 
 8      (9)  Notice of any liens, title defects, or encumbrances on
 
 9           or affecting the title to the units or plan;
 
10     (10)  Notice of any pending or anticipated suits that are
 
11           material to the time share units or plan, of which the
 
12           developer has, or should have, knowledge;
 
13     (11)  The total financial obligation of the purchaser, which
 
14           shall include the initial price and any additional
 
15           charges to which the purchaser may be subject;
 
16     (12)  An estimate of the dues, maintenance fees, real
 
17           property taxes, and similar periodic expenses, and the
 
18           method or formula by which they are derived and
 
19           apportioned; and
 
20     (13)  Other disclosures required by the director, as provided
 
21           by rules adopted pursuant to chapter 91.
 
22      (b)  Notwithstanding anything in subsection (a) to the
 
23 contrary, the director may accept for filing the disclosure
 

 
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 1 statement of a developer of a time share plan in which all
 
 2 accommodations are located outside the State, if the developer
 
 3 provides a certificate of registration or other evidence of
 
 4 registration from the appropriate regulatory agency of any other
 
 5 jurisdiction within the United States in which some or all of the
 
 6 accommodations are located, and the other jurisdiction has
 
 7 disclosure requirements that are substantially equivalent to or
 
 8 greater than the information required to be disclosed under state
 
 9 law, as determined by the director.  A developer filing a
 
10 disclosure statement under this subsection shall provide to the
 
11 director:
 
12      (1)  The developer's legal name, any assumed names used by
 
13           the developer, principal office location, mailing
 
14           address, primary contact person, and telephone number;
 
15      (2)  The name, location, mailing address, primary contact
 
16           person, and telephone number of the time share plan;
 
17      (3)  The name and address of the plan manager, if any, and a
 
18           description of the plan manager's responsibilities and
 
19           authority;
 
20      (4)  The name and Hawaii address of the authorized agent or
 
21           registered agent in the State upon whom claims or
 
22           service of process can be served;
 
23      (5)  The certificate of registration or other evidence of
 

 
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 1           registration from any jurisdiction in which the time
 
 2           share plan is approved or accepted;
 
 3      (6)  A declaration as to whether the time share plan is a
 
 4           time share ownership plan or time share use plan;
 
 5      (7)  Disclosure of each jurisdiction in which the time share
 
 6           plan has applied for registration, and whether the
 
 7           developer was denied registration or was the subject of
 
 8           any disciplinary proceeding in such jurisdiction;
 
 9      (8)  Copies of any disclosure documents required to be given
 
10           to purchasers or required to be filed with the
 
11           jurisdiction in which the time share plan is approved
 
12           or accepted, as may be requested by the director; and
 
13      (9)  Any other information reasonably required by the
 
14           director and established by rule.
 
15      [(b)] (c)  The requirements of this section shall not apply
 
16 to the following transactions:
 
17      (1)  Any transaction pursuant to order of any court;
 
18      (2)  Any disposition by a government or governmental agency; 
 
19      (3)  Normal hotel operations; or
 
20      (4)  Any gratuitous transfer.
 
21      [(c)] (d)  A developer or sales agent shall promptly amend
 
22 or supplement the disclosure statement to report any material
 
23 change in the information required by this section."
 

 
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 1      SECTION 2.  Section 514E-10, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  A developer shall not offer or dispose of a time share
 
 4 unit or a time share interest unless one of the disclosure
 
 5 [statement] statements required by section 514E-9 is filed with
 
 6 the director, pursuant to the time specified in this chapter, or
 
 7 the development is exempt from filing[,] and the time share plan
 
 8 to be offered by the developer is accepted by the director for
 
 9 registration under this chapter.  The director shall not accept a
 
10 developer's time share plan if the developer does not possess a
 
11 history of honesty, truthfulness, financial integrity, and fair
 
12 dealing.
 
13      (b)  Notwithstanding anything in this section to the
 
14 contrary, the director may issue a six-month preliminary permit
 
15 allowing the developer to begin offering and selling time share
 
16 units or time share interests while the registration is in
 
17 process.  To obtain a preliminary permit, the developer shall:
 
18      (1)  Submit a formal written request to the director for a
 
19           preliminary permit;
 
20      (2)  Submit a substantially complete application for
 
21           registration to the director, including all appropriate
 
22           fees and exhibits;
 
23      (3)  Provide evidence acceptable to the director that all
 

 
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 1           funds, negotiable instruments, and purchase money
 
 2           contracts received by the developer will be placed into
 
 3           an escrow account, pursuant to section 514E-16, with
 
 4           instructions that the funds, negotiable instruments,
 
 5           and purchase money contracts will not be released until
 
 6           the time share plan to be offered by the developer is
 
 7           accepted by the director for registration;
 
 8      (4)  Give to each purchaser a copy of the proposed
 
 9           disclosure statement submitted to the director with the
 
10           application; and
 
11      (5)  Offer to each purchaser the opportunity to cancel the
 
12           purchase in accordance with section 514E-8.  The
 
13           purchaser shall have an additional opportunity to
 
14           cancel upon the acceptance of the registration if the
 
15           director determines that there is a material difference
 
16           in the disclosures contained in the approved disclosure
 
17           statement and those given to the purchaser in the
 
18           proposed disclosure statement.
 
