Condos; Proxies

Clarifies that a board of directors of a condominium association
may use association funds, with proper notice, only to
"distribute" and not "solicit" proxies from apartment owners.
Authorizes the use of a copy, fax or other reliable reproduction
of a proxy in lieu of the original.  (SD2)

THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that confusion remains
 2 concerning whether condominium laws require the board of
 3 directors of a condominium association to comply with the notice
 4 requirements of section 514A-82(b)(4), Hawaii Revised Statutes,
 5 when soliciting proxies in connection with annual meetings.  The
 6 legislature has repeatedly addressed the issue of proxies over
 7 the years in an attempt to ensure that a level playing field
 8 exists between individual owners and the board of directors and
 9 managing agents.  Section 514A-82(b)(4) provides that if a member
10 of the board uses association funds to solicit proxies, the
11 member may not cast any of the proxies for the election or
12 reelection of board members unless the proxy form specifically
13 authorizes such action and the board first posts notice of its
14 intent to solicit proxies in prominent locations within the
15 project at least thirty days prior to the solicitation.
16      It is the intent of the legislature that this thirty day
17 notice provision apply only to proxies "distributed" by the board
18 if association funds are used.
19      The legislature also finds that copies, facsimile

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                                     S.B. NO.           S.D. 2

 1 telecommunications, and other reliable reproductions of proxies
 2 should be permitted.
 3      Accordingly, the purpose of this Act is to clarify that a
 4 board of directors of a condominium association that distributes
 5 proxies using association funds must comply with the thirty day
 6 notice requirement and that a copy, facsimile telecommunication,
 7 or other reliable reproduction of a proxy may be used in lieu of
 8 the original.
 9      SECTION 2.  Section 514A-82, Hawaii Revised Statutes, is
10 amended by amending subsection (b) to read as follows:
11      "(b)  In addition to the requirements of subsection (a), the
12 bylaws shall [provide for:] be consistent with the following
13 provisions:
14      (1)  [The method of removal from office of directors; that
15           at]  At any regular or special meeting of the apartment
16           owners, any one or more members of the board of
17           directors may be removed by the apartment owners and
18           successors shall then and there be elected for the
19           remainder of the term to fill the vacancies thus
20           created.  The removal and replacement shall be in
21           accordance with all applicable requirements and
22           procedures in the bylaws for the removal and
23           replacement of directors, including[, but not limited

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                                     S.B. NO.           S.D. 2

 1           to,] any [provisions] provision relating to cumulative
 2           voting.  If removal and replacement is to occur at a
 3           special association meeting, the call for the meeting
 4           shall be by the president or by a petition to the
 5           secretary or managing agent signed by not less than
 6           twenty-five per cent of the apartment owners as shown
 7           in the association's record of ownership; [and]
 8           provided [further] that if the secretary or managing
 9           agent shall fail to send out the notices for the
10           special meeting within fourteen days of receipt of the
11           petition, then the petitioners shall have the authority
12           to set the time, date, and place for the special
13           meeting and to send out the notices for the special
14           meeting in accordance with the requirements of the
15           bylaws.  Except as otherwise provided [herein,] in this
16           section, the meeting for the removal and replacement
17           from office of directors shall be scheduled, noticed,
18           and conducted in accordance with the bylaws of the
19           association.
20      (2)  The bylaws may be amended at any time by the vote or
21           written consent of sixty-five per cent of all apartment
22           owners; provided that each one of the particulars set
23           forth in this section shall be embodied in the bylaws

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                                     S.B. NO.           S.D. 2

