Hawaii 2025 Regular Session

Hawaii Senate Bill SB1372 Compare Versions

Only one version of the bill is available at this time.

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1	1	THE SENATE S.B. NO. 1372 THIRTY-THIRD LEGISLATURE, 2025 STATE OF HAWAII A BILL FOR AN ACT RELATING TO CONDOMINIUM ASSOCIATION'S OPERATING BUDGET. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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3	3	THE SENATE S.B. NO. 1372
4	4	THIRTY-THIRD LEGISLATURE, 2025
5	5	STATE OF HAWAII
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7	7	THE SENATE
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9	9	S.B. NO.
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11	11	1372
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13	13	THIRTY-THIRD LEGISLATURE, 2025
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17	17	STATE OF HAWAII
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31	31	A BILL FOR AN ACT
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37	37	RELATING TO CONDOMINIUM ASSOCIATION'S OPERATING BUDGET.
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43	43	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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47	47	SECTION 1. The legislature finds that, due to issues in the global insurance industry and recent increases in catastrophic weather events around the world, there have been unprecedented insurance premium rate increases for condominium associations. These significant increases have left condominium associations without a means to fund the premiums without placing an unbearable and unforeseen financial burden on Hawaii's condominium unit owners. The purpose of this Act is to allow associations to authorize an association's board to borrow or reallocate funds from its replacement reserve funds to pay for association operating expenses. SECTION 2. Section 514B-105, Hawaii Revised Statutes, is amended to read as follows: "§514B-105 Association; limitations on powers. (a) The declaration and bylaws shall not impose limitations on the power of the association to deal with the developer that are more restrictive than the limitations imposed on the power of the association to deal with other persons. (b) Unless otherwise permitted by the declaration, bylaws, or this chapter, an association may adopt rules and regulations that affect the use of or behavior in units that may be used for residential purposes only to: (1) Prevent any use of a unit that violates the declaration or bylaws; (2) Regulate any behavior in or occupancy of a unit that violates the declaration or bylaws or unreasonably interferes with the use and enjoyment of other units or the common elements by other unit owners; or (3) Restrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders who regularly lend money secured by first mortgages on units in condominiums or regularly purchase those mortgages. Otherwise, the association shall not regulate any use of or behavior in units by means of the rules and regulations. (c) Any payments made by or on behalf of a unit owner shall first be applied to outstanding common expenses that are assessed to all unit owners in proportion to the common interest appurtenant to their respective units, including commercial property assessed financing assessment expenses incurred for improvements financed pursuant to section 196-64.5. Only after the outstanding common expenses have been paid in full may the payments be applied to other charges owed to the association, including assessed charges to the unit such as ground lease rent, utility sub-metering, storage lockers, parking stalls, boat slips, insurance deductibles, and cable. After these charges are paid, other charges, including unpaid late fees, legal fees, fines, and interest, may be assessed in accordance with an application of payment policy adopted by the board; provided that if a unit owner has designated that any payment is for a specific charge that is not a common expense as described in this subsection, the payment may be applied in accordance with the unit owner's designation even if common expenses remain outstanding. (d) No unit owner who requests legal or other information from the association, the board, the managing agent, or their employees or agents, shall be charged for the reasonable cost of providing the information unless the association notifies the unit owner that it intends to charge the unit owner for the reasonable cost. The association shall notify the unit owner in writing at least ten days prior to incurring the reasonable cost of providing the information, except that no prior notice shall be required to assess the reasonable cost of providing information on delinquent assessments or in connection with proceedings to enforce the law or the association's governing documents. After being notified of the reasonable cost of providing the information, the unit owner may withdraw the request, in writing. A unit owner who withdraws a request for information shall not be charged for the reasonable cost of providing the information. (e) Subject to any approval requirements and spending limits contained in the declaration or bylaws, the association may authorize the board to borrow money for the repair, replacement, maintenance, operation, or administration of the common elements and personal property of the project, or the making of any additions, alterations, and improvements thereto; provided that written notice of the purpose and use of the funds is first sent to all unit owners and owners representing fifty per cent of the common interest vote or give written consent to the borrowing. In connection with the borrowing, including non-commercial property assessed financing, the board may grant to the lender the right to assess and collect monthly or special assessments from the unit owners and to enforce the payment of the assessments or other sums by statutory lien and foreclosure proceedings. The cost of the borrowing, including, without limitation, all principal, interest, commitment fees, and other expenses payable with respect to the borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project. For purposes of this section, the financing of insurance premiums by the association within the policy period shall not be deemed a loan and no lease shall be deemed a loan if it provides that at the end of the lease the association