19      (c)  Notwithstanding anything in this section to the
 
20 contrary, the director shall accept a time share plan for
 
21 registration if the developer submits:
 
22      (1)  An application form provided by the director that
 
23           contains the following information:
 

 
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 1           (A)  The developer's legal name, any assumed names used
 
 2                by the developer, principal office location,
 
 3                mailing address, primary contact person, and
 
 4                telephone number;
 
 5           (B)  The name, location, mailing address, main contact
 
 6                person, and telephone number of the time share
 
 7                plan included in the filing;
 
 8           (C)  The name and address of the plan manager, if any,
 
 9                and a description of the plan manager's
 
10                responsibilities and authority;
 
11           (D)  The name and Hawaii address of the authorized
 
12                agent or registered agent in the State upon whom
 
13                claims or service of process may be served;
 
14           (E)  A declaration as to whether the time share plan is
 
15                a time share ownership plan or time share use
 
16                plan; and
 
17           (F)  Disclosure of each jurisdiction in which the time
 
18                share plan has applied for registration, and
 
19                whether the developer was denied registration or
 
20                was the subject of any disciplinary proceeding in
 
21                such jurisdiction;
 
22      (2)  A surety bond, letter of credit, or other acceptable
 
23           assurance in the amount of $1,000,000; and
 

 
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 1      (3)  The appropriate registration fee.
 
 2 A developer who registers a time share plan pursuant to this
 
 3 subsection shall provide a purchaser with a disclosure statement
 
 4 that complies with any written disclosures required to be
 
 5 provided to a purchaser under this chapter.
 
 6      For purposes of this subsection, in the event any final,
 
 7 non-appealable judgment is entered on behalf of any Hawaii
 
 8 purchaser asserting any violation of this chapter by a developer
 
 9 in connection with the offering of a time share plan registered
 
10 under this subsection, the director may satisfy the amount of the
 
11 judgment, with the exception of punitive damages, from the surety
 
12 bond, letter of credit, or other acceptable assurance provided to
 
13 the director, if the judgment is not paid within ninety days
 
14 after it becomes final.  A developer registered pursuant to this
 
15 subsection shall not be entitled to continue offering the time
 
16 share plan pursuant to this subsection within the State unless,
 
17 within ten days following payment of the judgment, the developer
 
18 confirms to the director the continued availability of the surety
 
19 bond, letter of credit, or other acceptable assurance.  Any
 
20 surety bond, letter of credit, or other acceptable assurance
 
21 provided pursuant to this subsection shall remain in effect with
 
22 the director for a period of twelve months after the developer
 
23 ceases offering time share interests in the time share plan
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 within the State.  Thereafter, the surety bond, letter of credit,
 
 2 or other acceptable assurance may be released; provided the
 
 3 developer seeking the release certifies in writing that there is
 
 4 no pending litigation alleging a violation of this chapter
 
 5 brought by any Hawaii purchaser in connection with the time share
 
 6 plan.  For purposes of this subsection, a "Hawaii purchaser"
 
 7 means a person who, within the State, is solicited, offered, or
 
 8 sold a time share interest in a time share plan registered
 
 9 pursuant to this subsection.  Nothing contained within this
 
10 section shall affect the director's ability to initiate
 
11 disciplinary proceedings against a developer in accordance with
 
12 this chapter or rules adopted pursuant to section 514E-13.
 
13      [(b)] (d)  An acquisition agent (including the developer if
 
14 [it] the developer is also the acquisition agent) shall register
 
15 under this chapter by filing with the director a statement
 
16 setting forth the time sharing plan for which [it] the developer
 
17 is providing prospective purchasers, [its] the developer's
 
18 address, the telephone number, other information required by the
 
19 director, as provided by rules adopted pursuant to chapter 91,
 
20 and, if the acquisition agent is not a natural person, the name
 
21 of the responsible managing employee.  All acquisition agents not
 
22 licensed under chapter 467 shall be approved by the director.
 
23 The director shall not approve any acquisition agent who is not
 

 
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 1 of good character and who does not possess a reputation for
 
 2 honesty, truthfulness, and fair dealing.  The acquisition agent
 
 3 shall furnish evidence that:
 
 4      (1)  [the] The acquisition agent is bonded as required by
 
 5           rules adopted by the director pursuant to chapter 91 to
 
 6           cover any violation by the acquisition agent of any
 
 7           solicitation ordinance or other [regulation] rule
 
 8           governing the use of the premise or premises in which
 
 9           the time share plan is promoted; provided that the
 
10           acquisition agent shall be separately bonded for each
 
11           time share plan for which it is providing prospective
 
12           purchases; or
 
13      (2)  [that the] The acquisition agent is currently licensed
 
14           pursuant to chapter 467 as a real estate salesperson or
 
15           a real estate broker and the acquisition agent's
 
16           activities as such are covered by the real estate
 
17           recovery fund established pursuant to chapter 467.
 
