REPORT TITLE:
Condominium Apartments; Sale


DESCRIPTION:
Provides marketing requirements that give the sale of residential
condominium apartments to owner-occupants priority.  Streamlines
owner-occupancy sales requirements for condominiums.  (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE SALE OF RESIDENTIAL CONDOMINIUM APARTMENTS TO
   OWNER-OCCUPANTS.


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

 1      SECTION 1.  The legislature finds that certain governmental
 
 2 regulations pertaining to the sale of residential condominium
 
 3 apartments in Hawaii unnecessarily add to the time, cost, and
 
 4 efficiency of selling those apartments, all of which negatively
 
 5 impact the consumer.  Of particular concern is part VI of chapter
 
 6 514A, Hawaii Revised Statutes, which sets forth procedures to be
 
 7 followed in the sale of residential condominium apartments to
 
 8 prospective owner-occupants.
 
 9      The legislature finds that procedures governing the sale of
 
10 condominium apartments to owner-occupants were initially imposed
 
11 in 1980 when real estate prices in Hawaii were rising rapidly and
 
12 speculative purchasing limited the number of homes available to
 
13 bona fide owner-occupants, or resulted in an owner-occupant
 
14 paying more for an apartment.  The presale notice and other
 
15 restrictive sales procedure requirements were seen as ways to
 
16 offer a bona fide owner-occupant a first opportunity to purchase
 
17 a condominium apartment at its initial offering price.
 
18      The real estate market has drastically changed since these
 
19 presale notice and restrictive sales practice requirements were
 

 
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 1 enacted.  Speculative investment is no longer a reality, and the
 
 2 skyrocketing real estate prices of the late 1970s and early 1980s
 
 3 no longer exist.  The large number of condominium apartments
 
 4 available for sale and healthy competition in the marketplace
 
 5 have resulted in competitive prices and an environment in which
 
 6 an owner-occupant buyer may make a selective purchase.  The
 
 7 legislature therefore finds that some of the owner-occupancy
 
 8 sales requirements of part VI of chapter 514A, Hawaii Revised
 
 9 Statutes, are no longer relevant in today's market.  Certain
 
10 statutory requirements are confusing and cumbersome and often
 
11 inhibit sales and discourage buyers, especially first-time
 
12 homebuyers who are not familiar with condominiums and related
 
13 statutory requirements.  The requirements are also difficult to
 
14 monitor and regulate.  Accordingly, the legislature believes that
 
15 changes to chapter 514A, Hawaii Revised Statutes, are warranted
 
16 to facilitate the marketing and sale of condominium apartments.
 
17      The purpose of this Act is to amend part VI of chapter 514A,
 
18 Hawaii Revised Statutes, in order to set forth sales and
 
19 marketing requirements that give priority to the sale of
 
20 residential condominium apartments to owner-occupants, without
 
21 hampering a developer's need to maintain flexibility in an ever-
 
22 changing market.
 
23      SECTION 2.  Section 514A-101, Hawaii Revised Statutes, is
 

 
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 1 amended as follows:
 
 2      1.  By adding a new definition to be appropriately inserted
 
 3 and to read:
 
 4      ""Initial date of sale" means the date of the first
 
 5 publication of the announcement or advertisement pursuant to
 
 6 section 514A-102."
 
 7      2.  By amending the definitions of "chronological system",
 
 8 "owner-occupant", and "residential unit" to read:
 
 9      ""Chronological system" means a system in which the
 
10 residential [units] apartments designated for sale to prospective
 
11 owner-occupants are offered for sale to prospective owner-
 
12 occupants in the chronological order in which the prospective
 
13 owner-occupants deliver to the developer or the designated real
 
14 estate broker completed owner-occupant affidavits, executed sales
 
15 contracts[,] or reservations, and earnest money deposits.
 
16      "Owner-occupant" means any individual in whose name sole or
 
17 joint legal title is held in a residential [unit] apartment
 
18 which, simultaneous to such ownership, serves as the individual's
 
19 principal residence, as defined by the state department of
 
20 taxation, for a period of not less than three hundred [and]
 
21 sixty-five consecutive days; provided that the individual retains
 
22 complete possessory control of the premises of the residential
 
23 [unit] apartment during this period.  An individual shall not be
 

 
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 1 deemed to have complete possessory control of the premises if the
 
 2 individual rents, leases, or assigns the premises for any period
 
 3 of time to any other person in whose name legal title is not
 
 4 held[.]; except that an individual shall be deemed to have
 
 5 complete possessory control even when the individual conveys or
 
 6 transfers the apartment into a trust for estate planning purposes
 
 7 and continues in the use of the premises as the individual's
 
 8 principal residence during this period.
 
