2022 Legislative Update
In 2022, the legislature made a number of changes to both the condominium law (Chapter 514B) and the planned community associations law (Chapter 421J). Most but not all of the changes improve association operations. You can view the text of the acts by clicking on the links below.
Act 69 (SB 2685 SD2, HD1, CD1), Signed 6/17/22, effective January 1, 2023 Relating To Planned Community Associations.
The legislative history for act 69 indicates that its purpose is to:
- Establish requirements for cumulative voting and the removal of directors of planned community associations;
- Exempt planned community associations from certain requirements regarding cumulative voting for and the removal of directors under the Hawaii Nonprofit Corporations Act; and
- Require boards of directors of planned community associations, when planning to distribute proxies without the use of association funds, to post notices of their intent to distribute written notices for association meetings at least twenty-one days before distributing the written notices.
The legislature’s stated concern and the reasoning behind the act was that the cumulative voting provisions under the Hawaii Nonprofit Corporations Act (Chapter 414D) can be easily manipulated by planned community association boards of directors to prevent minority groups from attaining representation. Boards can do this by simply omitting cumulative voting from the notice. To overcome this problem, act 69 clarifies that the cumulative voting provisions under the Hawaii Nonprofit Corporations Act do not apply to planned community associations governed by the State’s planned community association law (Chapter 421J).
Instead, act 69 establishes provisions in chapter 421J that are specific to planned community associations. Most homeowner associations are subject to chapter 421J, so boards of those associations should be aware of the following:
- Section 1 of the bill states that cumulative voting is only permitted if the association’s governing documents provide for cumulative voting. Otherwise, cumulative voting is not permitted.
- Section 1 of the bill also provides a very detailed statutory procedure for the removal of boards of directors of planned community associations. This process includes provisions to protect the rights of both the directors who have been elected by cumulative voting and the owners who elected them. (Note that without these protections, it is sometimes possible for a majority of the owners to override the wishes of those owners who have elected a director by cumulative voting.)
- The removal process may be initiated by either the board at a regular or special meeting or by a petition of the members. Strangely, the bill seems to indicate that owners cannot simply vote to remove directors at any regular or special association meeting unless they first provide a petition signed by at least: (i) 25% of the total number of units in the planned community or (ii) 100 units, whichever is less. In other words, it appears that, without submitting the petition, owners will not have the right of simply proposing the removal of the board or a board member at a regular or special meeting of the association. Section 4 of the bill specifically deletes that right from section 421J-3.5.
- Finally, section 4 of the bill includes a specific provision, added as section 421J-3.5(f), relating to notice of meetings when the board does not propose to distribute proxies with the notice of the meeting:
(f) If the board of directors does not intend to use association funds to distribute proxies that include the election of directors and therefore does not post notice pursuant to section 421J-4(e), the board shall post notice in prominent locations within the planned community of its intent to distribute written notice of an association meeting at least twenty-one days in advance of distributing written notice under subsection (a). [Emphasis added.]
The relevant part of section 421J-4(e) reads:
(e) Any board of directors that intends to use association funds to distribute proxies that include the election of directors shall first post notice of its intent to distribute proxies in prominent locations within the project at least twenty-one days prior to its distribution of proxies; [Emphasis added.]
In other words, even if the board does not intend to distribute proxies at association expense, the board must still post notice that it intends to distribute written notice of an association meeting at least 21 days in advance of distributing the written notice.
Boards and members of planned communities should read act 69 very carefully.
Act 62 (HB 2272 HD1, SD1, CD1), Signed 6/17/22, effective January 1, 2023, Relating To Condominium Associations.
The purpose of this act is to:
- Specify that a condominium declaration may be amended at any time by the vote or written consent of unit owners representing at least sixty-seven percent of the common interest;
- Require the developer’s public report to include annual reserve contributions, based on a reserve study, as part of the breakdown of the annual maintenance fees;
- Clarify time and date requirements for petitions to amend bylaws and calls for special meetings; time frame for approval of minutes; and board meeting participation;
- Clarify the conditions for use of electronic voting devices;
- Specify that the use of electronic meetings and electronic, machine, or mail voting are to be at the sole discretion of the board of directors and expand the circumstances under which such use is authorized;
- Specify that a board of directors may make rules for owner participation at board meetings available on the association’s website;
- Require that the reserve study be performed by an independent, certified reserve study preparer who shall not be affiliated with the managing agent of the association and require that the reserve study be prepared or updated at least every three years; and
- Specify that an association’s cash flow plan be based on thirty-year projections and prepared by an independent reserve study preparer and reviewed or updated at least every three years.