may purchase the leased equipment for its fair market value. (f) For financing assessments imposed upon the project under a commercial property assessed financing program pursuant to section 196-64.5 and due from the association, the cost of the commercial property assessed financing, including all principal, interest, commitment fees, servicing fees, and other expenses payable with respect to this borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project and the unit owners' proportionate share of the financing assessment shall be collected in the same manner as common expenses. The written consent of at least fifty per cent of all unit owners to finance qualifying improvements with commercial property assessed financing shall include an acknowledgement that the annual financing assessment required to fund debt service on the commercial property assessed financing shall be included as part of the association's adopted revised budget. (g) Subject to any spending limits contained in the declaration or bylaws, the association may authorize the board to borrow or reallocate funds from the replacement reserves fund to pay for association-wide operating expenses to the extent that the reserve fund maintains a minimum of fifty per cent of the required estimated replacement reserves as detailed in the reserve study conducted pursuant to section 514B-148(a)(5) and (b), provided that written notice of the purpose and proposed use of the funds is sent to all unit owners, and owners representing a minimum of fifty per cent of the common interest, consent to the borrowing: (1) No consent by the ownership shall be given unless the written notice by the association to borrow or reallocate funds from the replacement reserves fund includes a schedule for how and when the funds will be restored over a maximum of one year and includes statements regarding the necessity of using the replacement reserves for other than their designated purpose, the necessity of the expense involved, and why the expense was not or could not have been reasonably foreseen in the budgeting process. A proposal to borrow or reallocate replacement reserves funds that are in excess of one hundred per cent of the estimated replacement reserves shall not require a schedule for restoration of borrowed or reallocated funds; (2) An association shall not borrow or reallocate replacement reserves funds that are reserved for repair and maintenance projects occurring within one year of the borrowing date; and (3) An association shall not borrow or reallocate replacement reserves funds for operating expenses that primarily benefit the board of directors, its officers, or their families. Violating this section constitutes a violation of fiduciary duty." SECTION 3. New statutory material is underscored. SECTION 4. This Act shall take effect upon its approval. INTRODUCED BY: _____________________________ BY REQUEST
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49	49	SECTION 1. The legislature finds that, due to issues in the global insurance industry and recent increases in catastrophic weather events around the world, there have been unprecedented insurance premium rate increases for condominium associations. These significant increases have left condominium associations without a means to fund the premiums without placing an unbearable and unforeseen financial burden on Hawaii's condominium unit owners.
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51	51	The purpose of this Act is to allow associations to authorize an association's board to borrow or reallocate funds from its replacement reserve funds to pay for association operating expenses.
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53	53	SECTION 2. Section 514B-105, Hawaii Revised Statutes, is amended to read as follows:
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55	55	"§514B-105 Association; limitations on powers. (a) The declaration and bylaws shall not impose limitations on the power of the association to deal with the developer that are more restrictive than the limitations imposed on the power of the association to deal with other persons.
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57	57	(b) Unless otherwise permitted by the declaration, bylaws, or this chapter, an association may adopt rules and regulations that affect the use of or behavior in units that may be used for residential purposes only to:
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59	59	(1) Prevent any use of a unit that violates the declaration or bylaws;
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61	61	(2) Regulate any behavior in or occupancy of a unit that violates the declaration or bylaws or unreasonably interferes with the use and enjoyment of other units or the common elements by other unit owners; or
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63	63	(3) Restrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders who regularly lend money secured by first mortgages on units in condominiums or regularly purchase those mortgages.
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65	65	Otherwise, the association shall not regulate any use of or behavior in units by means of the rules and regulations.
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67	67	(c) Any payments made by or on behalf of a unit owner shall first be applied to outstanding common expenses that are assessed to all unit owners in proportion to the common interest appurtenant to their respective units, including commercial property assessed financing assessment expenses incurred for improvements financed pursuant to section 196-64.5. Only after the outstanding common expenses have been paid in full may the payments be applied to other charges owed to the association, including assessed charges to the unit such as ground lease rent, utility sub-metering, storage lockers, parking stalls, boat slips, insurance deductibles, and cable. After these charges are paid, other charges, including unpaid late fees, legal fees, fines, and interest, may be assessed in accordance with an application of payment policy adopted by the board; provided that if a unit owner has designated that any payment is for a specific charge that is not a common expense as described in this subsection, the payment may be applied in accordance with the unit owner's designation even if common expenses remain outstanding.