 9      "Residential [unit"] apartment" means "apartment" as defined
 
10 in section 514A-3, but excludes:
 
11      (1)  Any apartment intended for commercial use; [and]
 
12      (2)  Any apartment designed and constructed for hotel or
 
13           resort use [which] that is located on any parcel of
 
14           real property designated and governed by a county for
 
15           hotel or resort use pursuant to[:
 
16           (A)  Section] section 46-4; [or] and
 
17           [(B)] (3)  Any other use pursuant to authority granted
 
18           by law to a county."
 
19      SECTION 3.  Section 514A-102, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "514A-102  Announcement[,] or advertisement; publication.
 
22 [(a)  At least once in each of the two successive weeks following
 
23 the issuance of an effective date of the first public report for
 

 
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 1 the condominium project, the developer shall cause to be
 
 2 published in the classified section of at least one newspaper
 
 3 published daily in the State with a general circulation in the
 
 4 county in which the project is to be located, and, if the project
 
 5 is located other than on the island of Oahu, in at least one
 
 6 newspaper which is published at least twice weekly in the county
 
 7 in which the project is to be located, an announcement containing
 
 8 a summary of at least the following information:
 
 9      (1)  The location of the project; 
 
10      (2)  A statement of:
 
11           (A)  The total number of apartments to be included in
 
12                the project; 
 
13           (B)  The number of apartments designated as residential
 
14                units;
 
15           (C)  The price range of the units; 
 
16           (D)  The approximate size of the units; and 
 
17           (E)  A designation whether the units are fee simple or
 
18                leasehold;
 
19      (3)  A statement of the intended use, such as, but not
 
20           limited to, commercial, time sharing, or vacation
 
21           rental, of any apartment in the project other than a
 
22           residential unit designated for use by an owner-
 
23           occupant;
 

 
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 1      (4)  A statement of the residential units by apartment
 
 2           numbers that have been designated by the developer
 
 3           pursuant to section 514A-103, and that such apartments
 
 4           shall initially be offered for a thirty-day period
 
 5           after the first publication of the announcement to only
 
 6           prospective owner-occupants who will use the
 
 7           residential units as their principal residences for a
 
 8           period of not less than three hundred sixty-five
 
 9           consecutive days;
 
10      (5)  A statement of the availability and number of
 
11           residential units in the project that are "accessible"
 
12           and "adaptable," as those terms are defined and
 
13           interpreted in 24 Code of Federal Regulations 100 et
 
14           seq., for persons with disabilities;
 
15      (6)  A statement that the residential units that have been
 
16           designated by the developer pursuant to section
 
17           514A-103 shall be offered to prospective purchasers:
 
18           (A)  Chronologically in the order in which the
 
19                purchasers submit to the developer a completed
 
20                owner-occupant affidavit, an executed sales
 
21                contract, and an earnest money deposit in a
 
22                reasonable amount designated by the developer; or
 
23           (B)  In an order determined by a public lottery, to be
 

 
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 1                held at a date, time, and place specified in the
 
 2                announcement; provided that any person interested
 
 3                in participating in the lottery shall submit a
 
 4                completed owner-occupant affidavit to the
 
 5                developer or designated real estate broker by a
 
 6                date designated by the developer;
 
 7           and
 
 8      (7)  The name, telephone number, and address of the
 
 9           developer or the real estate broker, who shall be
 
10           designated by the developer, whom any interested
 
11           individual may contact to secure an owner-occupant
 
12           affidavit, public report, and to obtain further
 
13           information on the project.
 
14      (b)  Within thirty days of the issuance of an effective date
 
15 of the first public report for the condominium project, the
 
16 developer shall file with the commission proof of publication of
 
17 the announcement required under subsection (a).
 
