Hawaii Condo Law
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.
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.
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
- 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.
A few days ago, the Department of Housing and Urban Development (“HUD”) issued a press release that it had settled a discrimination claim involving allegations that a condominium association rejected a qualified buyer based on the buyer’s national origin and sex. HUD is the federal agency that investigates and enforces claims of discrimination under the Federal Fair Housing Act.
It is relatively rare for condominium associations to have the authority to screen owners and residents of the condominium units. Normally, the sale of a condominium unit is a matter between the seller and the buyer — the condominium association is not involved. However, it is theoretically possible for the condominium documents to include a provision that grants the Board the authority to approve the sale of a condominium unit. Even then, however, there may be a claim that such a provision is an illegal restraint on sale of the property.
Even if an association has an enforceable right to screen prospective purchasers of a condominium unit, the Association may want to consider whether the association has an interest in restricting who owns a unit and whether the risk is worth the benefit to the Association. Screening prospective purchasers of a condominium unit might give rise to claims that the Association is discriminating based on a protected class, just like this Florida condominium association. Moreover, screening may make units in the condominium project ineligible for certain types of mortgages which could affect property values.
Under the terms of the HUD settlement agreement, the Florida condominium association will:
- Pay the complainants $25,000;
- Make dwellings available to persons without regard to race, color, religion, sex, handicap, familial status or national origin;
- Train board officers on all matters relating to their responsibilities under the Fair Housing Act;
- Submit to HUD a copy of all requests of occupancy and a copy of all board decisions to approve or reject each request for a period of 1 year; and
- Discontinue all applicant screening interviews.
Before you implement an owner or tenant screening process, you should seek the advice of the association’s attorney.
You may have heard about new requirements to have pool lifts in your swimming pools. In 2010, the U.S. Department of Justice promulgated revised regulations under Title III of the American’s with Disabilities Act (“ADA”). Most of the regulations went into effect on March 15, 2011. One of the regulatory changes by the Department of Justice was to adopt the 2010 ADA Standards for Accessible Design (“2010 ADA Standards”). The 2010 ADA Standards for Accessible Design requires that at least two accessible means of entry shall be provided for swimming pools. Accessible means of entry can be by swimming pool lifts, sloped entries, transfer walls, transfer systems and pool stairs, but each of the means of entry must comply with specific requirements in the 2010 ADA Standards. Moreover, each pool governed by the ADA is required to have either a pool lift or a sloped entry.
You should not assume, however, that every community association will be required to have pool lifts or other ADA compliant means of access. Generally, most purely residential communities are not governed by the ADA. This is because the public accommodation provisions of the ADA (often referred to as Title III) only applies to certain designated types of commercial operations. However, community associations can become public accommodations even if they do not have commercial operations. For instance, if the community rents out the swimming pool to a person or entity covered by the ADA (e.g. a swimming school) that permits non-residents to use the pool, the community would be governed by the ADA. There is also a possibility that a community association that holds a swim meet open to non-residents would be subject to the ADA even if the community does not charge a fee for the use of the pool. If your association permits its pool to be used for swim meets open to non-residents, you should discuss this with your association attorney to determine what your obligations are under the ADA. Fortunately, the Department of Justice has agreed to delay the implementation of the swimming pool access requirements until January 31, 2013.
The Community Associations Institute has prepared a fact sheet on the Justice Department’s ADA Pool Access requirements. Please note that the fact sheet was drafted before the Department of Justice delayed implementation of the pool access requirements until January 31, 2013.
Revised 7/26/2012: Deleted extraneous text at the end of the post.
One of the bills mentioned in our 2012 Interim Legislative Update is HB2078 relating to the transient accommodation tax. The bill requires the operator of a transient accommodation to designate a local contact residing on the same island where the transient accommodation is located. Unfortunately, the bill also requires community, condominium, and other similar associations to provide relevant information to the department of taxation about all operators who may be leasing their property as a transient accommodation, to help ensure compliance with appropriate state and county tax laws. Theoretically, an association that willfully fails to provide the information can be fined up to $100,000.00 if incorporated and up to $25,000 if not incorporated (although the Department of Taxation may argue that an unincorporated association should be treated as a corporation).
As noted in our previous post the Governor was required to notify the legislature of any bills he intended to veto by June 25, 2012. Since this bill was not on the potential veto list, the bill will become law. In addition, since the bill had an effective date of July 1, 2012, the law is probably already in effect even though the Governor has a few days to sign the bill or allow the bill to become law without his signature.
By law, the Governor is required to provide the legislature 10 days notice of the bills he may veto. Yesterday, the Governor provided the legislature with a list of 19 bills that he is considering vetoing. The good news is that HB1875, CD1 is not on the veto list and will become law either with or without the Governor’s signature. As noted in our Interim Legislative Report, the bill has several important provisions that provide additional protections to condominium and community associations. While not perfect, overall, the bill is better than the current law. John Morris, as a member of the Mortgage Foreclosure Task Force was instrumental in developing provisions that protect condominium and community associations.
On June 29, 2012, the Governor signed the bill as Act 182. Most of the provisions of the bill become effective on that date.
Revised 7/4/2012: Added the immediately preceding sentence.
The Americans with Disability Act or the ADA is a federal civil rights law that provides protections to persons with disabilities in a number of contexts. Title I of the ADA addresses discrimination of disabled individuals in employment, Title II of the ADA deals with discrimination of disabled individuals in the provision of governmental services and Title III of the ADA involves discrimination by certain types of commercial operations called public accommodations. (more…)
This year, the legislature adopted and the Governor signed into law HB1746 HD1 which is now Act 18. Act 18 became effective on April 12, 2012 and amends Hawaii Revised Statutes §514B-42 and §514A-15.5 relating to the metering of utilities. Some condominium associations had provisions in their governing documents that required an owner vote in order to install submeters for the units. For some associations it was impossible to get the requisite vote to approve submetering. Act 18 allows associations to install submeters without a vote of the owners. (more…)