STAND. COM. REP. NO. 520-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2846
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred H.B. No. 2846 entitled: 

     "A BILL FOR AN ACT RELATING TO CONDOMINIUM PROPERTY
     REGIMES,"

begs leave to report as follows:

     The purpose of this measure is to avoid unnecessary
litigation over condominium lease rent renegotiations by:

     (1)  Giving the condominium association the responsibility
          to renegotiate lease rents;

     (2)  Requiring that the costs of lease rent renegotiation be
          borne solely by the members of the association whose
          apartments are in leasehold as opposed to fee
          ownership; and

     (3)  Providing that the costs of lease rent renegotiation
          may be collected in the same manner and in compliance
          with the same requirements governing collection of
          association common expenses.

     Testimony in support of this measure was received from the
Hawaii Council of Associations of Apartment Owners, Monarch
Properties, Inc., Neely & Anderson, Hale Coalition, and an
individual.


 
 
 
                                 STAND. COM. REP. NO. 520-00
                                 Page 2

 
     The Legislature passed Act 326, Session Laws of Hawaii 1993,
which authorized the sale of the leased fee interest in the land
under any condominium project, to individual condominium unit
lessees.  Conversion from lease to fee ownership under this law
resulted in associations composed of a mixture of fee simple
apartment owners and apartment lessees.

     Associations facing lease rent renegotiation are now
discovering that the drafters of their governing declarations and
bylaws never considered that some association members would own
in fee simple, and would not be subject to, or interested in,
rent renegotiations.  Many condominium governing documents,
incorrectly assuming commonality of the interests of association
members in rent renegotiation, fail to state who is responsible
for renegotiation or inadequately address who is to bear the
cost.  To resolve these issues, a number of associations have
already been involved in litigation.

     Your Committee finds that this bill provides the minimum
intervention in condominium self-governance necessary to avoid
needless and costly legal disputes.  Your Committee also finds
that it is both appropriate and advantageous for lessees to be
represented as a group in lease rent renegotiations by the
association, and that it is fair that only those subject to lease
rent renegotiation should bear the cost.

     Mindful that the intent of the Condominium Property Regimes
Law is to facilitate self-governance by condominium associations,
your Committee hopes that association members will, through their
own procedures, mutually reach the same result as in this
measure.  In this regard, your Committee notes that associations
may, under their existing powers, provide for full representation
of those affected by rent renegotiation, and urges associations
to include lessee owners in any committee formed to conduct such
renegotiations.  Your Committee has refrained from adding
provisions for the recovery of interest and costs incurred as a
result of late payment of rent renegotiation assessments, and
recognized that imposition of interest and costs is also within
existing association power and authority.

     Technical, nonsubstantive amendments were made for purposes
of clarity, consistency, 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. 2846, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B. No.
2846, H.D. 1, and be placed on the calendar for Third Reading.

 
                                 STAND. COM. REP. NO. 520-00
                                 Page 3

 

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



                                   ______________________________
                                   RON MENOR, Chair