18      (c)  The developer or the developer's broker shall also
 
19 provide a copy of the announcement and the first public report
 
20 for the condominium project to each prospective purchaser and by
 
21 certified mail, delivered to the addressee only, return receipt
 
22 requested, to any individual occupying such unit immediately
 
23 prior to any conversion.] At least once in each of two successive
 

 
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 1 weeks, and at any time following the issuance of an effective
 
 2 date of the first public report for the condominium project, the
 
 3 developer shall cause to be published in at least one newspaper
 
 4 published daily in the State with a general circulation in the
 
 5 county in which the project is to be located, and, if the project
 
 6 is located other than on the island of Oahu, in at least one
 
 7 newspaper that is published at least weekly in the county in
 
 8 which the project is to be located, an announcement or
 
 9 advertisement containing at least the following information:
 
10      (1)  The location of the project;
 
11      (2)  The minimum price of the residential apartments;
 
12      (3)  A designation as to whether the residential apartments
 
13           are to be sold in fee simple or leasehold;
 
14      (4)  A statement that for a thirty-day period following the
 
15           initial date of sale of the condominium project, at
 
16           least fifty per cent of the residential apartments
 
17           being marketed shall be offered only to prospective
 
18           owner-occupants;
 
19      (5)  The name, telephone number, and address of the
 
20           developer or other real estate broker designated by the
 
21           developer that an interested individual may contact to
 
22           secure an owner-occupant affidavit, public report, and
 
23           any other information concerning the project; and
 

 
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 1      (6)  If applicable, a statement that the residential
 
 2           apartments will be offered to prospective purchasers
 
 3           through a public lottery."
 
 4      SECTION 4.  Section 514A-103, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "514A-103  Designation of residential [units.] apartments.
 
 7 (a)  The developer of any project containing residential [units]
 
 8 apartments shall designate at least fifty per cent of [such] the
 
 9 [units] apartments for sale to prospective owner-occupants
 
10 pursuant to section 514A-105.  [Such units] The designation shall
 
11 be set forth either in the public report or in the announcement
 
12 or advertisement required by section 514A-102, and may be set
 
13 forth in both.  The apartments shall constitute a proportionate
 
14 representation of all the residential [units] apartments in the
 
15 project with regard to factors of square footage, number of
 
16 bedrooms and bathrooms, floor level, and whether or not [such
 
17 unit] the apartment has a lanai.
 
18      (b)  A developer shall have the right to substitute an
 
19 apartment designated for owner-occupants with an apartment that
 
20 is not so designated; provided that the apartments are similar
 
21 with regard to factors enumerated in subsection (a).  The
 
22 substitution shall not require the developer's submission of a
 
23 supplementary public report."
 

 
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 1      SECTION 5.  Section 514A-104, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "514A-104  [Unit] Apartment selection, requirements.(a)
 
 4 When the chronological system is used, the developer or the
 
 5 developer's real estate broker, as the case may be, shall offer
 
 6 the residential [units] apartments that have been designated
 
 7 pursuant to section 514A-103 as follows:
 
 8      (1)  For thirty days from the date of the first published
 
 9           announcement or advertisement required under section
 
10           514A-102, the developer or developer's real estate
 
11           broker shall offer the residential [units] apartments
 
12           that have been designated pursuant to section 514A-103
 
13           to prospective purchasers chronologically in the order
 
14           in which they submit to the developer or the
 
15           developer's real estate broker, a completed owner-
 
16           occupant affidavit, an executed sales contract[,] or
 
17           reservation, and an earnest money deposit in a
 
18           reasonable amount designated by the developer.  The
 
19           developer or the developer's real estate broker shall
 
20           maintain at all times a sufficient number of sales
 
21           contracts and affidavits for prospective owner-
 
22           occupants to execute.  Prospective purchasers who do
 
23           not have the opportunity to select a residential [unit]
 

 
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 1           apartment during the thirty-day period shall be placed
 
 2           on a back-up reservation list in the order in which
 
 3           they submit a completed owner-occupant affidavit and
 
 4           earnest money deposit in a reasonable amount designated
 
 5           by the developer[.];
 
 6      (2)  If two or more prospective owner-occupants intend to
 
 7           reside jointly in the same residential [unit,]
 
 8           apartment, only one residential [unit] apartment
 
 9           designated pursuant to section 514A-103 shall be
 
10           offered to them or only one of them shall be placed on
 
11           the back-up reservation list[.];
 
