STAND. COM. REP. 972

Honolulu, Hawaii

, 2003

RE: S.B. No. 373

S.D. 1

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 373, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUM PROPERTY REGIMES,"

begs leave to report as follows:

The purpose of this bill is to establish, with exceptions, the time at which the purchaser of a condominium unit in a judicial or nonjudicial foreclosure is considered to have acquired title to the apartment and becomes liable for delinquent condominium association common assessments and expenses.

Testimony in support of this bill was submitted by the Community Associations Institute. The Hawaii Council of Association of Apartment Owners and Hawaii Financial Services Association testified in support of the intent of this bill. The Mortgage Bankers Association of Hawaii supported the intent of the bill and suggested amendments.

Your Committee finds that the Legislature amended section 514A-90, Hawaii Revised Statutes (HRS), in 1999 to specify that the purchaser of an apartment at a judicial foreclosure acquires title to the apartment and becomes responsible for delinquent maintenance fees on the earlier of 36 days after the order confirming the sale is filed with the court, or 60 days after the court grants the motion to confirm the sale.

Before these specific cutoffs were established, lenders participating in the judicial foreclosure of a condominium unit could avoid an apartment owner's liability for maintenance fees by delaying the recording of a foreclosure deed or the entry of an order to confirm foreclosure. As a result, the condominium association would have no choice but to absorb the unpaid maintenance fees during the delay.

Your Committee finds that current law fails to establish a cutoff for nonjudicial power of sale foreclosures. This bill addresses this omission. The bill also further clarifies the law relating to judicial and nonjudicial foreclosures by providing exceptions to the cutoffs, where title does not transfer to the purchaser of an apartment because of delays caused by certain motions, objections, and appeals, or by the bankruptcy of a party -- events that are a normal part of judicial and nonjudical foreclosure proceedings.

To further resolve ambiguities in this bill, your Committee has made amendments that:

(1) Eliminate repetition and reduce confusion by consolidating the exceptions into a single unit;

(2) Provide that the exceptions are triggered when the specified events delay foreclosure proceedings past the stated time periods for the cutoffs in the statute;

(3) Specify that when an exception is triggered, the purchaser of the apartment is deemed to acquire title upon recordation of the instrument of conveyance;

(4) Clarify that the exception for a delay in foreclosure proceedings when a party to the foreclosure declares or is placed in bankruptcy, is limited to the bankruptcy of the debtor in the proceeding;

(5) Replace "deed" with "instrument of conveyance" in order to include all transfers of property; and

(6) Amend the bill's effective date to prevent the amendments made by this bill from being repealed when section 514A-90, HRS, is repealed and reenacted pursuant to section 4 of Act 39, Session Laws of Hawaii 2000, on December 31, 2003.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 373, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 373, S.D. 1, H.D. 1, and be referred to the Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,

 

____________________________

KENNETH T. HIRAKI, Chair