RELATING TO COMMON INTEREST COMMUNITIES.

SB2294

THE SENATE

S.B. NO.

2294

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to COMMON INTEREST COMMUNITIES
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

����
SECTION 1.
�
The legislature finds that condominium
associations, led by boards of directors and overseen by managing agents,
primarily operate under the principles of self-governance and self-enforcement.
�
The legislature further finds, however, that
the powers of associations, boards, and managing agents are not unlimited.
�
It is critical to the well-being of residents
and long-term sustainability of an association that its board members and
managing agents understand their obligations to comply with local, state, and
federal laws.

����
Accordingly,
the purpose of this Act is to specify that condominium associations, boards,
and managing agents must comply with county, state, and federal laws and
regulations, including those relating to mortgage lending.

����
SECTION

2
.
�
Section
514B-104, Hawaii Revised Statutes, is amended by amending subsection (a) to
read as follows:

����
"(a)
�
Except as provided in section 514B‑105,
and subject to the provisions of the declaration [
and
]
;
bylaws[
,
]
;
and all county ordinances and state and federal laws, rules, and regulations, including
mortgage lending requirements,
the association, even if unincorporated,
may:

����
(1)
�
Adopt and amend the declaration,
bylaws, and rules and regulations;

����
(2)
�
Adopt and amend budgets for revenues,
expenditures, and reserves and collect assessments for common expenses from
unit owners, subject to section 514B‑148;

����
(3)
�
Hire and discharge managing agents and
other independent contractors, agents, and employees;

����
(4)
�
Institute, defend, or intervene in
litigation or administrative proceedings in its own name on behalf of itself or
two or more unit owners on matters affecting the condominium.
�
For the purposes of actions under chapter
480, associations shall be deemed to be "consumers";

����
(5)
�
Make contracts and incur liabilities;

����
(6)
�
Regulate the use, maintenance, repair,
replacement, and modification of common elements;

����
(7)
�
Cause additional improvements to be
made as a part of the common elements;

����
(8)
�
Acquire, hold, encumber, and convey in
its own name any right, title, or interest to real or personal property;
provided that:

���������
(A)
�
Designation of additional areas to be common elements or subject to
common expenses after the initial filing of the declaration or bylaws shall
require the approval of at least sixty-seven per cent of the unit owners;

���������
(B)
�
If the developer discloses to the initial buyer in writing that
additional areas will be designated as common elements whether pursuant to an
incremental or phased project or otherwise, the requirements of this paragraph
shall not apply as to those additional areas; and

���������
(C)
�
The requirements of this paragraph shall not apply to the purchase of a
unit for a resident manager, which may be purchased with the approval of the
board;

����
(9)
�
Subject to section 514B‑38, grant
easements, leases, licenses, and concessions through or over the common
elements and permit encroachments on the common elements;

���
(10)
�
Impose and receive any payments, fees,
or charges for the use, rental, or operation of the common elements, other than
limited common elements described in section 514B‑35(2) and (4), and for
services provided to unit owners;

���
(11)
�
Impose charges and penalties, including
late fees and interest, for late payment of assessments and levy reasonable
fines for violations of the declaration, bylaws, rules, and regulations of the
association, either in accordance with the bylaws or, if the bylaws are silent,
pursuant to a resolution adopted by the board
that establishes a fining procedure that states the
basis for the fine and allows an appeal to the board of the fine with notice
and an opportunity to be heard and providing that if the fine is paid, the unit
owner shall have the right to initiate a dispute resolution process as provided
by sections 514B-161, 514B-162, or by filing a request for an administrative
hearing under a pilot program administered by the department of commerce and consumer
affairs
;

���
(12)
�
Impose reasonable charges for the
preparation and recordation of amendments to the declaration, documents
requested for resale of units, or statements of unpaid assessments;

���
(13)
�
Provide for cumulative voting through a
provision in the bylaws;

���
(14)
�
Provide for the indemnification of its
officers, board, committee members, and agents, and maintain directors' and
officers' liability insurance;

���
(15)
�
Assign its right to future income,
including the right to receive common expense assessments, but only to the
extent section 514B‑105(e) expressly so provides;

���
(16)
�
Exercise any other powers conferred by
the declaration or bylaws;

���
(17)
�
Exercise all other powers that may be
exercised in this State by legal entities of the same type as the association,
except to the extent inconsistent with this chapter;

���
(18)
�
Exercise any other powers necessary and
proper for the governance and operation of the association; and

���
(19)
�
By regulation, subject to sections 514B‑146,
514B‑161, and 514B‑162, require that disputes between the board and
unit owners or between two or more unit owners regarding the condominium be
submitted to nonbinding alternative dispute resolution in the manner described
in the regulation as a prerequisite to commencement of a judicial proceeding."