12      (3)  No developer, employee or agent of the developer, or
 
13           any real estate licensee shall, either directly or
 
14           through any other person, release any information or
 
15           inform any prospective owner-occupant about the
 
16           publication announcement or advertisement referred to
 
17           in section 514A-102, including the date it is to appear
 
18           and when the chronological system will be initiated,
 
19           until after the announcement or advertisement is
 
20           published[.]; and
 
21      (4)  The developer shall compile and maintain a list of all
 
22           prospective purchasers that [submitted] submit a
 
23           completed owner-occupant affidavit, an executed sales
 

 
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 1           contract[,] or reservation, and an earnest money
 
 2           deposit, and maintain [the] a back-up reservation list,
 
 3           if any.  Upon the request of the commission, the
 
 4           developer shall provide a copy of the list of all
 
 5           prospective purchasers and the back-up reservation
 
 6           list.
 
 7      (b)  When the public lottery system is used, the developer
 
 8 or the developer's broker, as the case may be, shall offer the
 
 9 residential [units] apartments that have been designated pursuant
 
10 to section 514A-103 as follows:
 
11      (1)  From the date of the first published announcement or
 
12           advertisement required under section 514A-102[,] until
 
13           five calendar days after the last published
 
14           announcement[,] or advertisement, the developer or
 
15           developer's real estate broker shall compile and
 
16           maintain a list of all prospective owner-occupants who
 
17           have submitted to the developer or the developer's real
 
18           estate broker a duly executed owner-occupant affidavit.
 
19           All prospective owner-occupants on this list shall be
 
20           included in the public lottery described [below.] in
 
21           paragraph (2).  The [developers] developer and the
 
22           developer's real estate broker shall maintain at all
 
23           times sufficient copies of [such] affidavits for
 

 
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 1           prospective owner-occupants to execute.  Upon the
 
 2           request of the commission, the developer shall provide
 
 3           a copy of the lottery list of [those] prospective
 
 4           owner-occupants[.];
 
 5      (2)  The developer or developer's real estate broker shall
 
 6           conduct a public lottery [no later than thirty calendar
 
 7           days after the first published announcement, but no
 
 8           earlier than six calendar days after the last published
 
 9           announcement.  The public lottery shall be held] on the
 
10           date, time, and location as set forth in the published
 
11           announcement[.], or advertisement.  Any person,
 
12           including all prospective owner-occupants eligible for
 
13           the lottery, shall be allowed to attend the lottery[.];
 
14      (3)  The public lottery shall be conducted [in such a
 
15           manner] so that no prospective owner-occupant shall
 
16           have an unfair advantage, and shall, as to all owner-
 
17           occupants whose affidavits were submitted to the
 
18           developer or the developer's real estate broker within
 
19           the time period referred to in the first sentence of
 
20           subsection (b)(1) above, be conducted without regard to
 
21           the order in which the affidavits were submitted.  If
 
22           two or more prospective owner-occupants intend to
 
23           reside jointly in the same residential [unit,]
 

 
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 1           apartment, only one of them shall be entitled to enter
 
 2           the public lottery[.]; and
 
 3      (4)  [At] After the public lottery, each prospective owner-
 
 4           occupant purchaser, in the order in which they are
 
 5           selected in the lottery, shall be given the opportunity
 
 6           to select one of the residential [units] apartments
 
 7           that have been designated pursuant to section 514A-103,
 
 8           execute a sales contract, and submit an earnest money
 
 9           deposit in a reasonable amount designated by the
 
10           developer.  The developer shall maintain a list, in the
 
11           order of selection, of all prospective purchasers
 
12           selected in the lottery, and maintain a list of all
 
13           prospective purchasers who selected one of the
 
14           residential [units] apartments designated pursuant to
 
15           section 514A-103.  Those prospective purchasers
 
16           selected in the lottery who did not have the
 
17           opportunity to select one of the residential [units]
 
18           apartments designated pursuant to section 514A-103 but
 
19           who submitted an earnest money deposit in a reasonable
 
20           amount designated by the developer shall be placed on a
 
21           back-up reservation list in the order in which they
 
22           were selected in the public lottery.  Upon request of
 
23           the commission, copies of the aforementioned lists
 

 
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 1           shall be submitted."
 