1) Amendment of Declaration.
Since the beginning (2006), section 514B-32, has provided that a condominium declaration may be amended by “at least” 67% of the owners. The problem was that many declarations adopted prior to chapter 514B still provided for amendment by 75% of the owners. Since 75% of the owners is “at least 67%” of the owners, there was confusion as to section 514B-32 overrode existing declaration requirements for 75% owner approval to amend a declaration.
A second problem was that section 514B-32 did not specifically permit amendment of declarations by written consent, although chapter 514B did permit amendment of bylaws by written consent.
Of course, if a condominium association formally opted into chapter 514B, the 67% approval requirement for declaration amendments would apply automatically and override any 75% approval requirement already in the declaration. For other associations, act 62 attempts to clarify this issue by providing that a condominium declaration may be amended by 67% owner approval at any time “unless the declaration is amended by unit owners to require a higher percentage.”
The only problem with that language is that it could be interpreted to mean that if the declaration already requires 75% owner approval to amend it, the owners have already amended the declaration to require that percentage, even if they did so prior to act 62.
Regardless, act 62 clearly confirms that a declaration can now be amended by written consent, rather than just a vote at a meeting.
2) Reserve Contributions In The Public Report.
Anyone buying a new condominium unit receives a public report from the developer outlining all the material facts and relevant information relating to the condominium project in which the unit is located. This information allows the prospective purchaser to be fully informed about a project before he or she buys in.
While the public report will generally include a budget and an estimate of the future maintenance fees, it does not necessarily always include an estimate of the anticipated reserve contributions that will be required for the owners in the future. Act 62 changes the law to require that information be included in the breakdown of the monthly estimated costs for each unit.
3) Additional Requirements For Petitions To Amend The Bylaws.
The current law allows owners, outside of an association meeting, to submit a petition requesting amendments to the bylaws. Act 62 requires that: (i) owners signing the petition must also indicate the date of their signatures; and (ii) the petition will only be valid if it is submitted within 120 days of the earliest signature on the petition.
4) Additional Requirements For Electronic Voting and Meetings; Calling Special Meetings.
Act 62 includes additional requirements to ensure the accuracy and security of electronic voting. As part of that process, act 62 also imposes requirements for petitions by owners to call a special meeting of the association that are similar to those imposed for petitions to amend the bylaws. More specifically, act 62 requires that: (i) owners signing the petition must also indicate the date of their signatures; and (ii) the petition will only be valid if it is submitted within 120 days of the earliest signature on the petition.
Section 4 of act 62 adds the following underlined language with respect to electronic meetings and electronic, machine, or mail voting:
(e) All association meetings shall be conducted in accordance with the most recent edition of Robert’s Rules of Order Newly Revised. Notwithstanding any provision to the contrary in the association’s declaration or bylaws or in subsection (b), electronic meetings and electronic, machine, or mail voting [
shall] may be authorized[ :] by the board in its sole discretion:
(1) During any period in which a state of emergency or local state of emergency, declared pursuant to chapter 127A, is in effect in the county in which the condominium is located;
(2) For any association meeting for which notice was given while a state of emergency or local state of emergency, declared pursuant to chapter 127A, was in effect for the county in which the condominium is located but is no longer in effect as of the date of the meeting; provided that the meeting is held within sixty days of the date the notice was first given; [
(3) For any electronic, machine, or mail voting for which notice of voting has been sent; provided that the electronic, machine, or mail voting deadline is within sixty days of the date the notice was first sent;
(4) Whenever approved in advance by:
(A) Written consent of a majority of unit owners; or
(B) Majority vote at an association meeting; or
(3)] (5) Whenever otherwise authorized in an association’s declaration or bylaws.
The association shall implement reasonable measures to verify that each person permitted to vote is a member of the association or proxy of a member.
As used in this subsection, “mail voting” includes sending or receiving written ballots via mail, courier, or electronic transmission; provided that the transmission is a complete reproduction of the original.
5) Eliminate Deadline For Board Approval Of Association Minutes.
Previously, section 514B-122 (a) provided that if the owners authorized the board to approve the association minutes, the board must do so “within sixty days after the meeting.” Act 62 eliminates the 60-day requirement for board approval.
6) Making Available Rules For Owner Participation At Board Meetings.
