Makes variety of amendments to the recodified condominium law to clarify and improve implementation of its provisions. Requires insurers to provide summary to association board of directors of association insurance policy.
HOUSE OF REPRESENTATIVES
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO CONDOMINIUMS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The recodified condominium law which took effect on July 1, 2006, is the result of Act 164, Session Laws of Hawaii 2004, Act 93, Session Laws of Hawaii 2005, and Act 273, Session Laws of Hawaii 2006. Since July 1, 2006, experience has confirmed that the recodified condominium law needs minor amendments to help clarify and implement its provisions. Therefore, the purpose of this Act is to make those minor amendments to the recodified condominium law.
SECTION 2. Section 514B-3, Hawaii Revised Statutes, is amended as follows:
1. By adding a new definition to be appropriately inserted and to read:
""Approval" means approval by a vote or the written consent of the unit owners."
2. By amending the definitions of "managing agent" and "resident manager" to read:
""Managing agent" means any person retained, as an independent contractor, for the purpose of assisting the board in managing the operation of the property.
"Resident manager" means any person
retained as an employee by the association to manage, on-site, the operation of
.], including a site manager and general manager."
SECTION 3. Section 514B-22, Hawaii Revised Statutes, is amended to read as follows:
"§514B-22 Applicability to preexisting condominiums. Sections 514B‑4, 514B‑5, 514B-32, 514B-35, 514B-41(c), 514B‑46, 514B‑72, and part VI, and section 514B‑3 to the extent definitions are necessary in construing any of those provisions, and all amendments thereto, apply to all condominiums created in this State before July 1, 2006; provided that those sections:
(1) Shall apply only with respect to events and circumstances occurring on or after July 1, 2006; and
(2) Shall not invalidate existing provisions of the declaration, bylaws, condominium map, or other constituent documents of those condominiums if to do so would invalidate the reserved rights of a developer or be an unreasonable impairment of contract.
For purposes of interpreting this chapter, the terms "condominium property regime" and "horizontal property regime" shall be deemed to correspond to the term "condominium"; the term "apartment" shall be deemed to correspond to the term "unit"; the term "apartment owner" shall be deemed to correspond to the term "unit owner"; and the term "association of apartment owners" shall be deemed to correspond to the term "association"."
SECTION 4. Section 514B-38, Hawaii Revised Statutes, is amended to read as follows:
"§514B-38 Common elements. Each unit owner may use the common elements in accordance with the purposes permitted under the declaration, subject to:
(1) The rights of other unit owners to use the common elements;
(2) Any owner's exclusive right to use of the limited common elements as provided in the declaration;
(3) The right of the owners to amend the declaration
to change the permitted uses of the common elements; provided that [
to [section] 514B-140(c)]:
(A) Changing common element open spaces or landscaped spaces to other uses shall not require an amendment to the declaration; and
(B) Minor additions to or alterations of the common elements for the benefit of individual units are permitted if the additions or alterations can be accomplished without substantial impact on the interests of other owners in the common elements, as reasonably determined by the board;
(4) Any rights reserved in the declaration to amend the declaration to change the permitted uses of the common elements;
(5) The right of the board, on behalf of the association, to lease or otherwise use for the benefit of the association those common elements that the board determines are not actually used by any of the unit owners for a purpose permitted in the declaration. Unless the lease is approved by the owners of at least sixty-seven per cent of the common interest, the lease shall have a term of no more than five years and may be terminated by the board or the lessee on no more than sixty days prior written notice; provided that the requirements of this paragraph shall not apply to any leases, licenses, or other agreements entered into for the purposes authorized by section 514B-140(d); and
(6) The right of the board, on behalf of the association, to lease or otherwise use for the benefit of the association those common elements that the board determines are actually used by one or more unit owners for a purpose permitted in the declaration. The lease or use shall be approved by the owners of at least sixty-seven per cent of the common interest, including all directly affected unit owners that the board reasonably determines actually use the common elements, and the owners' mortgagees; provided that the requirements of this paragraph shall not apply to any leases, licenses, or other agreements entered into for the purposes authorized by section 514B-140(d)."
