Report Title:

Condominiums; Condominium Hotels; Common Elements

 

Description:

Allows a condominium board of directors to lease common elements of the condominium, under certain conditions, if elements are not used by unit owners for purposes permitted in the declaration. Requires all direct costs attributable to condominium hotel operations to be charged only to unit owners whose units are included in condominium hotel operations.

 


HOUSE OF REPRESENTATIVES

H.B. NO.

78

TWENTY-FIFTH LEGISLATURE, 2009

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

relating to mixed-use condominium projects.

 

 

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

 


SECTION 1. Section 514A-13, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Each apartment owner may use the common elements in accordance with the purpose for which they were intended without hindering or encroaching upon the lawful rights of the other apartment owners, subject to:

(1) The right of the board of directors, upon the approval of the owners of seventy-five per cent of the common interests, except as provided in section 514A-13.4, to change the use of the common elements;

(2) The right of the board of directors, on behalf of the association of apartment owners, to lease or otherwise use for the benefit of the association of apartment owners those common elements [which] that are not actually used by any of the apartment owners for an originally intended special purpose, as determined by the board of directors; provided that, except for any leases, licenses, or other agreements entered into for the purposes authorized by section 514A-13.4, unless the approval of the owners of seventy-five per cent of the common interest is obtained, any such lease [shall not]:

(A) Shall not set rent at an amount below fair market rent;

(B) Shall not have a term exceeding five years [and shall contain]; and

(C) Shall contain a provision that the lease or agreement for use may be terminated by either party thereto on not more than sixty days written notice;

(3) The right of the board of directors to lease or otherwise use for the benefit of the association of apartment owners those common elements not falling within paragraph (2), upon obtaining:

(A) Except as provided in section 514A-13.4, the approval of the owners of seventy-five per cent of the common elements, including all directly affected owners and all owners of apartments to which [such] those common elements are appurtenant in the case of limited common elements; and

(B) The approval of all mortgagees of record on apartments with respect to which owner approval is required by subparagraph (A), if [such] the lease or use would be in derogation of the interest of [such] those mortgagees; and

(4) The exclusive use of the limited common elements as provided in the declaration."

SECTION 2. Section 514A-15, Hawaii Revised Statutes, is amended to read as follows:

"514A-15 Common profits and expenses. (a) The common profits of the property shall be distributed among, and the common expenses shall be charged to, the apartment owners, including the developer, in proportion to the common interest appurtenant to their respective apartments; provided that [in]:

(1) In a mixed-use project containing apartments for both residential and commercial use, [such] those charges and distributions may be apportioned in a fair and equitable manner as set forth in the declaration; [provided further that all] and

(2) All limited common elements costs and expenses, including but not limited to, maintenance, repair, replacement, additions, and improvements shall be charged to the owner of the apartment to which the limited common element is appurtenant in an equitable manner as set forth in the declaration.

(b) An apartment owner, including the developer, shall become obligated for the payment of the share of the common expenses allocated to [his] the apartment owner's apartment at the time the certificate of occupancy relating to [his] the apartment owner's apartment is issued by the appropriate county agency; provided that a developer may assume all the actual common expenses in a residential project containing no mixed commercial and residential use, by stating in the abstract as required by section 514A-61 that the apartment owner shall not be obligated for the payment of [his] the apartment owner's respective share of the common expenses until [such time] the developer files an amended abstract with the commission [which] that shall provide, that after a date certain, the respective apartment owner shall thereafter be obligated to pay for [his] the apartment owner's respective share of common expenses that is allocated to [his] the apartment owner's apartment. The amended abstract shall be filed at least thirty days in advance with the commission with a copy of the abstract being delivered either by mail or personal delivery after the filing to each of the apartment owners whose maintenance expenses were assumed by the developer.

(c) In a condominium project that includes residential units and condominium hotel units, all direct costs attributable to the condominium hotel operations shall be charged only to the unit owners whose units are included in the condominium hotel operations."

SECTION 3. 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 subject 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 not set rent at an amount below fair market rent; 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 4. Section 514B-41, Hawaii Revised Statutes, is amended to read as follows:

"[[]514B-41[]] Common profits and expenses. (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.

(b) A unit owner, including the developer, shall become obligated for the payment of the share of the common expenses allocated to the owner's unit at the time the certificate of occupancy relating to the owner's unit is issued by the appropriate county agency; provided that a developer may assume all the actual common expenses in a project by stating in the developer's public report required by section 514B‑54 that the unit owner shall not be obligated for the payment of the owner's share of the common expenses until [such time as] the developer sends the owners written notice that, after a specified date, the unit owners shall be obligated to pay for the portion of common expenses that is allocated to their respective units. The developer shall mail the written notice to the owners, the association, and the managing agent, if any, at least thirty days before the specified date.

(c) Unless otherwise provided in the declaration or bylaws, if the board reasonably determines that the extra cost incurred to separately account for and charge for the costs of maintenance, repair, or replacement of limited common elements is not justified, the board may adopt a resolution determining that certain limited common element expenses will be assessed in accordance with the undivided common interest appurtenant to each unit. In reaching its determination, the board shall consider:

(1) The amount at issue;

(2) The difficulty of segregating the costs;

(3) The number of units to which similar limited common elements are appurtenant;

(4) The apparent difference between separate assessment and assessment based on the undivided common interest; and

(5) Any other relevant factors, as determined by the board.

The resolution shall be final and binding in the absence of a determination that the board abused its discretion.

(d) Unless made pursuant to rights reserved in the declaration and disclosed in the developer's public report, if an association amends its declaration or bylaws to change the use of the condominium property regime from residential to nonresidential, all direct and indirect costs attributable to the newly permitted nonresidential use shall be charged only to the unit owners using or directly benefiting from the new nonresidential use, in a fair and equitable manner as set forth in the amendment to the declaration or bylaws.

(e) In a condominium project that includes residential units and condominium hotel units, all direct costs attributable to the condominium hotel operations shall be charged only to the unit owners whose units are included in the condominium hotel operations."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2009.

 

INTRODUCED BY:

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