REPORT TITLE:
Time Share Plans


DESCRIPTION:
Allows director of the department of commerce and consumer
affairs to issue a one-year preliminary permit to allow developer
to begin public offerings, subject to conditions.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        657
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                S.D. 1
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;
 

 
 
Page 2                                                     657
                                     H.B. NO.           H.D. 2
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 1      (6)  Whether the time share plan is a time share ownership
 
 2           plan or a time share use plan, along with a description
 
 3           of the rights and responsibilities under [said] the
 
 4           plan;
 
 5      (7)  A statement that there is a seven-calendar-day period
 
 6           of mutual rescission;
 
 7      (8)  A statement that, pursuant to section 514E-11.3, every
 
 8           sale or transfer[,] made in violation of this chapter
 
 9           is voidable at the election of the purchaser;
 
10      (9)  Notice of any liens, title defects, or encumbrances on
 
11           or affecting the title to the units or plan;
 
12     (10)  Notice of any pending or anticipated suits that are
 
13           material to the time share units or plan, of which the
 
14           developer has, or should have, knowledge;
 
15     (11)  The total financial obligation of the purchaser, which
 
16           shall include the initial price and any additional
 
17           charges to which the purchaser may be subject;
 
18     (12)  An estimate of the dues, maintenance fees, real
 
19           property taxes, and similar periodic expenses, and the
 
20           method or formula by which they are derived and
 
21           apportioned; and
 
22     (13)  Other disclosures required by the director, as provided
 
23           by rules adopted pursuant to chapter 91.
 

 
Page 3                                                     657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      (b) The requirements of this section shall not apply to the
 
 2 following transactions:
 
 3      (1)  Any transaction pursuant to order of any court;
 
 4      (2)  Any disposition by a government or governmental agency; 
 
 5      (3)  Normal hotel operations; or
 
 6      (4)  Any gratuitous transfer.
 
 7      (c) A developer or sales agent shall promptly amend or
 
 8 supplement the disclosure statement to report any material change
 
 9 in the information required by this section."
 
10      SECTION 2.  Section 514E-10, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "514E-10  Registration required:  developer, acquisition
 
13 agent, sales agent, plan manager, and exchange agent.(a)  A
 
14 developer shall not offer or dispose of a time share unit or a
 
15 time share interest unless one of the disclosure [statement]
 
16 statements required by section 514E-9 is filed with the director,
 
17 pursuant to the time specified in this chapter, or the
 
18 development is exempt from filing[,] and the time share plan to
 
19 be offered by the developer is accepted by the director for
 
20 registration under this chapter.  The director shall not accept a
 
21 developer's time share plan if the developer does not possess a
 
22 history of honesty, truthfulness, financial integrity, and fair
 
23 dealing.
 

 
Page 4                                                     657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      (b)  Notwithstanding any provision in this section to the
 
 2 contrary, the director may issue a preliminary permit that shall
 
 3 be effective for a one-year period, unless extended by the
 
 4 director pursuant to this chapter, allowing a developer to begin
 
 5 offering and selling time share units or time share interests
 
 6 while the application for registration is undergoing review.  The
 
 7 director shall issue the preliminary permit to the developer and
 
 8 the developer may commence sales within forty-five days of
 
 9 submission to the director of the following:
 
10      (1)  A formal written request for a preliminary permit;
 
11      (2)  A substantially complete application for registration,
 
12           including all appropriate fees and exhibits;
 
13      (3)  Evidence acceptable to the director that all funds,
 
14           negotiable instruments, and purchase money contracts
 
15           received by the developer will be placed into an escrow
 
16           account, pursuant to section 514E-16, with instructions
 
17           that the funds, negotiable instruments, and purchase
 
18           money contracts will not be released until the
 
19           application for registration is accepted and the
 
20           requirements of sections 514E-17 and 514E-18 have been
 
21           met;
 
22      (4)  A copy of the proposed disclosure statement that will
 
23           be given to each purchaser, that shall clearly state on
 

 
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                                     H.B. NO.           H.D. 2
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 1           the cover page:  "A preliminary permit for the time
 
 2           share plan has been issued by the department of
 
 3           commerce and consumer affairs of the state of Hawaii.
 