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69	69	(d) No unit owner who requests legal or other information from the association, the board, the managing agent, or their employees or agents, shall be charged for the reasonable cost of providing the information unless the association notifies the unit owner that it intends to charge the unit owner for the reasonable cost. The association shall notify the unit owner in writing at least ten days prior to incurring the reasonable cost of providing the information, except that no prior notice shall be required to assess the reasonable cost of providing information on delinquent assessments or in connection with proceedings to enforce the law or the association's governing documents.
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71	71	After being notified of the reasonable cost of providing the information, the unit owner may withdraw the request, in writing. A unit owner who withdraws a request for information shall not be charged for the reasonable cost of providing the information.
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73	73	(e) Subject to any approval requirements and spending limits contained in the declaration or bylaws, the association may authorize the board to borrow money for the repair, replacement, maintenance, operation, or administration of the common elements and personal property of the project, or the making of any additions, alterations, and improvements thereto; provided that written notice of the purpose and use of the funds is first sent to all unit owners and owners representing fifty per cent of the common interest vote or give written consent to the borrowing. In connection with the borrowing, including non-commercial property assessed financing, the board may grant to the lender the right to assess and collect monthly or special assessments from the unit owners and to enforce the payment of the assessments or other sums by statutory lien and foreclosure proceedings. The cost of the borrowing, including, without limitation, all principal, interest, commitment fees, and other expenses payable with respect to the borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project. For purposes of this section, the financing of insurance premiums by the association within the policy period shall not be deemed a loan and no lease shall be deemed a loan if it provides that at the end of the lease the association may purchase the leased equipment for its fair market value.
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75	75	(f) For financing assessments imposed upon the project under a commercial property assessed financing program pursuant to section 196-64.5 and due from the association, the cost of the commercial property assessed financing, including all principal, interest, commitment fees, servicing fees, and other expenses payable with respect to this borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project and the unit owners' proportionate share of the financing assessment shall be collected in the same manner as common expenses. The written consent of at least fifty per cent of all unit owners to finance qualifying improvements with commercial property assessed financing shall include an acknowledgement that the annual financing assessment required to fund debt service on the commercial property assessed financing shall be included as part of the association's adopted revised budget.
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77	77	(g) Subject to any spending limits contained in the declaration or bylaws, the association may authorize the board to borrow or reallocate funds from the replacement reserves fund to pay for association-wide operating expenses to the extent that the reserve fund maintains a minimum of fifty per cent of the required estimated replacement reserves as detailed in the reserve study conducted pursuant to section 514B-148(a)(5) and (b), provided that written notice of the purpose and proposed use of the funds is sent to all unit owners, and owners representing a minimum of fifty per cent of the common interest, consent to the borrowing:
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79	79	(1) No consent by the ownership shall be given unless the written notice by the association to borrow or reallocate funds from the replacement reserves fund includes a schedule for how and when the funds will be restored over a maximum of one year and includes statements regarding the necessity of using the replacement reserves for other than their designated purpose, the necessity of the expense involved, and why the expense was not or could not have been reasonably foreseen in the budgeting process. A proposal to borrow or reallocate replacement reserves funds that are in excess of one hundred per cent of the estimated replacement reserves shall not require a schedule for restoration of borrowed or reallocated funds;
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81	81	(2) An association shall not borrow or reallocate replacement reserves funds that are reserved for repair and maintenance projects occurring within one year of the borrowing date; and
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83	83	(3) An association shall not borrow or reallocate replacement reserves funds for operating expenses that primarily benefit the board of directors, its officers, or their families. Violating this section constitutes a violation of fiduciary duty."
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85	85	SECTION 3. New statutory material is underscored.
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87	87	SECTION 4. This Act shall take effect upon its approval.
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91	91	INTRODUCED BY: _____________________________
92	92	BY REQUEST
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94	94	INTRODUCED BY:
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96	96	_____________________________
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102	102	BY REQUEST
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104	104	Report Title: Condominium Associations; Reserve Funds Description: Permits condominium associations to borrow from or reallocate their reserve funds provided the loan is repaid within one year. Effective upon approval. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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112	112	Report Title:
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114	114	Condominium Associations; Reserve Funds
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118	118	Description:
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120	120	Permits condominium associations to borrow from or reallocate their reserve funds provided the loan is repaid within one year. Effective upon approval.
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128	128	The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.