STAND. COM. REP. NO. 870

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: H.B. No. 766
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred H.B. No. 766 entitled: 

     "A BILL FOR AN ACT RELATING TO CONDOMINIUMS,"

begs leave to report as follows:

     The purpose of this bill is to clarify that a mortgagee of
record or other purchaser of an apartment who obtains possession
of the apartment as a result of foreclosure on the mortgage,
becomes liable for the apartment's share of common expenses and
assessments:

     (1)  Thirty-six days after filing of the court order
          confirming the sale;

     (2)  Sixty days after the court confirms the sale; or

     (3)  Upon recording of the deed,

whichever occurs first.

     The Real Estate Commission submitted testimony in general
support, deferring to other testifiers on the specifics of the
bill.  Testimony supporting this measure was also submitted by
the Hawaii Independent Condominium and Cooperative Owners, Hawaii
Council of Associations of Apartment Owners, Community
Associations Institute, Association of Apartment Owners of
Makakilo Hale 1, Board of Directors of the Mauna Luan Condominium
and many individual members of condominium associations.

 
 
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     Your Committee received testimony that the number of
foreclosures in Hawaii has greatly increased due to the current
state of the economy, and that associations of apartment owners
are required to bear an unfair share of the economic burden.
Testimony indicated that the practice in judicial foreclosures
involving apartments is for purchasers to take advantage of an
ambiguity in the law that allows them to exercise the rights of
ownership over the apartment purchased, without the
responsibility of paying maintenance fees.  This practice leaves
associations the burden of the unpaid fees as well as the
continuing responsibility for maintaining common property and
providing common services benefiting the apartment.

     You Committee was told that in a judicial foreclosure of an
apartment, the sale becomes final and purchasers may exercise the
rights of ownership over the apartment as soon as a court
confirms the sale.  However, a number of additional steps are
needed before it is clear under current law that title and
responsibility for maintenance fees, passes to the purchaser.  A
written order must be filed with the court, and the deed
transferring the apartment must also be recorded.  Lenders are
typically the purchasers at foreclosure due to negative equity in
the current market, and delay recordation of the deed until they
are able to sell the property, thereby avoiding liability for
maintenance fees.  Your Committee heard testimony that sometimes
there are delays of up to two or three months after court
confirmation of the sale before the order is filed, and your
Committee was apprised of an instance in which the deed was not
recorded until almost eight months after the order, costing the
association approximately $2,300.  This bill would provide some
relief to associations of apartment owners by specifying a time
at which a purchaser becomes responsible for maintenance fees.

     Your Committee has made nonsubstantive, technical amendments
to this bill for purposes of clarity and style.

     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 H.B. No. 766, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B. No.
766, H.D. 1, and be placed on the calendar for Third Reading.


 
 
 
 
 
                                 STAND. COM. REP. NO. 870
                                 Page 3

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



                                   ______________________________
                                   RON MENOR, Chair