 2      SECTION 6.  Section 514A-104.5, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "514A-104.5  Affidavit.(a)  The owner-occupant affidavit
 
 5 required by section 514A-104 shall expire after three hundred
 
 6 sixty-five consecutive days have elapsed after the recordation of
 
 7 the instrument conveying the apartment to the affiant.  The
 
 8 affidavit shall expire prior to this period upon acquisition of
 
 9 title to the property by an institutional lender or investor
 
10 through mortgage foreclosure, foreclosure under power of sale, or
 
11 a conveyance in lieu of foreclosure.
 
12      (b)  The affidavit shall include statements by the affiant
 
13 affirming that[:
 
14      (1)  If the affiant intends to secure financing from a
 
15           financial institution, the financing shall be an owner-
 
16           occupant mortgage loan;
 
17      (2)  At any time after obtaining adequate financing or a
 
18           commitment for adequate financing up until the
 
19           expiration of the affidavit,] the affiant shall notify
 
20           the commission immediately upon any decision to cease
 
21           being an owner-occupant[; and
 
22      (3)  At closing of escrow the affiant shall file a claim for
 
23           an owner-occupant property tax exemption with the
 

 
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 1           appropriate county office].
 
 2      (c)  The affidavit shall be personally executed by all the
 
 3 prospective owner-occupants of the residential [unit] apartment
 
 4 and shall not be executed by an attorney-in-fact.
 
 5      [(d)  The affidavit shall be reaffirmed as provided in
 
 6 section [514A-105(c)]]."
 
 7      SECTION 7.  Section 514A-104.6, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "[[]514A-104.6[]]  Prohibitions.(a)  No person who has
 
10 executed an owner-occupant affidavit shall sell or offer to sell,
 
11 lease or offer to lease, rent or offer to rent, assign or offer
 
12 to assign, or convey the [unit] apartment until at least three
 
13 hundred sixty-five consecutive days have elapsed since the
 
14 recordation of the purchase[.]; provided that a person who
 
15 continues in the use of the premises as the individual's
 
16 principal residence during this period may convey or transfer the
 
17 apartment into a trust for estate planning purposes.  Any
 
18 contract or instrument entered into in violation of this part
 
19 shall be subject to the remedies provided in section 514A-69.
 
20      (b)  No developer, employee or agent of a developer, or real
 
21 estate licensee shall violate or aid any other person in
 
22 violating this part.  [It is the affirmative duty of any
 
23 developer, employee or agent of a developer, and real estate
 

 
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 1 licensee to immediately report to the commission any person who
 
 2 violates or attempts to violate this part.]"
 
 3      SECTION 8.  Section 514A-105, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "514A-105  Sale of residential [units.] apartments;
 
 6 developer requirements.  [(a)  From the issuance of an effective
 
 7 date of the first public report until the developer has complied
 
 8 with section 514A-104, the developer shall offer all the
 
 9 residential units designated pursuant to section 514A-103 for
 
10 sale only as set forth in section 514A-104; provided that
 
11 notwithstanding this part, in the case of a project which
 
12 includes one or more existing structures being converted to
 
13 condominium status, each residential unit contained in the
 
14 project shall first be offered for sale to any individual
 
15 occupying the unit immediately prior to the conversion and who
 
16 submits an owner-occupant affidavit and an earnest money deposit
 
17 in a reasonable amount designated by the developer.
 
18      (b)  Each contract for the purchase of a designated
 
19 residential unit by an owner-occupant may be conditioned upon the
 
20 purchaser obtaining adequate financing, or a commitment for
 
21 adequate financing, by a date which is no earlier than fifty
 
22 calendar days after the developer's execution and acceptance of
 
23 the sales contract, and if the financing or commitment is not
 

 
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 1 obtained, the contract may be canceled by either the developer or
 
 2 the purchaser.  If the sales contract is so canceled, the
 
 3 developer shall re-offer the residential unit first to those
 
 4 prospective owner-occupants on the back-up reservation list who
 
 5 have not executed a sales contract for a residential unit in the
 
 6 project in the order in which their names appear on that list.
 
