Legislature Considers Bills that Allows Condominiums and Coops to Adopt Rules Prohibiting Smoking

House Bill 34 would amend both the Residential Cooperative Statute and the Hawaii Condominium Act to permit condominiums and coops to prohibit smoking in the common areas and units by rule.  The bill was heard on January 30, 2013, but has been scheduled for further hearing on February 4, 2013 at 2:00 P.M. in House Conference Room 325.

The Senate companion bill, Senate Bill 945 was heard by the Senate Health Committee on January 30, 2013.  The Senate Health Committee passed the bill out of committee with some amendments.  Senate Bill 945 will be referred to the Senate Consumer Protection Committee.

Currently, there is some question whether condominiums can prohibit smoking in units by rule or whether a bylaw amendment would be necessary.

We’re Moving!

We will be moving to our new office located at:

888 Mililani Street, 2nd Floor
Honolulu, HI  96813

The building is on Queen Street located behind (makai) of the Old Federal Building.


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Right now our contractor is rushing to complete the work so that we can move in later this month.  We will be closed on Friday, January 18, 2013 and will re-open at our new office on Tuesday, January 22, 2013.  During the move, we will not have access to our phones, faxes or email.  We apologize for any inconvenience will cause you.  However, this should be our last move for a while.  After the move, our phone numbers and email addresses will remain the same after our move.

 

Court Rules Management Company Not a Debt Collector Under FDCPA

A few days ago, the Federal District Court for the District of Hawaii ruled that a management company is not a debt collector under the Fair Debt Collection Practices Act (“FDCPA”).  Although the legal principles in the decision are not particularly new, it does provide an opportunity to discuss the FDCPA and management companies.

The FDCPA requires debt collectors to meet certain requirements in the collection of a debt, including a requirement to provide the debtor with a very specific notice that you are debt collector and the debtor has certain rights.  Failure to follow the requirements can result in a significant award in favor of the debtor.  The primary target of the FDCPA was collection agencies.  However, the FDCPA was written broadly so that it could apply to management companies and even attorneys under certain circumstances.

Management companies have two possible arguments that they are not a debt collector under the FDCPA.   The FDCPA contains an exemption for:

any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.  [Emphasis added.]

The first exception (incidental to a bona fide fiduciary obligation) sometimes applies because the management company owes a fiduciary duty to the association.  See, Hawaii Revised Statutes §514B-132(c)Therefore, if the collection of the association’s debts is not central to the fiduciary relationship, a management company would not be a debt collector under the first exemption.  In Beckman v. Maalaea Surf Association of Apartment Owners, the Hawaii Federal District Court recognized that the management company’s duties included:  (1) maintaining a record of all income and expenses related to the Property; (2) preparing an annual budget; (3) maintaining the common elements of the Property; (4) negotiating various utility related services contracts; and (5) collecting all monthly and other assessments and fees that are due the Association with respect to the Property.  The Court ruled that all these duties meant that the the collection of assessments and fees is “incidental to” [the management company’s] overall fiduciary obligation to manage the Property.

The third exception (a debt which was not in default at the time it was obtained) sometimes applies because often the unit owner may not be in default at the time the management company is hired by the association.  In Turner v. Hawaii First Inc., the Hawaii Federal District Court ruled that the management company was not a debt collector because the account was not in default at the time the management company was hired by the Association to collect the Association’s debts.

State Tax Department Issues Announcement on Transient Accommodation Tax Law

On July 4, 2012, I posted a short article about the law that requires associations to provide information to the State Department of Taxation on its members’ use of their lots or units for transient accommodations.  Recently, the Department of Taxation issued an Announcement No. 2012-12 on the law.  The announcement includes a statement about an association’s obligations under Act 326 (2012) as follows:

The Act requires any nongovernmental entity with covenants, bylaws and administrative provisions which is formed pursuant to chapter 514A, 514B or 421J to do the following:

 

  • Provide to the Department of Taxation (the “Department”) relevant information related to operators leasing transient accommodations on its property. The relevant information includes the operator’s name, address, contact information,registration identification number issued under HRS § 237D-4 (i.e., the TAT tax license number) and website address if advertising or soliciting the transient accommodation on the internet.
  • Provide the relevant information by December 31 of each year, or within 60 days of a change, whichever is later. Further guidance on how taxpayers will providethis relevant information will be forthcoming.

The Announcement provides a little more guidance to condominium and planned community associations about the law.  The Department of Taxation indicates that:

  • No penalties will be imposed on taxpayers who fail to provide to the Department before January 1, 2013 relevant information related to operators leasing transient accommodations on their property.
  • However a penalty will be imposed if the taxpayer fails to timely provide the relevant information after December 31, 2012.
  • The Department will issue further guidance when it determines the manner and form in which taxpayers should submit this
    information.
  • The Department notes that the Act’s definition of “relevant information” is broader than the information operators are required to submit to the nongovernmental entities (e.g., website address).

This means that associations should provide as much information it has in its records on transient accommodations operating in their project.

Associations on Maui should be aware that they are also required to provide similar transient accommodation information to the Maui County Director of Finance pursuant to Maui Code 3.48.305.