 1           always; and provided further that any proposed bylaws
 2           with the rationale for the proposal may be submitted by
 3           the board of directors or by a volunteer apartment
 4           owners' committee.  If submitted by that committee,
 5           [it] the proposal shall be accompanied by a petition
 6           signed by not less than twenty-five per cent of the
 7           apartment owners as shown in the association's record
 8           of ownership.  The proposed bylaws, rationale, and
 9           ballots for voting on any proposed bylaw shall be
10           mailed by the board of directors to the owners at the
11           expense of the association for vote or written consent
12           without change within thirty days of the receipt of the
13           petition by the board of directors.  The vote or
14           written consent required to adopt the proposed bylaw
15           shall not be less than sixty-five per cent of all
16           apartment owners; provided that the vote or written
17           consent must be obtained within one hundred twenty days
18           after mailing.  In the event that the bylaw is duly
19           adopted, then the board shall cause the bylaw amendment
20           to be recorded in the bureau of conveyances or filed in
21           the land court, as the case may be.  The volunteer
22           apartment owners' committee shall be precluded from
23           submitting a petition for a proposed bylaw that is

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                                     S.B. NO.           S.D. 2

 1           substantially similar to that which has been previously
 2           mailed to the owners within one year after the original
 3           petition was submitted to the board.  This subsection
 4           shall not preclude any apartment owner or voluntary
 5           apartment owners' committee from proposing any bylaw
 6           amendment at any annual association meeting.
 7      (3)  Notices of association meetings, whether annual or
 8           special, shall be sent to each member of the
 9           association of apartment owners at least fourteen days
10           prior to the meeting[,] and shall contain at least:
11           the date, time, and place of the meeting, the items on
12           the agenda for the meeting, and a standard proxy form
13           authorized by the association, if any.
14      (4)  No resident manager or managing agent shall solicit,
15           for use by the manager or managing agent, any proxies
16           from any apartment owner of the association of owners
17           that employs the resident manager or managing agent,
18           nor shall the resident manager or managing agent cast
19           any proxy vote at any association meeting except for
20           the purpose of establishing a quorum.  [No member of a]
21           Any board of directors [who uses] that intends to use
22           association funds to [solicit] distribute proxies,
23           including the standard proxy form referred to in

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                                     S.B. NO.           S.D. 2

 1           paragraph (3), shall [cast any of these proxy votes for
 2           the election or reelection of board members at any
 3           association meeting unless the proxy form specifically
 4           authorizes the board member to vote for the election or
 5           reelection of board directors and the board] first
 6           [posts] post notice of its intent to [solicit]
 7           distribute proxies in prominent locations within the
 8           project at least thirty days prior to its
 9           [solicitation] distribution of proxies; provided that
10           if the board receives within seven days of the posted
11           notice a request by any owner for use of association
12           funds to solicit proxies accompanied by a statement,
13           the board shall mail to all owners either:
14           (A)  A proxy form containing the names of all owners
15                who have requested the use of association funds
16                for soliciting proxies accompanied by their
17                statements; or
18           (B)  A proxy form containing no names, but accompanied
19                by a list of names of all owners who have
20                requested the use of association funds for
21                soliciting proxies and their statements.
22           The statement shall not exceed one hundred words,
23           indicating the owner's qualifications to serve on the

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                                     S.B. NO.           S.D. 2

 1           board and reasons for wanting to receive proxies.
 2      (5)  A director who has a conflict of interest on any issue
 3           before the board shall disclose the nature of the
 4           conflict of interest prior to a vote on that issue at
 5           the board meeting, and the minutes of the meeting shall
 6           record the fact that a disclosure was made.
 7      (6)  The apartment owners shall have the irrevocable right,
 8           to be exercised by the board of directors, to have
 9           access to each apartment from time to time during
10           reasonable hours as may be necessary for the operation
11           of the property or for making emergency repairs therein
12           necessary to prevent damage to the common elements or
13           to another apartment or apartments.
14      (7)  An owner shall not act as an officer of an association
15           and an employee of the managing agent employed by the
16           association.
17      (8)  An association's employees shall not engage in selling
18           or renting apartments in the condominium in which they
19           are employed except association-owned units, unless
20           such activity is approved by an affirmative vote of
21           sixty-five per cent of the membership.
22      (9)  The board of directors shall meet at least once a year.
23           Whenever practicable, notice of all board meetings

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                                     S.B. NO.           S.D. 2

