HOUSE OF REPRESENTATIVES

H.B. NO.

21

TWENTY-SEVENTH LEGISLATURE, 2013

H.D. 2

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO CONDOMINIUMS.

 

 

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

 


     SECTION 1.  Section 514A-90, Hawaii Revised Statutes, is amended to read as follows:

     "§514A-90  Priority of lien.  (a)  All sums assessed by the association of apartment owners but unpaid for the share of the common expenses chargeable to any apartment constitute a lien on the apartment prior to all other liens, except:

     (1)  Liens for taxes and assessments lawfully imposed by governmental authority against the apartment; and

     (2)  All sums unpaid on any mortgage of record that was recorded prior to the recordation of notice of a lien by the association of apartment owners, and costs and expenses including attorneys' fees provided in such mortgages;

provided that a lien recorded by an association of apartment owners for unpaid assessments shall expire six years from the date of recordation unless proceedings to enforce the lien are instituted prior to the expiration of the lien; provided further that the expiration of a recorded lien shall in no way affect the association of apartment owners' automatic lien that arises pursuant to this subsection or the declaration or bylaws.  Any proceedings to enforce an association of apartment owners' lien for any assessment shall be instituted within six years after the assessment became due; provided that if the owner of an apartment subject to a lien of the association of apartment owners files a petition for relief under the United States Bankruptcy Code (11 U.S.C. §101 et seq.), the period of time for instituting proceedings to enforce the association of apartment owners' lien shall be tolled until thirty days after the automatic stay of proceedings under section 362 of the United States Bankruptcy Code (11 U.S.C. §362) is lifted.

     The lien of the association of apartment owners may be foreclosed by action or by nonjudicial or power of sale foreclosure procedures set forth in chapter 667, by the managing agent or board of directors, acting on behalf of the association of apartment owners and in the name of the association of apartment owners; provided that no association of apartment owners may exercise the nonjudicial or power of sale remedies provided in chapter 667 to foreclose a lien against any apartment that arises solely from fines, penalties, legal fees, or late fees, and the foreclosure of any such lien shall be filed in court pursuant to part IA of chapter 667.

     In any such foreclosure, the apartment owner shall be required to pay a reasonable rental for the apartment, if so provided in the bylaws or the law, and the plaintiff in the foreclosure shall be entitled to the appointment of a receiver to collect the rental owed by the apartment owner or any tenant of the apartment.  If the association of apartment owners is the plaintiff, it may request that its managing agent be appointed as receiver to collect the rent from the tenant.  The managing agent or board of directors, acting on behalf of the association of apartment owners and in the name of the association of apartment owners, unless prohibited by the declaration, may bid on the apartment at foreclosure sale, and acquire and hold, lease, mortgage, and convey the apartment.  Action to recover a money judgment for unpaid common expenses shall be maintainable without foreclosing or waiving the lien securing the unpaid common expenses owed.

     (b)  Except as provided in subsection [(g),] (h) when the mortgagee of a mortgage of record or other purchaser of an apartment obtains title to the apartment as a result of foreclosure of the mortgage, the acquirer of title and the acquirer's successors and assigns shall not be personally liable for the share of the common expenses or assessments by the association of apartment owners chargeable to the apartment that became due prior to the acquisition of title to the apartment by the acquirer.  The unpaid share of common expenses or assessments not reimbursed pursuant to subsection (c) shall be deemed to be common expenses collectible from all of the apartment owners, including the acquirer and the acquirer's successors and assigns.  The mortgagee of record or other purchaser of the apartment shall be deemed to acquire title and shall be required to pay the apartment's share of common expenses and assessments beginning:

     (1)  Thirty-six days after the order confirming the sale to the purchaser has been filed with the court;

     (2)  Sixty days after the hearing at which the court grants the motion to confirm the sale to the purchaser;

     (3)  Thirty days after the public sale in a nonjudicial power of sale foreclosure conducted pursuant to chapter 667; or

     (4)  Upon the recording of the instrument of conveyance,

whichever occurs first; provided that the mortgagee of record or other purchaser of the apartment shall not be deemed to acquire title under paragraph (1), (2), or (3), if transfer of title is delayed past the thirty-six days specified in paragraph (1), the sixty days specified in paragraph (2), or the thirty days specified in paragraph (3), when a person who appears at the hearing on the motion or a party to the foreclosure action requests reconsideration of the motion or order to confirm sale, objects to the form of the proposed order to confirm sale, appeals the decision of the court to grant the motion to confirm sale, or the debtor or mortgagor declares bankruptcy or is involuntarily placed into bankruptcy.  In any such case, the mortgagee of record or other purchaser of the apartment shall be deemed to acquire title upon recordation of the instrument of conveyance.

