Condominiums; Liens

Grants limited priority to condominium association liens for
unpaid common expenses.

THE SENATE                              S.B. NO.           701
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that the current system of
 2 lien priority for condominium associations unfairly requires non-
 3 delinquent apartment owners to bear the entire burden of unpaid
 4 common expense assessments accrued by a delinquent owner, in
 5 cases in which there is a mortgage lien that is recorded prior to
 6 the recordation of the association's notice of lien and the
 7 foreclosure sale proceeds are insufficient to pay the claims of
 8 both the mortgagee and the association.
 9      Accordingly, the purpose of this Act is to grant the
10 condominium association's lien for unpaid common expenses a
11 limited priority over mortgage liens.
12      SECTION 2.  Section 514A-90, Hawaii Revised Statutes, is
13 amended by amending subsection (a) to read as follows:
14      "(a)  All sums assessed by the association of apartment
15 owners but unpaid for the share of the common expenses chargeable
16 to any apartment constitute a lien on the apartment prior to all
17 other liens, except:
18      (1)  [liens] Liens for taxes and assessments lawfully

Page 2                                                     
                                     S.B. NO.           701

 1           imposed by governmental authority against the
 2           apartment[,]; and
 3      (2)  [all] All sums unpaid on any mortgage of record [which]
 4           that was recorded prior to the recordation of a notice
 5           of a lien by the association of apartment owners[,] and
 6           costs and expenses, including attorneys' fees, provided
 7           in such mortgages[.];
 8 provided that the association of apartment owners' lien shall be
 9 prior to any mortgages recorded after the effective date of this
10 Act to the extent of any unpaid common expense assessments based
11 on the annual budget adopted under section 514A-83.6 which would
12 have become due in the absence of acceleration during the six
13 months immediately preceding the commencement of any legal
14 proceeding to collect amounts due to the association or the
15 mortgagee under the mortgage, including but not limited to
16 foreclosure by the association pursuant to this section.  The
17 lien of the association of apartment owners may be foreclosed by
18 action by the [manager] managing agent or board of directors,
19 acting on behalf of the apartment owners, in like manner as a
20 mortgage of real property.  In any [such] foreclosure, the
21 apartment owner shall be required to pay a reasonable rental for
22 the apartment, if so provided in the bylaws, and the plaintiff in

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                                     S.B. NO.           701

 1 the foreclosure shall be entitled to the appointment of a
 2 receiver to collect the [same.] rental.  The [manager] managing
 3 agent or board of directors, acting on behalf of the association
 4 of apartment owners, [may,] unless prohibited by the declaration,
 5 may bid on the apartment at foreclosure sale[,] and acquire and
 6 hold, lease, mortgage, and convey the [same.] apartment.  Action
 7 to recover a money judgment for unpaid common expenses shall be
 8 maintainable without foreclosing or waiving the lien securing the
 9 [same.] expenses owed."
10      SECTION 3.  Statutory material to be repealed is bracketed.
11 New statutory material is underscored.
12      SECTION 4.  This Act shall take effect upon its approval.
14                           INTRODUCED BY:  _______________________