 4           The developer's application for registration is
 
 5           currently undergoing review and may not be approved.";
 
 6      (5)  Evidence acceptable to the director that each purchaser
 
 7           will be given the opportunity to cancel:
 
 8           (A)  At any time until the expiration of the
 
 9                preliminary permit, including any extensions; or
 
10           (B)  Under section 514E-8, if upon acceptance of the
 
11                registration, the director determines that there
 
12                is a material difference in the disclosures
 
13                contained in the approved disclosure statement and
 
14                those statements given to the purchaser in the
 
15                proposed disclosure statement.
 
16           If the purchaser cancels, then the purchaser shall
 
17           receive a full refund of all moneys, including
 
18           interest;
 
19      (6)  A title report, policy of title insurance, or any other
 
20           evidence of title acceptable to the director that is
 
21           dated not more than sixty days from the date that the
 
22           developer's request for the preliminary permit is
 
23           delivered to the director;
 

 
Page 6                                                     657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      (7)  The proposed declaration of covenants, conditions, and
 
 2           restrictions for the time share plan;
 
 3      (8)  The proposed bylaws of the time share owner's
 
 4           association;
 
 5      (9)  The program rules for the time share plan;
 
 6     (10)  Any underlying condominium documents applicable to the
 
 7           time share plan;
 
 8     (11)  A county verification of zoning for the time share
 
 9           plan, that is dated not more than thirty days from the
 
10           date that the developer's request for a preliminary
 
11           permit is delivered to the director;
 
12     (12)  A specimen copy of the sales contract for the time
 
13           share plan;
 
14     (13)  A specimen copy of the conveyance document for the time
 
15           share plan; and
 
16     (14)  Evidence acceptable to the director that the developer
 
17           is duly registered to do business in the State.
 
18     Upon expiration of the one-year preliminary permit period
 
19 without acceptance of the application for registration, and
 
20 without an extension period as permitted by this section, or
 
21 rejection of the application for registration, whichever occurs
 
22 first, the developer shall promptly cancel all sales contracts
 
23 and refund all purchasers' funds together with interest.  Thirty
 

 
Page 7                                                     657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 days prior to the expiration of the one-year preliminary permit,
 
 2 the developer may apply to the director for an extension of the
 
 3 one-year term of the preliminary permit, and the extension may be
 
 4 granted in the director's sole discretion.  If the extension is
 
 5 granted, the developer may continue sales under the preliminary
 
 6 permit until expiration of the extended term, acceptance of the
 
 7 application for registration, or rejection of the application for
 
 8 registration, whichever occurs first.  The department, by
 
 9 issuance of a preliminary permit to a developer, shall not be
 
10 obligated to accept the developer's application for registration.
 
11     [(b)](c)  An acquisition agent (including the developer if
 
12 [it] the developer is also the acquisition agent) shall register
 
13 under this chapter by filing with the director a statement
 
14 setting forth the time sharing plan for which [it] the
 
15 acquisition agent is providing prospective purchasers, [its] the
 
16 acquisition agent's address, the telephone number, other
 
17 information required by the director, as provided by rules
 
18 adopted pursuant to chapter 91[,] and, if the acquisition agent
 
19 is not a natural person, the name of the responsible managing
 
20 employee.  All acquisition agents not licensed under chapter 467
 
21 shall be approved by the director.  The director shall not
 
22 approve any acquisition agent who is not of good character and
 
23 who does not possess a reputation for honesty, truthfulness, and
 

 
Page 8                                                     657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1 fair dealing.  An acquisition agent shall be permitted to
 
 2 register upon issuance by the director of a preliminary permit
 
 3 for developer registration.  The acquisition agent shall furnish
 
 4 evidence that:
 
 5      (1)  [the] The acquisition agent is bonded as required by
 
 6           rules adopted by the director pursuant to chapter 91 to
 
 7           cover any violation by the acquisition agent of any
 
 8           solicitation ordinance or other [regulation] rule
 
 9           governing the use of the premise or premises in which
 
10           the time share plan is promoted; provided that the
 
11           acquisition agent shall be separately bonded for each
 
12           time share plan for which it is providing prospective
 
13           purchasers; or
 
14      (2)  [that the] The acquisition agent is currently licensed
 
15           pursuant to chapter 467 as a real estate salesperson or
 
16           a real estate broker and the acquisition agent's
 
17           activities as such are covered by the real estate
 
18           recovery fund established pursuant to chapter 467.
 