18      [(c)] (e)  A sales agent (including the developer if [it]
 
19 the developer is also the sales agent) shall register under this
 
20 chapter by filing with the director a statement setting forth the
 
21 time sharing plan that [it] the developer is selling, [its] the
 
22 developer's address, telephone number, other information required
 
23 by the director, as provided by rules adopted pursuant to chapter
 

 
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 1 91, and, if the sales agent is not a natural person, the name of
 
 2 the responsible managing employee[,] and the escrow account
 
 3 required under section 514E-16 for the deposit and collection of
 
 4 purchasers' funds.  The director shall not approve any sales
 
 5 agent who is not of good character and who does not possess a
 
 6 reputation for honesty, truthfulness, and fair dealing.  The
 
 7 sales agent shall furnish evidence that the sales agent is
 
 8 currently licensed pursuant to chapter 467 as a real estate
 
 9 salesperson or real estate broker and the sales agent's
 
10 activities as such are covered by the real estate recovery fund
 
11 established pursuant to chapter 467.
 
12      [(d)] (f)  A plan manager (including the developer if [it]
 
13 the developer is also the plan manager) shall register under this
 
14 chapter by filing with the director a statement setting forth the
 
15 time sharing plan that [it] the developer is managing, [its] the
 
16 developer's principal office address, telephone number, and
 
17 responsible managing employee.  The plan manager shall furnish
 
18 evidence that the plan manager is bonded, as required by rules
 
19 adopted by the director pursuant to chapter 91, to cover any
 
20 default of the plan manager and any of its employees of their
 
21 duties and responsibilities; provided that the plan manager shall
 
22 be separately bonded for each time share plan under the
 
23 management of the plan manager.
 

 
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 1      [(e)] (g)  An exchange agent (including the developer if
 
 2 [it] the developer is also an exchange agent) shall register
 
 3 under this chapter by filing with the director a statement
 
 4 setting forth the time sharing plan for which [it] the developer
 
 5 is offering exchange services, [its] the developer's principal
 
 6 office address and telephone number, and [designate its] the
 
 7 developer's responsible managing employee.
 
 8      [(f)] (h)  Any plan manager or developer registration
 
 9 required in this section shall be renewed by December 31 of each
 
10 even-numbered year, and any acquisition agent, sales agent, or
 
11 exchange agent registration required in this section shall be
 
12 renewed on December 31 of each odd-numbered year; provided that
 
13 this subsection shall not relieve the person required to register
 
14 from the obligation to notify the director promptly of any
 
15 material change in any information submitted to the director, nor
 
16 shall it relieve the developer of [its] the developer's
 
17 obligation to promptly file amendments or supplements to the
 
18 disclosure statement[,] and to promptly supply the amendments or
 
19 supplements to purchasers of time share interests."
 
20      SECTION 3.  Section 514E-10.5, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "514E-10.5  Consultant review of developer filing.  The
 
23 director may contract with private consultants in connection with
 

 
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 1 the review of the filing required of time share developers
 
 2 pursuant to section 514E-10(a) and [(f).] (h).  The cost of
 
 3 contracting private consultants shall be borne by the developer;
 
 4 provided that the consultant review required under this section
 
 5 shall not affect the scope of the review under section 514E-27
 
 6 that the director may request for filings that encompass
 
 7 alternative arrangements for purchaser protection.  The
 
 8 consultant shall be asked to thoroughly review the filing for the
 
 9 purpose of examining its compliance with the requirements of this
 
10 chapter and any rule adopted by the director, including the
 
11 documentation and other provided materials.  Upon completing the
 
12 review, the consultant shall provide a written analysis of the
 
13 filing and an opinion of the nature and extent to which it
 
14 complies with this chapter and adopted rules.  The director may
 
15 adopt rules pursuant to chapter 91 to further delineate the
 
16 duties of the consultant in undertaking the review and analysis
 
17 required pursuant to this section."
 
18      SECTION 4.  Section 514E-30, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "514E-30  Scope of chapter.  This chapter applies to the
 
21 offer and sale in Hawaii of time share interests in time share
 
22 units located in Hawaii.  If time share units are located outside
 
23 of Hawaii, but any offer or sale is made within the State, this
 

 
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 1 chapter, except for sections 514E-3, 514E-4, 514E-5, 514E-6,
 
 2 514E-7, and 514E-14, shall apply.  As to the offer and sale
 
 3 outside of Hawaii of time share interest in a time share plan
 
 4 [which] that includes time share units located in Hawaii, this
 
 5 chapter, except for sections 514E-2.5, [514E-10(b) and (c),]
 
 6 514E-10(d) and (e), 514E-11, and 514E-11.1, shall apply."
 
 7      SECTION 5.  Statutory material to be repealed is bracketed.
 
 8 New statutory material is underscored.
 
 9      SECTION 6.  This Act shall take effect upon its approval.
 
10 
 
11                           INTRODUCED BY:_________________________