 7      (c)  Any prospective owner-occupant who executes an
 
 8 affidavit as set forth in section 514A-104.5 and a sales contract
 
 9 for the sale of one of the designated residential units shall be
 
10 required to reaffirm the person's intent to be an owner-occupant
 
11 no earlier than the person's receipt for a final public report
 
12 and no later than closing of escrow for the unit.  The developer
 
13 may provide in its sales contract that failure to sign the
 
14 reaffirmation upon reasonable request shall constitute a default
 
15 under the sales contract by the person failing to sign.  The
 
16 developer shall cancel the sales contract or reservation of any
 
17 person failing to make the reaffirmation pursuant to this
 
18 subsection and shall re-offer the residential unit first to those
 
19 prospective owner-occupants on the back-up reservation list who
 
20 have not executed a sales contract for a residential unit in the
 
21 project, in the order in which their names appear on that list.
 
22 If the sales contract has become binding upon the purchaser
 
23 pursuant to section 514A-62, the developer may exercise the
 

 
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 1 remedies provided for in the sales contract and any other
 
 2 remedies provided by law.
 
 3      (d)  Any prospective owner-occupant on the back-up
 
 4 reservation list, at any time, may be offered any residential
 
 5 unit in the project not subject to the designation required by
 
 6 section 514A-103.
 
 7      (e)  The developer, escrow agent, or any other party, at the
 
 8 direction of the developer, shall mail twice to each owner-
 
 9 occupant by registered or certified mail, once by the sixtieth
 
10 day and once by the two hundred seventieth day following the
 
11 conveyance of the first unit to an owner-occupant listed on the
 
12 final reservation list, a complete copy of the executed affidavit
 
13 to inform them of their legal obligations and penalties as
 
14 provided for in this part.
 
15      The developer shall keep records of its notice mailings and
 
16 the owner-occupant affidavits for a period of three years
 
17 starting from the date of its first mailing pursuant to this
 
18 subsection and the date of the conveyance of the first unit to an
 
19 owner-occupant listed on the final reservation list.  Failure of
 
20 the developer to give the notices required by this subsection
 
21 shall not affect title to the owner-occupant unit or the
 
22 obligations of the owner-occupant pursuant to this part.] (a)
 
23 The developer may go to sale using either a chronological system
 

 
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 1 or a lottery system at any time after issuance of an effective
 
 2 date for a public report for which the effective date has not
 
 3 expired.
 
 4      (b)  For a thirty-day period following the initial date of
 
 5 sale of apartments in a condominium project, at least fifty per
 
 6 cent of the apartments being sold shall be offered for sale only
 
 7 to prospective owner-occupants; provided that notwithstanding
 
 8 this part, in the case of a project that includes one or more
 
 9 existing structures being converted to condominium status, each
 
10 residential apartment contained in the project first shall be
 
11 offered for sale to any individual occupying the apartment
 
12 immediately prior to the conversion and who submits an owner-
 
13 occupant affidavit and an earnest money deposit in a reasonable
 
14 amount designated by the developer.
 
15      (c)  Each contract for the purchase of a residential
 
16 apartment by an owner-occupant may be conditioned upon the
 
17 purchaser obtaining adequate financing, or a commitment for
 
18 adequate financing.  If the sales contract is canceled, the
 
19 developer shall re-offer the residential apartment first to
 
20 prospective owner-occupants on the back-up reservation list
 
21 described in sections 514A-104 and 514A-105, in the order in
 
22 which the names appear on the reservation list; provided that the
 
23 prospective owner-occupant has not already executed a sales
 

 
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 1 contract or reservation for a residential apartment in the
 
 2 project.
 
 3      (d)  At any time, any prospective owner-occupant on the
 
 4 back-up reservation list may be offered any residential apartment
 
 5 in the project that has not been sold or set aside for sale to
 
 6 prospective owner-occupants."
 
 7      SECTION 9.  Section 514A-107, Hawaii Revised Statutes, is
 
 8 amended by amending subsections (b) and (c) to read as follows:
 
 9      "(b)  Before the commission brings an action in any court of
 
10 competent jurisdiction pursuant to subsection (a) against any
 
11 person who executed an affidavit pursuant to this part, it may
 
12 consider whether the following extenuating circumstances affected
 
13 the person's ability to comply with the law:
 
14      (1)  Serious illness of any of the owner-occupants who
 
15           executed the affidavit or any other person who was to
 
16           or has occupied the residential [unit;] apartment;
 
17      (2)  Unforeseeable job or military transfer;
 
18      (3)  Unforeseeable change in marital status, or change in
 
19           parental status; or
 
20      (4)  Any other unforeseeable occurrence subsequent to
 
21           execution of the affidavit.
 