SECTION 5. Section 514B-41, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) The common profits of the property shall be distributed among, and the common expenses shall be charged to, the unit owners, including the developer, in proportion to the common interest appurtenant to their respective units, except as otherwise provided in the declaration or bylaws. In a mixed-use project containing units for both residential and nonresidential use, the charges and distributions may be apportioned in a fair and equitable manner as set forth in the declaration. Except as otherwise provided in subsection (c) or the declaration or bylaws, all limited common element costs and expenses, including but not limited to maintenance, repair, replacement, additions, and improvements, shall be charged to the owner or owners of the unit or units to which the limited common element is appurtenant in an equitable manner as set forth in the declaration. Notwithstanding the preceding limitations, all costs and expenses of items designated as limited common elements pursuant to section 514B-35, including the costs and expenses of maintenance, repair, replacement, additions, and improvements, shall be charged to the owner or owners of the unit or units to which the limited common element is appurtenant."
SECTION 6. Section 514B-83, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) A developer's public report shall contain:
(1) The name and address of the project, and the name, address, telephone number, and electronic mail address, if any, of the developer or the developer's agent;
(2) A statement of the deadline, pursuant to section 514B‑89, for completion of construction or, in the case of a conversion, for the completion of any repairs required to comply with section 514B‑5, and the remedies available to the purchaser, including but not limited to cancellation of the sales contract, if the completion of construction or repairs does not occur on or before the completion deadline;
(3) A breakdown of the annual maintenance fees, including minimum reserve contributions, and the monthly estimated cost for each unit, certified to have been based on generally accepted accounting principles, and a statement regarding when a purchaser shall become obligated to start paying the fees pursuant to section 514B‑41(b);
(4) A description of all warranties for the individual units and the common elements, including the date of initiation and expiration of any such warranties, or a statement that no warranties exist;
(5) A summary of the permitted uses of the units and, if applicable, the number of units planned to be devoted to a particular use;
(6) A description of any development rights reserved to the developer or others;
(7) A declaration, subject to the penalties set forth in section 514B‑69(b), that the project is in compliance with all county zoning and building ordinances and codes, and all other county permitting requirements applicable to the project, pursuant to sections 514B‑5 and 514B‑32(a)(13); and
(8) Any other facts, documents, or information that would have a material impact on the use or value of a unit or any appurtenant limited common elements or amenities of the project available for an owner's use, or that may be required by the commission."
SECTION 7. Section 514B-106, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (c) to read:
Within thirty days after the adoption] Prior to
the effective date of any proposed budget for the condominium, the board
shall [ make available] send a copy of the budget to all the unit
owners [ and shall notify each unit owner that the unit owner may request a
copy of the budget]."
2. By amending subsection (f) to read:
"(f) At any regular or
special meeting of the association, any member of the board may be removed and
successors shall be elected for the remainder of the term to fill the vacancies
thus created. The removal [
and replacement] shall be by a vote of a
majority of the unit owners and, otherwise, in accordance with all applicable
requirements and procedures in the bylaws for the removal and replacement of
directors and, if removal and replacement is to occur at a special meeting,
SECTION 8. Section 514B-122, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Minutes of meetings of the
association shall be approved at the next succeeding regular meeting or by the
board, within sixty days after the meeting, if authorized by the owners at an
annual meeting. If approved by the board, owners shall be given a copy of the
approved minutes [
or notified of the availability of the minutes within
thirty days after approval.] prior to the next association meeting."
SECTION 9. Section 514B-143, Hawaii Revised Statutes, is amended to read as follows:
"§514B-143 Insurance. (a) Unless otherwise provided in the declaration or bylaws, the association shall purchase and at all times maintain the following:
(1) Property insurance:
(A) On the common elements;
(B) Providing coverage for special form causes of loss; and
(C) In a total amount of not less than the full insurable replacement cost of the insured property, less deductibles, but including coverage for the increased costs of construction due to building code requirements, at the time the insurance is purchased and at each renewal date;
(2) Commercial general liability insurance against claims and liabilities arising in connection with the ownership, existence, use, or management of the property in a minimum amount of $1,000,000, or a greater amount deemed sufficient in the judgment of the board;
(3) A fidelity bond, as follows:
(A) An association with more than five dwelling units shall obtain and maintain a fidelity bond covering persons, including the managing agent and its employees who control or disburse funds of the association, in an amount equal to $500 multiplied by the number of units; provided that the amount of the fidelity bond required by this paragraph shall not be less than $20,000 nor greater than $200,000; and
(B) All management companies that are responsible for the funds held or administered by the association shall be covered by a fidelity bond as provided in section 514B‑132(a)(3). The association shall have standing to make a loss claim against the bond of the managing agent as a party covered under the bond; and
The board shall obtain directors] Directors
and officers liability coverage at a level deemed reasonable by the board, if
not otherwise limited by the declaration or bylaws.
