STAND. COM. REP. NO. 742

Honolulu, Hawaii

, 2005

RE: H.B. No. 973

H.D. 1

 

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Consumer Protection & Commerce, to which was referred H.B. No. 973 entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUMS,"

begs leave to report as follows:

The purpose of this bill is to remove conflicts of interest in the management of a condominium property by a managing agent, in the recodified condominium law in Act 164, Session Laws of Hawaii 2004, by:

(1) Requiring a managing agent wishing to lease part of the property to obtain a third-party professional appraisal;

(2) Prohibiting an employee of the association of apartment owners (AOAO) of the property to also be employed by the managing agent; and

(3) Requiring the condominium property developer, the developer's affiliate, or the condominium board of directors to consider a minimum of two bids for the property management contract.

Five private citizens submitted testimony in support of this measure. Pahio Resorts supported the bill with amendments. The Community Associations Institute Hawaii Chapter, Outrigger Hotels, Cendant Timeshare Resort Group, Inc., Fairfield Resorts, Inc., and Aston Hotels and Resorts Hawaii submitted testimony in opposition.

Your Committee finds that this measure mitigates conflicts of interest that may occur in the management of a condominium property by a managing agent. When employees of the condominium AOAO are also employed in a vacation rental business operated by the managing agent at the same complex, these employees must attempt to serve the best interests of the AOAO while simultaneously generating the greatest profit for the managing agent's vacation rental business, thus creating an apparent conflict of interest. This measure prohibits these types of employment arrangements.

While the bill also attempts to increase competitive pricing of condominium management contracts by requiring more than one bid for the contract, and also tries to assure that current market rates are known, through a professional appraisal before condominium property is leased by the managing agent, your Committee has concerns that these two-bid and professional appraisal requirements will prove to be too costly and time consuming to be effective.

Therefore, your Committee has amended this measure by:

(1) Deleting the required third-party professional appraisal of rental leases;

(2) Deleting the required minimum of two bids for the management contract;

(3) Amending the effective date to July 1, 2099, to encourage further discussion; and

(4) Making technical, nonsubstantive amendments for clarity, consistency, and style.

As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 973, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 973, H.D. 1, and be placed on the calendar for Third Reading.

 

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

 

____________________________

KENNETH HIRAKI, Chair