HOUSE OF REPRESENTATIVES

H.B. NO.

382

TWENTY-NINTH LEGISLATURE, 2017

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to condominium associations.

 

 

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

 


SECTION 1. Chapter 514A, Hawaii Revised Statutes, is amended by adding two new sections to part V to be appropriately designated and to read as follows:

"514A-A Conflicts of interest. (a) No board member shall take any action directly affecting the association and a third-party provider in which the board member has a substantial financial interest, unless the board member provides prior written disclosure to the unit owners.

(b) For the purposes of this section:

"Financial interest" means an interest held by an individual, or the individual's spouse or dependent children, that is:

(1) An ownership interest in a business;

(2) A creditor interest in an insolvent business;

(3) An employment, or prospective employment for which negotiations have begun;

(4) An ownership interest in real or personal property;

(5) A loan or other debtor interest; or

(6) A directorship or officership in a business.

"Third-party provider" means a developer, management agency, or other private sector business that performs services for an association.

514A-B Gifts. (a) No board member shall solicit, accept, or receive, directly or indirectly, any gift, whether in the form of money, service, loan, travel, entertainment, hospitality, a thing, or a promise, or in any other form, by a third-party provider under circumstances in which it can reasonably be inferred that the gift is intended to influence the board member in the performance of the board member's duties or is intended as a reward for any action on the board member's part.

(b) For the purposes of this section, "third-party provider" has the same meaning as provided under section 514A-A."

SECTION 2. Chapter 514B, Hawaii Revised Statutes, is amended by adding two new sections to part VI, subpart A, to be appropriately designated and to read as follows:

"514B-A Conflicts of interest. (a) No board member shall take any action directly affecting the association and a third-party provider in which the board member has a substantial financial interest, unless the board member provides prior written disclosure to the unit owners.

(b) For the purposes of this section:

"Third-party provider" means a developer, management agency, or other private sector business that performs services for an association.

"Financial interest" means an interest held by an individual, the individual's spouse, or dependent children that is:

(1) An ownership interest in a business;

(2) A creditor interest in an insolvent business;

(3) An employment, or prospective employment for which negotiations have begun;

(4) An ownership interest in real or personal property;

(5) A loan or other debtor interest; or

(6) A directorship or officership in a business.

514B-B Gifts. (a) No board member shall solicit, accept, or receive, directly or indirectly, any gift, whether in the form of money, service, loan, travel, entertainment, hospitality, a thing, or a promise, or in any other form, by a third-party provider under circumstances in which it can reasonably be inferred that the gift is intended to influence the board member in the performance of the board member's duties or is intended as a reward for any action on the board member's part.

(b) For the purposes of this section, "third-party provider" has the same meaning as provided under section 514B-A."

SECTION 3. Section 514A-46, Hawaii Revised Statutes, is amended to read as follows:

"514A-46 Investigatory powers. If the commission has reason to believe that any person is violating or has violated section 514A-2, 514A-31 to 514A-49, 514A-61 to 514A-63, 514A-65, 514A-67, 514A-68, 514A-70, 514A-A, 514A-B, 514A-83.5, 514A-84, 514A-85, 514A-95, 514A-95.1, 514A-97, 514A-98, 514A-134, or 514B-72, or the rules of the commission adopted pursuant thereto, the commission may conduct an investigation of the matter and examine the books, accounts, contracts, records, and files of the association of apartment owners, the board of directors, the managing agent, the real estate broker, the real estate salesperson, the purchaser, or the developer. For the purposes of this examination, the developer and the real estate broker shall keep and maintain records of all sales transactions and of the funds received by the developer and the real estate broker pursuant thereto, and shall make the records accessible to the commission upon reasonable notice and demand."

SECTION 4. Section 514A-47, Hawaii Revised Statutes, is amended to read as follows:

"514A-47 Cease and desist orders. In addition to its authority under section 514A-48, whenever the commission has reason to believe that any person is violating or has violated section 514A-2, 514A-31 to 514A-49, 514A-61 to 514A-63, 514A-65, 514A-67, 514A-68, 514A-70, 514A-A, 514A-B, 514A-83.5, 514A-84, 514A-85, 514A-95, 514A-95.1, 514A-97, 514A-98, 514A-134, or 514B-72, or the rules of the commission adopted pursuant thereto, it shall issue and serve upon the person a complaint stating its charges in that respect and containing a notice of a hearing at a stated place and upon a day at least thirty days after the service of the complaint. The person served has the right to appear at the place and time specified and show cause why an order should not be entered by the commission requiring the person to cease and desist from the violation of the law or the rules of the commission charged in the complaint. If, upon the hearing, the commission is of the opinion that this chapter or the rules of the commission have been or are being violated, it shall make a report in writing stating its findings as to the facts and shall issue and cause to be served on the person an order requiring the person to cease and desist from the violations. The person, within thirty days after service upon the person of the report or order, may obtain a review thereof in the appropriate circuit court."

