Bill to Change “Pay First and Dispute Later” Principle

SB 2661 seeks to change the balance of power between associations and owners in connection with the collection of charges other than maintenance fees. The current law requires owners to “pay first and dispute later” with respect to charges imposed by the association – i.e., that owners must pay the amounts claim by the association and then have the option of going to Small Claims Court or filing for mediation and arbitration.  This bill proposes to eliminate that process for all charges other than maintenance fees and common expenses. Instead, the bill proposes that any owner being assessed fines, late fees, and assessments other than maintenance fees, may request mandatory mediation before the association can collect the charges.

The bill also proposes that if the association and owner have entered into a payment plan, any delinquency caused by charges other than maintenance fees will not operate as a breach of the payment plan. Instead, those other charges will have to be resolved through mediation.

Finally, the bill also proposes to eliminate the “priority of payment” section from the law. Those familiar with the section know that it allows an association to apply payments received from maintenance fees to other charges against the owner. In effect, this priority of payment process converts delinquent assessments for fines, late fees, repair costs, et cetera, into a delinquent maintenance fees. The idea is supposed to be that it is easier for the association to collect delinquent maintenance fees than other charges.  Therefore, this process allows the association greater ability to collect fines, late fees, etc. Again, SB 2661 proposes to completely delete this priority of payment process from the law.

SB 2661 reportedly stems from claims by owners to legislators that the collection process was being abused by associations and eliminating the owner’s ability to contest charges other than maintenance fees in any meaningful way.

The Bill is scheduled for a hearing before the Senate Judiciary Committee tomorrow, March 1, 2016 at 9:05AM in conference room 016.  Please contact your State Senator and in addition:

Senator Rosalyn H. Baker
Senate Commerce, Consumer Protection, and Health Committee
Hawaii State Capitol
Room 230
phone: 808-586-6070
fax: 808-586-6071
[email protected]

Gilbert S.C. Keith-Agaran
Chair, Senate Judicairy and Labor Committee
Hawaii State Capitol, Room 221
phone: 808-586-7344
fax: 808-586-7348
[email protected]

Politely inform them that you are opposed to the Bill and that the current process is not misused.  All an owner has to do is pay the fine and dispute the matter later.