Previously, section 514B-125 (b) required that after the election of board members by the association, the board had to, at a meeting, establish rules for owner participation in board meetings. In other words, the prior law suggested that every new board had to adopt or reaffirm the rules for owner participation following every election of new board members. Act 62 eliminates that requirement. Instead, act 62 amends the law to state that the board may simply establish rules for owner participation and must only notify owners if there is an amendment to those rules. It also provides that the board may make the rules available to owners on an association website.
7) Changes To Reserve Study Requirements.
Previously, section 514B-148 required that the annual association budget prepared by the board must include an estimate of the replacement reserves that are required to maintain the property, based on a reserve study performed by the association. Act 62 amends the law to state that the reserve study must be reviewed by “an independent reserve study preparer.” Act 62 also requires that the reserve study must be reviewed and updated at least every three years. Finally, the act requires that a reserve study using a “cash flow plan” (as defined in the law) must be based on a minimum 30-year projection of the association’s future income and expense requirements to fund its replacement reserves, rather than the 20-year projection required under the original law for a reserve study based on a cash flow plan.
Act 202 (SB 2720 SD2, HD2, CD1), Signed 6/27/22, effective June 30, 2022, Relating To Energy.
Section 1 of this act states that its purpose is to:
- Provide a rebate for new or upgraded Level 2 charging stations with one port;
- Eliminate the annual cap on rebates, but provide that rebates are subject to the availability of funds;
- Amend and add flexibility to the guidelines for consideration by the public utilities commission in administering the program;
- Increase the maximum percentage of rebate program appropriations that may be expended for administrative costs and allow for marketing and outreach expenses to be included among allowable program administration expenses; and
- Appropriate funds out of the electric vehicle charging system subaccount for the electric vehicle charging system rebate program.
In 2019, recognizing that a lack of charging infrastructure remains a barrier to more widespread adoption of electric vehicles, the legislature established an electric vehicle charging system rebate program to incentivize the installation of publicly available charging stations and charging stations that serve multiple tenants, employees, or customers, or electric vehicle fleets.
The legislature determined that the continuation of the electric vehicle charging system rebate program is a critical component of the State’s efforts to transition from fossil fuels and achieve a carbon-negative economy by 2045. Therefore, section 269-72, “Electric vehicle charging system; rebate program”, allows “applicants” to apply for rebate for the cost of installing an electric vehicle charging station. Applicants do so by submitting applications to the public utilities commission or its designated administrator within twelve months of the date that the newly installed or upgraded charging system is placed into service.
Subsection 269-72(i) defines an applicant to include homeowner associations:
“Applicant” means an individual; non-profit or for-profit corporation; local, state, or federal government agency; homeowner association; or any other eligible entity as defined under rules adopted for the electric vehicle charging system rebate program. [Emphasis added.]
The act increases the available annual funding for 2021-22 from $100,000 to $500,000 and for fiscal year 2022-23 to $1,000,000. The rebates and subsidies are handled by Hawaii Energy.
Act 154 (SB 2002 SD2, HD2), Signed 6/27/22, effective November 1 2022, Relating To Fair Housing Reasonable Accommodations.
Section 1 of this act states that, to assist individuals requiring assistance animals and housing providers who are requested to make reasonable accommodations for assistance animals, the purpose of this Act is to:
- Define “assistance animal” in the context of existing state law prohibiting discrimination in real property transactions;
- Codify the administrative process to verify that a person requesting a reasonable accommodation that includes the use of an assistance animal has a disability and the assistance animal is needed to alleviate one or more symptoms of the person’s disability; and
- Specify that possession of a vest or other distinguishing animal garment, tag, or registration document commonly purchased online and purporting to identify an animal as a service animal or assistance animal does not constitute valid verification of a disability-related need for an assistance animal.
In real life terms, it is not clear that act 154 changes very much, but it does at least put into law what has been the custom and practice in past years.
The legislature noted that recent legislation prohibits the misrepresentation of animals as service animals. Act 217, Session Laws of Hawaii 2018 (Act 217), amends the definition of “service animal” to mean “any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability” and requires that the work or tasks performed by the service animal relate directly to the individual’s disability. Act 217 also excludes other species of animals and the provision of emotional support, comfort, or companionship from the definition of service animals.