22 Thereafter, the commission may cease any further action and order
 
23 release of any net proceeds held in abeyance.
 

 
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 1      (c)  Any individual who executes an affidavit pursuant to
 
 2 this part and who subsequently sells or offers to sell, leases or
 
 3 offers to lease, rents or offers to rent, assigns or offers to
 
 4 assign, or otherwise transfers any interest in the residential
 
 5 [unit which] apartment that the person obtained pursuant to this
 
 6 part, shall have the burden of proving his or her compliance with
 
 7 the requirements of this part."
 
 8      SECTION 10.  Section 514A-107.5, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (a) to read as follows:
 
10      "(a)  Any person who executes an affidavit required by this
 
11 part and violates or fails to comply with any of the provisions
 
12 of this part or any rule adopted by the commission pursuant
 
13 thereto shall be subject to a civil penalty of up to $10,000 or
 
14 fifty per cent of the net proceeds received or to be received by
 
15 the person from the sale, lease, rental, assignment, or other
 
16 transfer of the residential [unit] apartment to which the
 
17 violation relates, whichever is the greater."
 
18      SECTION 11.  Section 514A-108, Hawaii Revised Statutes, is
 
19 amended as follows:
 
20      1.  By amending subsection (a) to read:
 
21      "(a)  This part shall not apply to [any] a project developed
 
22 pursuant to section 46-15 or 46-15.1, or chapter 53, 201G, or
 
23 206[,]; provided that the developer of [such a] the project may
 

 
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 1 elect to be subject to this part through a written notification
 
 2 to the commission [with the notification requirements of section
 
 3 514A-102(b).  Disclosure of the election shall be made through an
 
 4 additional statement in the announcement pursuant to section
 
 5 514A-102(a)]."
 
 6      2.  By amending subsection (d) to read:
 
 7      "(d)  A developer of a project [enumerated] specified in
 
 8 subsection (a) electing to be subject to this part or a project
 
 9 developed pursuant to an affordable housing condition or
 
10 provision by a state or county governmental agency may elect to
 
11 waive [certain] specific provisions of this part that conflict
 
12 with the eligibility or preference requirements imposed by [such]
 
13 the governmental agency.  The developer of a project specified in
 
14 subsection (a) who exercises [such an] the election shall provide
 
15 detailed written notification to the commission of [which] the
 
16 [specified] specific provisions that will be waived, an
 
17 explanation for each waived provision, and a statement from the
 
18 affected government agency that the project is either an
 
19 inapplicable project pursuant to subsection (a) or a project
 
20 whereby a governmental agency has imposed eligibility or
 
21 preference requirements.  [This] A copy of this notification
 
22 shall be filed [with the notification requirements of section
 
23 514A-102(b) and a copy simultaneously filed] with the affected
 

 
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 1 governmental agency.  [Disclosure of the election to waive
 
 2 certain specific provisions of this part shall be made through an
 
 3 additional statement in the announcement pursuant to section
 
 4 514A-102(a).]"
 
 5      SECTION 12.  Section 514A-106, Hawaii Revised Statutes, is
 
 6 repealed.
 
 7      ["514A-106  Financial institutions and escrow companies,
 
 8 obligations.  Any person subject to chapter 412 or 454, or who is
 
 9 subject to any other law for the purpose of lending money upon
 
10 the security of real property shall:
 
11      (1)  Within forty-five days after receipt of an application
 
12           for credit from any individual for the purpose of
 
13           purchasing a residential unit designated for owner-
 
14           occupants under this part, notify the applicant of the
 
15           action on the application; and
 
16      (2)  Prior to making any commitment to extend credit to any
 
17           individual for the purpose of purchasing a residential
 
18           unit designated for owner-occupants under this part,
 
19           take all reasonable steps necessary to determine that
 
20           the individual, in fact, intends to become an owner-
 
21           occupant of such residential unit."]
 
22      SECTION 13.  This Act shall not apply to any condominium
 
23 project for which the announcement required under section
 

 
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 1 514A-102, Hawaii Revised Statutes, was published prior to the
 
 2 effective date of this Act.
 
 3      SECTION 14.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 15.  This Act shall take effect on July 1, 2000.