(b) If a building contains attached units, the insurance maintained under subsection (a)(1), to the extent reasonably available, shall include the units, the limited common elements, except as otherwise determined by the board, and the common elements. The insurance need not cover improvements and betterments to the units installed by unit owners, but if improvements and betterments are covered, any increased cost may be assessed by the association against the units affected.
For the purposes of this section, "improvements and betterments" means all decorating, fixtures, and furnishings installed or added to and located within the boundaries of the unit, including electrical fixtures, appliances, air conditioning and heating equipment, water heaters, or built-in cabinets installed by unit owners.
(c) If a project contains detached units, then notwithstanding the requirement in this section that the association obtain the requisite coverage, if the board determines that it is in the best interest of the association to do so, the insurance to be maintained under subsection (a)(1) may be obtained separately for each unit by the unit owners; provided that the requirements of subsection (a)(1) shall be met; and provided further that evidence of such insurance coverage shall be delivered annually to the association. In such event, the association shall be named as an additional insured.
(d) The board, in the case of a claim for damage to a unit or the common elements, may:
(1) Pay the deductible amount as a common expense;
(2) After notice and an opportunity for a hearing, assess the deductible amount against the owners who caused the damage or from whose units the damage or cause of loss originated; or
(3) Require the unit owners of the units affected to pay the deductible amount.
(e) The declaration, bylaws, or the board may require the association to carry any other insurance, including workers' compensation, employment practices, environmental hazards, and equipment breakdown, that the board considers appropriate to protect the association, the unit owners, or officers, directors, or agents of the association. Flood insurance shall also be maintained if the property is located in a special flood hazard area as delineated on flood maps issued by the Federal Emergency Management Agency. The flood insurance policy shall comply with the requirements of the National Flood Insurance Program and the Federal Insurance Administration.
(f) Any loss covered by the property policy under subsection (a)(1) shall be adjusted by and with the association. The insurance proceeds for that loss shall be payable to the association, or to an insurance trustee designated by the association for that purpose. The insurance trustee or the association shall hold any insurance proceeds in trust for unit owners and secured parties as their interests may appear.
(g) The board, with the vote or written consent of a majority of the owners, may require unit owners to obtain reasonable types and levels of insurance. The liability of a unit owner shall include but not be limited to the deductible of the owner whose unit was damaged, any damage not covered by insurance required by this subsection, as well as the decorating, painting, wall and floor coverings, trim, appliances, equipment, and other furnishings.
If the unit owner does not purchase or produce evidence of insurance requested by the board, the directors may, in good faith, purchase the insurance coverage and charge the reasonable premium cost back to the unit owner. In no event is the association or board liable to any person either with regard to the failure of a unit owner to purchase insurance or a decision by the board not to purchase the insurance for the owner, or with regard to the timing of its purchase of the insurance or the amounts or types of coverages obtained.
(h) The provisions of this section may be varied or waived in the case of a project in which all units are restricted to nonresidential use.
(i) Any association insurance policy provided under this section shall contain a provision requiring the insurance carrier, at the inception of the policy and on each anniversary date of the policy, to provide the board of directors with a written summary, in plain language, of the policy. The summary shall include:
(1) The type of policy;
(2) A description of the coverage and the limits of coverage;
(3) The amount of the annual premium cost; and
(4) Renewal dates.
The board of directors shall provide this information to each unit owner."
SECTION 10. Section 514B-148, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
The association shall assess the unit owners to either fund a minimum of fifty
per cent of the estimated replacement reserves or fund one hundred per cent of
the estimated replacement reserves when using a cash flow plan[
that a new association need not collect estimated replacement reserves until
the fiscal year which begins after the association's first annual meeting].
For each fiscal year, the association shall collect the amount assessed to fund
the estimated replacement for that fiscal year reserves, as determined by the
SECTION 11. Section 514B-153, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:
"(e) The managing agent, resident manager, or board shall keep an
accurate and current list of members of the association and their current
addresses, and the names and addresses of the vendees under an agreement of
sale, if [
any.] the information is provided by the members and
vendees. The list shall be maintained at a place designated by the board,
and a copy shall be available, at cost, to any member of the association as
provided in the declaration or bylaws or rules and regulations or, in any case,
to any member who furnishes to the managing agent or resident manager or the
board a duly executed and acknowledged affidavit stating that the list:
(1) Will be used by the owner personally and only for the purpose of soliciting votes or proxies, or for providing information to other owners with respect to association matters; and
(2) Shall not be used by the owner or furnished to anyone else for any other purpose.
A board may prohibit commercial solicitations."
SECTION 12. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.
SECTION 13. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 14. This Act shall take effect upon its approval.