SECTION 5. Section 514A-48, Hawaii Revised Statutes, is amended to read as follows:

"514A-48 Power to enjoin. Whenever the commission believes from satisfactory evidence that any person has violated section 514A-2, 514A-31 to 514A-49, 514A-61 to 514A-63, 514A-65, 514A-67, 514A-68, 514A-70, 514A-A, 514A-B, 514A-83.5, 514A-84, 514A-85, 514A-95, 514A-95.1, 514A-97, 514A-98, 514A-134, or 514B-72, or the rules of the commission adopted pursuant thereto, it may conduct an investigation on the matter and bring an action in the name of the people of the State in any court of competent jurisdiction against the person to enjoin the person from continuing the violation or engaging therein or doing any act or acts in furtherance thereof."

SECTION 6. Section 514A-49, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Any person who violates or fails to comply with section 514A-2, 514A-31 to 514A-49, 514A-61 to 514A-63, 514A-65, 514A-67, 514A-68, 514A-70, 514A-A, 514A-B, 514A-83.5, 514A-84, 514A-85, 514A-95, 514A-95.1, 514A-97, 514A-98, 514A-102 to 514A-105, 514A-134, or 514B-72 is guilty of a misdemeanor and shall be punished by a fine not exceeding $10,000 or by imprisonment for a term not exceeding one year, or both. Any person who violates or fails, omits, or neglects to obey, observe, or comply with any rule, order, decision, demand, or requirement of the commission under section 514A-31 to 514A-49, 514A-61 to 514A-63, 514A-65, 514A-67, 514A-68, 514A-70, 514A-A, 514A-B, 514A-83.5, 514A-84, 514A-85, 514A-95, 514A-95.1, 514A-97, 514A-98, 514A-102 to [[]514A-105[]], or 514B-72 shall be punished by a fine not exceeding $10,000."

SECTION 7. Section 514B-61, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) If it appears that any person has engaged, is engaging, or is about to engage in any act or practice in violation of this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, section 514B‑154.5, or any of the commission's related rules or orders, the commission, without prior administrative proceedings, may maintain an action in the appropriate court to enjoin that act or practice or for other appropriate relief. The commission shall not be required to post a bond or to prove that no adequate remedy at law exists in order to maintain the action."

SECTION 8. Section 514B-65, Hawaii Revised Statutes, is amended to read as follows:

"514B-65 Investigative powers. If the commission has reason to believe that any person is violating or has violated this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, section 514B‑154.5, or the rules of the commission adopted pursuant thereto, the commission may conduct an investigation of the matter and examine the books, accounts, contracts, records, and files of all relevant parties. For purposes of this examination, the developer and the real estate broker shall keep and maintain records of all sales transactions and of the funds received by the developer and the real estate broker in accordance with chapter 467 and the rules of the commission, and shall make the records accessible to the commission upon reasonable notice and demand."

SECTION 9. Section 514B-66, Hawaii Revised Statutes, is amended to read as follows:

"514B-66 Cease and desist orders. In addition to its authority under sections 514B‑67 and 514B‑68, whenever the commission has reason to believe that any person is violating or has violated this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, section 514B‑154.5, or the rules of the commission adopted pursuant thereto, it may issue and serve upon the person a complaint stating its charges in that respect and containing a notice of a hearing at a stated place and upon a day at least thirty days after the service of the complaint. The person served has the right to appear at the place and time specified and show cause why an order should not be entered by the commission requiring the person to cease and desist from the violation of the law or rules charged in the complaint. If the commission finds that this chapter or the rules of the commission have been or are being violated, it shall make a report in writing stating its findings as to the facts and shall issue and cause to be served on the person an order requiring the person to cease and desist from the violations. The person, within thirty days after service upon the person of the report or order, may obtain a review thereof in the appropriate circuit court."

SECTION 10. Section 514B-68, Hawaii Revised Statutes, is amended to read as follows:

"514B-68 Power to enjoin. Whenever the commission believes from satisfactory evidence that any person has violated this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, section 514B‑154.5, or the rules of the commission adopted pursuant thereto, it may conduct an investigation of the matter and bring an action against the person in any court of competent jurisdiction on behalf of the State to enjoin the person from continuing the violation or doing any acts in furtherance thereof."

SECTION 11. Section 514B-69, Hawaii Revised Statutes, is amended to read as follows:

"514B-69 Penalties. (a) Any person who violates or fails to comply with this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, or section 514B‑154.5, shall be guilty of a misdemeanor and shall be punished by a fine not exceeding $10,000, or by imprisonment for a term not exceeding one year, or both. Any person who violates or fails to comply with any rule, order, decision, demand, or requirement of the commission under this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, or section 514B‑154.5, shall be punished by a fine not exceeding $10,000.

(b) In addition to any other actions authorized by law, any person who violates or fails to comply with this part, part V, section 514B‑103, 514B-A, 514B-B, 514B‑132, 514B‑134, 514B‑149, sections 514B‑152 to 514B‑154, section 514B‑154.5, or the rules of the commission adopted pursuant thereto, shall also be subject to a civil penalty not exceeding $10,000 for any violation. Each violation shall constitute a separate offense."

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. In codifying the new sections added by sections 1 and 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 14. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 15. This Act shall take effect upon its approval.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Condominiums; Board Members; Fiduciary Duties

 

Description:

Requires board members of condominium associations to disclose significant financial interests prior to taking action that affects both the association and a third-party provider. Prohibits board members from receiving gifts from those types of third party providers. Expands the powers of the real estate commission to enforce violations by board members of disclosure requirements and gift prohibitions.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.