 1           shall be posted by the resident manager or a member of
 2           the board in prominent locations within the project
 3           seventy-two hours prior to the meeting or
 4           simultaneously with notice to the board of directors.
 5     (10)  Directors shall not expend association funds for their
 6           travel, directors' fees, and per diem, unless owners
 7           are informed and a majority approve of these expenses.
 8     (11)  Associations at their own expense shall provide all
 9           board members with a current copy of the association's
10           declaration, bylaws, house rules, and, annually, a copy
11           of this chapter with amendments.
12     (12)  The directors may expend association funds, which shall
13           not be deemed to be compensation to the directors, to
14           educate and train themselves in subject areas directly
15           related to their duties and responsibilities as
16           directors; provided that the approved annual operating
17           budget shall include these expenses as separate line
18           items.  These expenses may include registration fees,
19           books, videos, tapes, other educational materials, and
20           economy travel expenses.  Except for economy travel
21           expenses within the State, all other travel expenses
22           incurred under this subsection shall be subject to the
23           requirements of [subsection 514A-82(b)(10).] paragraph

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                                     S.B. NO.           S.D. 2

 1           (10).
 2     (13)  A lien created pursuant to section 514A-90 may be
 3           enforced by the association in any manner permitted by
 4           law, including nonjudicial or power of sale foreclosure
 5           procedures authorized by chapter 667, as that chapter
 6           may be amended from time to time.
 7 The provisions of this subsection shall be deemed incorporated
 8 into the bylaws of all condominium projects existing as of
 9 January 1, 1988, and all condominium projects created after that
10 date."
11      SECTION 3.  Section 514A-83.2, Hawaii Revised Statutes, is
12 amended to read as follows:
13      "514A-83.2  Proxies.(a)  A proxy, to be valid, must:
14      (1)  Be delivered to the secretary of the association of
15           apartment owners or the managing agent, if any, no
16           later than 4:30 p.m. on the second business day prior
17           to the date of the meeting to which it pertains;
18      (2)  Contain at least the name of the association of
19           apartment owners, the date of the meeting of the
20           association of apartment owners, the printed [name and
21           signature of the person or] names and signatures of the
22           persons giving the proxy, the [apartment or] apartments
23           for which the proxy is given, and the date that the

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                                     S.B. NO.           S.D. 2

 1           proxy is given; and
 2      (3)  Contain boxes wherein the owner has indicated that the
 3           proxy is given:
 4           (A)  For quorum purposes only;
 5           (B)  To the individual whose name is printed on a line
 6                next to this box;
 7           (C)  To the board of directors as a whole and that the
 8                vote be made on the basis of the preference of the
 9                majority of the board; or
10           (D)  To those directors present at the meeting and the
11                vote to be shared with each board member receiving
12                an equal percentage.
13      (b)  A proxy shall only be valid for the meeting to which
14 the proxy pertains and its adjournments, may designate any person
15 as proxy, and may be limited as the apartment owner desires and
16 indicates; provided that no proxy shall be irrevocable unless
17 coupled with a financial interest in the unit.
18      (c)  No [officer of a] board of directors or member of the
19 board shall use association funds to solicit proxies[;] except
20 for the distribution of proxies as set forth in section
21 514A-82(b)(4); provided that this shall not prevent an [officer
22 from exercising the officer's right] individual member of the
23 board from soliciting proxies as an apartment owner under section

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                                     S.B. NO.           S.D. 2

 1 514A-82(b)(4).
 2      (d)  A copy, facsimile telecommunication, or other reliable
 3 reproduction of a proxy may be used in lieu of the original proxy
 4 for any and all purposes for which the original proxy could be
 5 used; provided that any copy, facsimile telecommunication, or
 6 other reproduction shall be a complete reproduction of the entire
 7 original proxy.
 8      [(d)] (e)  Nothing in this section shall affect the holder
 9 of any proxy under a first mortgage of record encumbering an
10 apartment or under an agreement of sale affecting an apartment."
11      SECTION 4.  Statutory material to be repealed is bracketed.
12 New statutory material is underscored.
13      SECTION 5.  This Act shall take effect upon its approval and
14 shall apply retroactively to all condominium projects existing as
15 of the approval of this Act and to all condominium projects
16 created thereafter.