     (c)  Notwithstanding any other provision of law to the contrary, an association of apartment owners, through its board or managing agent, may collect on a monthly basis from each apartment owner an amount that does not exceed ten per cent of regular monthly common assessments as defined in subsection (j) chargeable to the apartment.  This amount may be collected monthly until the total amount collected from each apartment owner is equal to the total of regular monthly common assessments chargeable to the apartment for a twelve-month period.  All amounts collected pursuant to this subsection shall be deposited into an interest-bearing account to be maintained and managed by the association's board or managing agent. 

     Funds collected pursuant to this subsection shall be used only for the purpose of reimbursing the association for any unpaid regular monthly common assessments chargeable to the apartment that remain outstanding after foreclosure of a lien pursuant to subsection (a), foreclosure of the apartment's mortgage, or sale or transfer of the unit.  Any funds, including principal and interest amounts, remaining in the account after reimbursement of the association shall revert to the apartment owner or the apartment owner's successors or assigns.

     [(c)] (d)  No apartment owner shall withhold any assessment claimed by the association.  An apartment owner who disputes the amount of an assessment may request a written statement clearly indicating:

     (1)  The amount of common expenses included in the assessment, including the due date of each amount claimed;

     (2)  The amount of any penalty, late fee, lien filing fee, and any other charge included in the assessment;

     (3)  The amount of attorneys' fees and costs, if any, included in the assessment;

     (4)  That under Hawaii law, an apartment owner has no right to withhold assessments for any reason;

     (5)  That an apartment owner has a right to demand mediation or arbitration to resolve disputes about the amount or validity of an association's assessment; provided the apartment owner immediately pays the assessment in full and keeps assessments current; and

     (6)  That payment in full of the assessment shall not prevent the owner from contesting the assessment or receiving a refund of amounts not owed.

Nothing in this section shall limit the rights of an owner to the protection of all fair debt collection procedures mandated under federal and state law.

     [(d)] (e)  An apartment owner who pays an association the full amount claimed by the association may file in small claims court or require the association to mediate to resolve any disputes concerning the amount or validity of the association's claim.  If the apartment owner and the association are unable to resolve the dispute through mediation, either party may file for arbitration under part VII; provided that an apartment owner may only file for arbitration if all amounts claimed by the association are paid in full on or before the date of filing.  If the apartment owner fails to keep all association assessments current during the arbitration, the association may ask the arbitrator to temporarily suspend the arbitration proceedings.  If the apartment owner pays all association assessments within thirty days of the date of suspension, the apartment owner may ask the arbitrator to recommence the arbitration proceedings.  If the owner fails to pay all association assessments by the end of the thirty-day period, the association may ask the arbitrator to dismiss the arbitration proceedings.  The apartment owner shall be entitled to a refund of any amounts paid to the association which are not owed.

     [(e)] (f)  As an alternative to foreclosure proceedings under subsection (a), where an apartment is owner-occupied, the association of apartment owners may authorize its managing agent or board of directors to, after sixty days' written notice to the apartment owner and to the apartment's first mortgagee of the nonpayment of the apartment's share of the common expenses, terminate the delinquent apartment's access to the common elements and cease supplying a delinquent apartment with any and all services normally supplied or paid for by the association of apartment owners.  Any terminated services and privileges shall be restored upon payment of all delinquent assessments.

     [(f)] (g)  Before the board of directors or managing agent may take the actions permitted under [subsection (e),] subsections (c) or (f), the board shall adopt a written policy providing for such actions and have the policy approved by a majority vote of the apartment owners at an annual or special meeting of the association or by the written consent of a majority of the apartment owners.

     [(g)] (h)  Subject to this subsection, and subsections [(h) and (i),] (i) and (j), the board of an association of apartment owners may specially assess the amount of the unpaid regular monthly common assessments for common area expenses against a person who, in a judicial or nonjudicial power of sale foreclosure, purchases a delinquent apartment; provided that:

     (1)  A purchaser who holds a mortgage on a delinquent apartment that was recorded prior to the filing of a notice of lien by the association of apartment owners and who acquires the delinquent apartment through a judicial or nonjudicial foreclosure proceeding, including purchasing the delinquent apartment at a foreclosure auction, shall not be obligated to make, nor be liable for, payment of the special assessment as provided for under this subsection; and

     (2)  A person who subsequently purchases the delinquent apartment from the mortgagee referred to in paragraph (1) shall be obligated to make, and shall be liable for, payment of the special assessment provided for under this subsection; provided that the mortgagee or subsequent purchaser may require the association of apartment owners to provide at no charge a notice of the association's intent to claim a lien against the delinquent apartment for the amount of the special assessment, prior to the subsequent purchaser's acquisition of title to the delinquent apartment.  The notice shall state the amount of the special assessment, how that amount was calculated, and the legal description of the apartment.