The legislature further noted that the term “service animal” applies in the general context of the Americans with Disabilities Act. In contrast, the broader term “assistance animal”, which is used under the federal and state fair housing laws and rules, includes a wider category of animals that provide support, including emotional support animals and service animals. When a person with a disability requests the use of an assistance animal as a reasonable housing accommodation, the housing provider may ask for information, including verification from a treating health care professional, that the person has a disability, and the requested assistance animal is needed to alleviate one or more symptoms of the person’s disability. “Assistance animal” is defined in the State’s administrative rules, but not in statute.
To achieve those goals, the legislature added the following (underlined) language to section 515-3, stating that it is a discriminatory practice:
(9) To refuse to make reasonable accommodations in rules, policies, practices, or services, when the accommodations may be necessary to afford a person with a disability equal opportunity to use and enjoy a housing accommodation; provided that if reasonable accommodations include the use of an assistance animal, reasonable restrictions may be imposed; provided further that if the disability is not readily apparent, an owner or other person engaging in a real estate transaction may request information that verifies that the person has a disability, defined as a physical or mental impairment that substantially limits a major life activity. An owner or other person engaging in a real estate transaction shall not request medical records or access to health care providers, and shall not inquire as to the diagnosis, nature, or severity of the person’s disability. If the disability-related need for an assistance animal is not readily apparent, an owner or other person engaging in a real estate transaction may request verification that the assistance animal is needed to alleviate one or more symptoms of the person’s disability. Verification may be provided by a letter or other communication from the person’s treating health care professional, mental health professional, or social worker. Possession of a vest or other distinguishing animal garment, tag, or registration documents that are commonly purchased online and purporting to identify an animal as a service animal or assistance animal shall not constitute valid verification; [Emphasis added.]
While the language in bold is a welcome clarification that some of the claims of animal owners relating to their online identification paraphernalia may not be valid, the process for providing verification is still very open-ended and unlikely to prevent anyone from representing that their pet is actually an “assistance animal.”
A new definition was also added to the section, as subsection (b):
(b) For purposes of this section, “assistance animal” means an animal that is needed to perform disability-related work, services, or tasks for the benefit of a person with a disability or provide emotional support that alleviates one or more identified symptoms or effects of a person’s disability. “Assistance animals” may include but are not limited to service animals, therapy animals, comfort animals, or emotional support animals that may have formal training or may be untrained and may include species other than dogs.
Again, this new definition is essentially the standard that has been in place for many years, so it is unlikely to change the current situation very much.
In summary, it is good that the legislature made an attempt to clarify some of the issues relating to assistance animals. Nevertheless, in real life terms, the effect of the act may be minimal.
Act 133 (HB 2280 HD2, SD1, CD1), Signed 6/27/22, effective June 27, 2022, Relating To Real Property.
This act adds a new section to chapter 421J that prohibits planned community associations from prohibiting or unreasonably restricting the use of a unit owner’s enclosed yard area for personal agriculture, as long as doing so is not in violation of the association’s existing master landscape plan or other restrictive covenants applicable to the unit.
A review of the wording of the new section indicates that it is a recipe for disputes.
§421J- Personal agriculture allowed. (a) No association shall prohibit or unreasonably restrict the use of a unit owner’s enclosed yard area for personal agriculture, provided that the use is not in violation of the association’s existing master landscape plan or other restrictive covenants applicable to the unit.
(b) This section shall apply only to enclosed yard areas that are designated for the exclusive use of the unit owner.
(c) This section shall not:
(1) Apply to provisions in an association document that impose reasonable restrictions on the use of a unit owner’s enclosed yard area for personal agriculture; or
(2) Prohibit an association from applying rules and regulations requiring that dead plant material and weeds, with the exception of straw, mulch, compost, and other organic materials intended to encourage vegetation and retention of moisture in the soil, be regularly cleared from the enclosed yard area.
(d) For purposes of this section:
“Personal agriculture” means a use of land where an individual cultivates lawful edible plant crops for personal use or donation.
“Reasonable restrictions” means restrictions that are reasonably necessary to protect neighbor unit owners or residents’ use and enjoyment of their property and do not unreasonably increase the cost of engaging in personal agriculture or unreasonably decrease its efficiency. [Emphasis added.]
For example, anyone who has a clear idea what is meant by the bolded language in the new section, will have a head start in determining how to enforce this section. Everyone else will have to make a best guess, but it seems clear that any attempt to prevent “personal agriculture” will lead to disputes.