19      [(c)](d)  A sales agent (including the developer if [it]
 
20 the developer is also the sales agent) shall register under this
 
21 chapter by filing with the director a statement setting forth the
 
22 time sharing plan that [it] the sales agent is selling, [its] the
 
23 sales agent's address, telephone number, other information
 

 
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                                     H.B. NO.           H.D. 2
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 1 required by the director as provided by rules adopted pursuant to
 
 2 chapter 91[,] and, if the sales agent is not a natural person,
 
 3 the name of the responsible managing employee[,] and the escrow
 
 4 account required under section 514E-16 for the deposit and
 
 5 collection of purchasers' funds.  The director shall not approve
 
 6 any sales agent who is not of good character and who does not
 
 7 possess a reputation for honesty, truthfulness, and fair dealing.
 
 8 The sales agent shall furnish evidence that the sales agent is
 
 9 currently licensed pursuant to chapter 467 as a real estate
 
10 salesperson or real estate broker and the sales agent's
 
11 activities as such are covered by the real estate recovery fund
 
12 established pursuant to chapter 467.  A sales agent shall be
 
13 permitted to register upon issuance by the director of a
 
14 preliminary permit for developer registration.
 
15      [(d)](e)  A plan manager (including the developer if  [it]
 
16 the developer is also the plan manager) shall register under this
 
17 chapter by filing with the director a statement setting forth the
 
18 time sharing plan that [it] the plan manager is managing, [its]
 
19 the plan manager's principal office address, telephone number,
 
20 and responsible managing employee.  The plan manager shall
 
21 furnish evidence that the plan manager is bonded, as required by
 
22 rules adopted by the director pursuant to chapter 91, to cover
 
23 any default of the plan manager and any of its employees of their
 

 
Page 10                                                    657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

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

 
 
 
Page 11                                                    657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      SECTION 3.  Section 514E-10.5, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "514E-10.5  Consultant review of developer filing.  The
 
 4 director may contract with private consultants in connection with
 
 5 the review of the filing required of time share developers
 
 6 pursuant to section 514E-10(a) and [(f).](g).  The cost of
 
 7 contracting private consultants shall be borne by the developer;
 
 8 provided that the consultant review required under this section
 
 9 shall not affect the scope of the review under section 514E-27
 
10 that the director may request for filings that encompass
 
11 alternative arrangements for purchaser protection.  The
 
12 consultant shall be asked to thoroughly review the filing for the
 
13 purpose of examining its compliance with the requirements of this
 
14 chapter and any rule adopted by the director, including the
 
15 documentation and other provided materials.  Upon completing the
 
16 review, the consultant shall provide a written analysis of the
 
17 filing and an opinion of the nature and extent to which it
 
18 complies with this chapter and adopted rules.  The director may
 
19 adopt rules pursuant to chapter 91 to further delineate the
 
20 duties of the consultant in undertaking the review and analysis
 
21 required pursuant to this section."
 
22      SECTION 4.  Section 514E-30, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
Page 12                                                    657
                                     H.B. NO.           H.D. 2
                                                        S.D. 1
                                                        

 
 1      "514E-30  Scope of chapter.  This chapter applies to the
 
 2 offer and sale in Hawaii of time share interests in time share
 
 3 units located in Hawaii.  If time share units are located outside
 
 4 of Hawaii, but any offer or sale is made within the State, this
 
 5 chapter, except for sections 514E-3, 514E-4, 514E-5, 514E-6,
 
 6 514E-7, and 514E-14, shall apply.  As to the offer and sale
 
 7 outside of Hawaii of time share interest in a time share plan
 
 8 [which] that includes time share units located in Hawaii, this
 
 9 chapter, except for sections 514E-2.5, [514E-10(b) and (c),]
 
10 514E-10(c) and (d), 514E-11, and 514E-11.1, shall apply."
 
11      SECTION 5.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 6.  This Act shall take effect on June 31, 2050.