     [(h)] (i)  The amount of the special assessment assessed under subsection [(g)] (h) shall not exceed the total amount of unpaid regular monthly common assessments that were assessed during the six months immediately preceding the completion of the judicial or nonjudicial power of sale foreclosure. 

     [(i)] (j)  For purposes of subsections [(g) and (h),] (h) and (i), the following definitions shall apply:

     "Completion" means:

     (1)  In a nonjudicial power of sale foreclosure, when the affidavit after public sale is recorded pursuant to section 667-33; and

     (2)  In a judicial foreclosure, when a purchaser is deemed to acquire title pursuant to subsection (b).

     "Regular monthly common assessments" shall not include:

     (1)  Any other special assessment, except for a special assessment imposed on all apartments as part of a budget adopted pursuant to section 514A-83.6;

     (2)  Late charges, fines, or penalties;

     (3)  Interest assessed by the association of apartment owners;

     (4)  Any lien arising out of the assessment; or

     (5)  Any fees or costs related to the collection or enforcement of the assessment, including attorneys' fees and court costs.

     (k)  The cost of a release of any lien filed pursuant to this section shall be paid by the party requesting the release.

     (l)  After any judicial or non-judicial foreclosure proceeding in which the association acquires title to the apartment, any excess rental income received by the association from the apartment shall be paid to existing lien holders based on the priority of lien, and not on a pro rata basis.  For purposes of this subsection, excess rental income shall be any net income received by the association after paying, crediting, or reimbursing the association or a third party for:

     (1)  The lien for delinquent assessments pursuant to subsections (a) and (b);

     (2)  Any maintenance fee delinquency against the apartment;

     (3)  Attorney's fees and other collection costs related to the association's foreclosure of the apartment; or

     (4)  Any costs incurred by the association for the rental, repair, maintenance, or rehabilitation of the apartment while the association is in possession of the apartment including monthly association maintenance fees, management fees, real estate commissions, cleaning and repair expenses for the apartment, and general excise taxes paid on rental income;

provided that the lien for delinquent assessments under paragraph (1) shall be paid, credited, or reimbursed first."

     SECTION 2.  Section 514B-146, Hawaii Revised Statutes, is amended to read as follows:

     "§514B-146  Association fiscal matters; lien for assessments.  (a)  All sums assessed by the association but unpaid for the share of the common expenses chargeable to any unit shall constitute a lien on the unit with priority over all other liens, except:

     (1)  Liens for taxes and assessments lawfully imposed by governmental authority against the unit; and

     (2)  All sums unpaid on any mortgage of record that was recorded prior to the recordation of a notice of a lien by the association, and costs and expenses including attorneys' fees provided in such mortgages;

provided that a lien recorded by an association for unpaid assessments shall expire six years from the date of recordation unless proceedings to enforce the lien are instituted prior to the expiration of the lien; provided further that the expiration of a recorded lien shall in no way affect the association's automatic lien that arises pursuant to this subsection or the declaration or bylaws.  Any proceedings to enforce an association's lien for any assessment shall be instituted within six years after the assessment became due; provided that if the owner of a unit subject to a lien of the association files a petition for relief under the United States Bankruptcy Code (11 U.S.C. §101 et seq.), the period of time for instituting proceedings to enforce the association's lien shall be tolled until thirty days after the automatic stay of proceedings under section 362 of the United States Bankruptcy Code (11 U.S.C. §362) is lifted.

     The lien of the association may be foreclosed by action or by nonjudicial or power of sale foreclosure procedures set forth in chapter 667, by the managing agent or board, acting on behalf of the association and in the name of the association; provided that no association may exercise the nonjudicial or power of sale remedies provided in chapter 667 to foreclose a lien against any unit that arises solely from fines, penalties, legal fees, or late fees, and the foreclosure of any such lien shall be filed in court pursuant to part IA of chapter 667.

     In any such foreclosure, the unit owner shall be required to pay a reasonable rental for the unit, if so provided in the bylaws or the law, and the plaintiff in the foreclosure shall be entitled to the appointment of a receiver to collect the rental owed by the unit owner or any tenant of the unit.  If the association is the plaintiff, it may request that its managing agent be appointed as receiver to collect the rent from the tenant.  The managing agent or board, acting on behalf of the association and in the name of the association, unless prohibited by the declaration, may bid on the unit at foreclosure sale, and acquire and hold, lease, mortgage, and convey the unit.  Action to recover a money judgment for unpaid common expenses shall be maintainable without foreclosing or waiving the lien securing the unpaid common expenses owed.

