Condo Reserves, Where Held

Permits condominium reserves to be held in a federal credit union
or insured financial institution in the United States.

THE SENATE                              S.B. NO.           372
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Section 514A-97(c), Hawaii Revised Statutes,
 2 should be revised to allow condominium associations to comply
 3 with their fiduciary duty to ensure that association deposits are
 4 covered by federal insurance.  Currently there are eight
 5 financial institutions in the State that offer Federal Deposit
 6 Insurance Corporation protection up to a limit of $100,000 per
 7 account.  Due to the enactment in 1991 of the budget and reserves
 8 law, section 514A-83.6, Hawaii Revised Statutes, condominium
 9 associations have been required to build up their reserves
10 through the collection of maintenance fees to ensure the
11 availability of funds for repair and improvement of their aging
12 buildings.  This has resulted in substantial sums in reserve
13 accounts -- some associations have reserve accounts in excess of
14 $1,000,000 -- and due to the limited number of financial
15 institutions in the State, associations are facing problems as to
16 where to deposit their funds so as to comply with section
17 514A-97(c).
18      SECTION 2.  Section 514A-97, Hawaii Revised Statutes, is
19 amended by amending subsection (c) to read as follows:

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                                     S.B. NO.           372

 1      "(c)  All funds, except as otherwise provided in this
 2 subsection, collected by an association, or by a managing agent
 3 for any association, shall be:
 4      (1)  Deposited in a financial institution, including a
 5           credit union, located in the [State] United States,
 6           whose deposits are insured by an agency of the United
 7           States government;
 8      (2)  Held by a corporation authorized to do business under
 9           article 8 of chapter 412; or
10      (3)  Invested in the obligations of the United States
11           government.
12      Records of the deposits and disbursements shall be disclosed
13 to the commission upon request.  All funds collected by an
14 association shall only be disbursed by employees of the
15 association under the supervision of the association's board of
16 directors.  All funds collected by a managing agent from an
17 association shall be held in a client trust fund account and
18 shall be disbursed only by the managing agent or the managing
19 agent's employees under the supervision of the association's
20 board of directors.  The commission may draft rules governing the
21 handling and disbursement of condominium association funds."
22      SECTION 3.  Statutory material to be repealed is bracketed.
23 New statutory material is underscored.

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                                     S.B. NO.           372

 1      SECTION 4.  This Act shall take effect upon its approval.
 3                           INTRODUCED BY:_________________________