Act 200 (SB 3324 SD2, HD2, CD1), Signed 6/27/22, effective on signing and July 1, 2022, Relating To Infrastructure Maintenance In Housing Subdivisions.
Section 1 of this act states that its purpose is to establish a working group to examine and address the problem of infrastructure repair and maintenance in planned housing subdivisions that do not have compulsory homeowner associations. The act appropriates $100,000 for fiscal year 2022-2023 for the purposes of funding the operations of the working group.
Section 1 of the act also provides more background on the legislative intent of the act:
The legislature finds that some housing subdivisions in the State have been approved without a requirement that the lot owners fund the repair and maintenance of the private roads and other infrastructure within the subdivision. Unlike condominium property regimes, many housing subdivisions are not subject to a statutory framework or an oversight agency to oversee the creation, monitoring, training, and auditing of the various volunteer associations responsible for the subdivision infrastructure. Accordingly, the judicial system has created a patchwork system through judgments in various lawsuits that does not provide adequate oversight.
The legislature additionally finds that there is currently no oversight agency for some associations whose assessment collections are more than $1,000,000 per year. The inability to collect assessments from lot owners of some subdivisions with no court-approved corporation, association, or entity results in substandard and deeply rutted roads that can delay emergency vehicles that respond to emergency situations, including crime scenes. Furthermore, numerous structures have been destroyed because a fire truck was not able to arrive in time.
Act 289 (HB 980 HD1, SD2), Signed and Effective 7/12/22, Relating To Adult Protective Services.
Section 1 of this bill notes that reports of abuse against vulnerable adults continue to rise as Hawaii’s population ages. Although the department of human services is authorized to enter premises without a warrant for purposes of investigation of abuse to vulnerable adults, existing law limits that right of warrantless entry to only situations where there is probable cause to believe that a vulnerable adult will be physically injured.
The legislature determined that under state law, abuse includes not only physical abuse, but also psychological abuse, sexual abuse, financial exploitation, caregiver neglect, or self-neglect. All of these forms of abuse can result in damaging losses to the vulnerable adult’s mental health, welfare, and financial stability. Additionally, vulnerable adults may suffer multiple forms of abuse in combination.
The stated purpose of this act is to broaden the department of human services’ right of entry into a vulnerable adult’s premises without a warrant for an investigation of caregiver neglect, self-neglect, or physical abuse. The bill does so by amending section 346-229, Hawaii Revised Statutes, to read as follows:
(b) Any employee of the department engaged in an investigation under this part, having probable cause to believe that a vulnerable adult will be [
physically] injured through [ abuse] caregiver neglect, self-neglect, or by physical abuse before a court order for entry can be obtained, without a warrant, may enter upon the premises where the vulnerable adult may be found for the purpose of ascertaining that person’s welfare. Where a warrantless entry is authorized under this section, the employee of the department may request the assistance of a police officer to gain entrance.
Since a resident’s “self-neglect” is often a problem for associations, act 289 may assist associations in obtaining help for that problem.
Act 310 (SB 206 SD2, HD1, CD1), Signed 07/12/2022, effective May 1, 2023, Relating To Rental Discrimination.
The purpose of this act is to prohibit discrimination, including in advertisements for rental property, in rental transactions based on participation in a section 8 housing choice voucher program or any permanent supportive housing program or requirements related to participation in these housing assistance programs. The act does so by adding a new chapter to the Hawaii Revised Statutes entitled “RENTAL DISCRIMINATION BASED ON SOURCE OF INCOME.”
The legislature noted that the federal housing choice voucher program, also known as section 8 of the United States Housing Act of 1937, as amended, provides federally-funded, tenant-based vouchers to low-income households who are responsible for finding appropriate rental units in the private market. Once a household receives a section 8 voucher, the challenge is finding a landlord who is willing to accept the voucher. The legislature believes that renters who participate in housing assistance programs, such as section 8, should have an equal opportunity to find housing and should not be discriminated against because their source of income includes funds from housing assistance programs.
The legislature also noted that studies have shown that when there are laws that prevent discrimination against renters with housing assistance vouchers, these renters are twelve per cent more likely to find housing. The American Bar Association adopted a resolution in 2017 that called for the enactment of laws that ban housing discrimination based on lawful sources of income. The legislature notes that source of income discrimination laws do not alter or restrict standard industry practices to vet prospective renters. Rather, these laws prohibit landlords from rejecting prospective renters who receive section 8 vouchers or other housing assistance simply because of the voucher or assistance.