     (b)  Except as provided in subsection [(g),] (h) when the mortgagee of a mortgage of record or other purchaser of a unit obtains title to the unit as a result of foreclosure of the mortgage, the acquirer of title and the acquirer's successors and assigns shall not be personally liable for the share of the common expenses or assessments by the association chargeable to the unit that became due prior to the acquisition of title to the unit by the acquirer.  The unpaid share of common expenses or assessments not reimbursed pursuant to subsection (c) shall be deemed to be common expenses collectible from all of the unit owners, including the acquirer and the acquirer's successors and assigns.  The mortgagee of record or other purchaser of the unit shall be deemed to acquire title and shall be required to pay the unit's share of common expenses and assessments beginning:

     (1)  Thirty-six days after the order confirming the sale to the purchaser has been filed with the court;

     (2)  Sixty days after the hearing at which the court grants the motion to confirm the sale to the purchaser;

     (3)  Thirty days after the public sale in a nonjudicial power of sale foreclosure conducted pursuant to chapter 667; or

     (4)  Upon the recording of the instrument of conveyance;

whichever occurs first; provided that the mortgagee of record or other purchaser of the unit shall not be deemed to acquire title under paragraph (1), (2), or (3), if transfer of title is delayed past the thirty-six days specified in paragraph (1), the sixty days specified in paragraph (2), or the thirty days specified in paragraph (3), when a person who appears at the hearing on the motion or a party to the foreclosure action requests reconsideration of the motion or order to confirm sale, objects to the form of the proposed order to confirm sale, appeals the decision of the court to grant the motion to confirm sale, or the debtor or mortgagor declares bankruptcy or is involuntarily placed into bankruptcy.  In any such case, the mortgagee of record or other purchaser of the unit shall be deemed to acquire title upon recordation of the instrument of conveyance.

     (c)  Notwithstanding any other provision of law to the contrary, an association, through its board or managing agent, may collect on a monthly basis from each unit owner an amount that does not exceed ten per cent of regular monthly common assessments as defined in subsection (j) chargeable to the unit.  This amount may be collected monthly until the total amount collected from each unit owner is equal to the total of regular monthly common assessments chargeable to the unit for a twelve-month period.  All amounts collected pursuant to this subsection shall be deposited into an interest-bearing account to be maintained and managed by the association's board or managing agent. 

     Funds collected pursuant to this subsection shall be used only for the purpose of reimbursing the association for any unpaid regular monthly common assessments chargeable to the unit that remain outstanding after foreclosure of a lien pursuant to subsection (a), foreclosure of the unit's mortgage, or sale or transfer of the unit.  Any funds, including principal and interest amounts, remaining in the account after reimbursement of the association shall revert to the unit owner or the unit owner's successors or assigns.

     [(c)] (d)  No unit owner shall withhold any assessment claimed by the association.  A unit owner who disputes the amount of an assessment may request a written statement clearly indicating:

     (1)  The amount of common expenses included in the assessment, including the due date of each amount claimed;

     (2)  The amount of any penalty, late fee, lien filing fee, and any other charge included in the assessment;

     (3)  The amount of attorneys' fees and costs, if any, included in the assessment;

     (4)  That under Hawaii law, a unit owner has no right to withhold assessments for any reason;

     (5)  That a unit owner has a right to demand mediation or arbitration to resolve disputes about the amount or validity of an association's assessment, provided the unit owner immediately pays the assessment in full and keeps assessments current; and

     (6)  That payment in full of the assessment does not prevent the owner from contesting the assessment or receiving a refund of amounts not owed.

Nothing in this section shall limit the rights of an owner to the protection of all fair debt collection procedures mandated under federal and state law.

     [(d)] (e)  A unit owner who pays an association the full amount claimed by the association may file in small claims court or require the association to mediate to resolve any disputes concerning the amount or validity of the association's claim.  If the unit owner and the association are unable to resolve the dispute through mediation, either party may file for arbitration under section 514B‑162; provided that a unit owner may only file for arbitration if all amounts claimed by the association are paid in full on or before the date of filing.  If the unit owner fails to keep all association assessments current during the arbitration, the association may ask the arbitrator to temporarily suspend the arbitration proceedings.  If the unit owner pays all association assessments within thirty days of the date of suspension, the unit owner may ask the arbitrator to recommence the arbitration proceedings.  If the owner fails to pay all association assessments by the end of the thirty-day period, the association may ask the arbitrator to dismiss the arbitration proceedings.  The unit owner shall be entitled to a refund of any amounts paid to the association which are not owed.

     [(e)] (f)  In conjunction with or as an alternative to foreclosure proceedings under subsection (a), where a unit is owner-occupied, the association may authorize its managing agent or board to, after sixty days' written notice to the unit owner and to the unit's first mortgagee of the nonpayment of the unit's share of the common expenses, terminate the delinquent unit's access to the common elements and cease supplying a delinquent unit with any and all services normally supplied or paid for by the association.  Any terminated services and privileges shall be restored upon payment of all delinquent assessments but need not be restored until payment in full is received.

     [(f)] (g)  Before the board or managing agent may take the actions permitted under [subsection (e),] subsections (c) or (f), the board shall adopt a written policy providing for such actions and have the policy approved by a majority vote of the unit owners at an annual or special meeting of the association or by the written consent of a majority of the unit owners.

     [(g)] (h)  Subject to this subsection, and subsections [(h) and (i),] (i) and (j), the board may specially assess the amount of the unpaid regular monthly common assessments for common expenses against a person who, in a judicial or nonjudicial power of sale foreclosure, purchases a delinquent unit; provided that:

     (1)  A purchaser who holds a mortgage on a delinquent unit that was recorded prior to the filing of a notice of lien by the association and who acquires the delinquent unit through a judicial or nonjudicial foreclosure proceeding, including purchasing the delinquent unit at a foreclosure auction, shall not be obligated to make, nor be liable for, payment of the special assessment as provided for under this subsection; and

     (2)  A person who subsequently purchases the delinquent unit from the mortgagee referred to in paragraph (1) shall be obligated to make, and shall be liable for, payment of the special assessment provided for under this subsection; and provided further that the mortgagee or subsequent purchaser may require the association to provide at no charge a notice of the association's intent to claim lien against the delinquent unit for the amount of the special assessment, prior to the subsequent purchaser's acquisition of title to the delinquent unit.  The notice shall state the amount of the special assessment, how that amount was calculated, and the legal description of the unit.

    [(h)] (i)  The amount of the special assessment assessed under subsection [(g)] (h) shall not exceed the total amount of unpaid regular monthly common assessments that were assessed during the six months immediately preceding the completion of the judicial or nonjudicial power of sale foreclosure.

    [(i)] (j)  For purposes of subsections [(g) and (h),] (h) and (i), the following definitions shall apply, unless the context requires otherwise:

     "Completion" means:

     (1)  In a nonjudicial power of sale foreclosure, when the affidavit after public sale is recorded pursuant to section 667-33; and

     (2)  In a judicial foreclosure, when a purchaser is deemed to acquire title pursuant to subsection (b).

     "Regular monthly common assessments" does not include:

     (1)  Any other special assessment, except for a special assessment imposed on all units as part of a budget adopted pursuant to section 514B‑148;

     (2)  Late charges, fines, or penalties;

     (3)  Interest assessed by the association;

     (4)  Any lien arising out of the assessment; or

     (5)  Any fees or costs related to the collection or enforcement of the assessment, including attorneys' fees and court costs.

    [(j)] (k)  The cost of a release of any lien filed pursuant to this section shall be paid by the party requesting the release.

     (l)  After any judicial or non-judicial foreclosure proceeding in which the association acquires title to the unit, any excess rental income received by the association from the unit shall be paid to existing lien holders based on the priority of lien, and not on a pro rata basis.  For purposes of this subsection, excess rental income shall be any net income received by the association after paying, crediting, or reimbursing the association or a third party for:

     (1)  The lien for delinquent assessments pursuant to subsections (a) and (b);

     (2)  Any maintenance fee delinquency against the unit;

     (3)  Attorney's fees and other collection costs related to the association's foreclosure of the unit; or

     (4)  Any costs incurred by the association for the rental, repair, maintenance, or rehabilitation of the unit while the association is in possession of the unit including monthly association maintenance fees, management fees, real estate commissions, cleaning and repair expenses for the unit, and general excise taxes paid on rental income;

provided that the lien for delinquent assessments under paragraph (1) shall be paid, credited, or reimbursed first."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2112.


 


 

Report Title:

Condominiums; Assessments; Liens

 

Description:

Amends procedures for reimbursement for common assessments by condominium associations after delinquency or foreclosure.  Authorizes collection of specified amounts for deposit into a reserve account to pay for unpaid common assessments in the event of foreclosure, or unit sale or transfer.  Effective July 1, 2112.  (HB21 HD2)

 

 

 

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