����
SECTION

3
.
�
Section
514B-106, Hawaii Revised Statutes, is amended by amending subsection (a) to
read as follows:

����
"
(a)
�
Except
as provided in the declaration[
,
]
;
the bylaws[
,
]
;
subsection
(b)[
, or
]
;
other provisions of this chapter[
,
]
; or
county ordinances or state and federal laws, rules, and regulations, including
mortgage lending requirements,
the board may act in all instances on behalf
of the association.
�
In the performance
of their duties, officers and members of the board shall owe the association a
fiduciary duty and exercise the degree of care and loyalty required of an
officer or director of a corporation organized under chapter 414D.
�
Any violation by a board or its officers or
members of the mandatory provisions of section 514B-161 or 514B-162 may
constitute a violation of the fiduciary duty owed pursuant to this subsection;
provided that a board member may avoid liability under this subsection by
indicating in writing the board member's disagreement with [
such
]
the

board action or rescinding or withdrawing the violating conduct within
forty-five days of the occurrence of the initial violation.
"

����
SECTION

4
.
�
Section
514B-132, Hawaii Revised Statutes, is amended by amending subsection (a) to
read as follows:

����
"
(a)
�

Every managing agent shall:

����
(1)
�
Be a:

���������
(A)
�
Licensed
real estate broker in compliance with chapter 467 and the rules of the
commission.
�
With respect to any
requirement for a corporate managing agent in any declaration or bylaws
recorded before July 1, 2006, any managing agent organized as a limited
liability company shall be deemed to be organized as a corporation for the
purposes of this paragraph, unless the declaration or bylaws are expressly
amended after July 1, 2006
,
to require that the managing agent be
organized as a corporation and not as a limited liability company; or

���������
(B)
�
Corporation
authorized to do business under article 8 of chapter 412;

����
(
2)
�
Register
with the commission prior to conducting managing agent activity through
approval of a completed registration application, payment of fees, and
submission of any other additional information set forth by the commission.
�
The registration shall be for a biennial
period with termination on December 31 of an even-numbered year.
�
The commission shall prescribe a deadline
date prior to the termination date for the submission of a completed
reregistration application, payment of fees, and any other additional
information set forth by the commission.
�

Any managing agent who has not met the submission requirements by the
deadline date shall be considered a new applicant for registration and subject
to initial registration requirements.
�

The information required to be submitted with any application shall
include the name, business address, phone number, and names of associations
managed;

����
(
3)
�
Obtain
and keep current a fidelity bond in an amount equal to $500 multiplied by the
aggregate number of units of the association managed by the managing agent;
provided that the amount of the fidelity bond shall not be less than $20,000
nor greater than $500,000.
�
Upon request
by the commission, the managing agent shall provide evidence of a current
fidelity bond or a certification statement from an insurance company authorized
by the insurance division of the department of commerce and consumer affairs certifying
that the fidelity bond is in effect and meets the requirements of this section
and the rules adopted by the commission.
�

The managing agent shall permit only employees covered by the fidelity
bond to handle or have custody or control of any association funds, except any
principals of the managing agent that cannot be covered by the fidelity
bond.
�
The fidelity bond shall protect
the managing agent against the loss of any association's moneys, securities, or
other properties caused by the fraudulent or dishonest acts of employees of the
managing agent.
�
Failure to obtain or
maintain a fidelity bond in compliance with this chapter and the rules adopted
pursuant thereto, including failure to provide evidence of the fidelity bond
coverage in a timely manner to the commission, shall result in nonregistration
or the automatic termination of the registration, unless an approved exemption
or a bond alternative is presently maintained.
�

A managing agent who is unable to obtain a fidelity bond may seek an
exemption from the fidelity bond requirement from the commission;

����
(
4)
�
Act
promptly and diligently to recover from the fidelity bond, if the fraud or
dishonesty of the managing agent's employees causes a loss to an association,
and apply the fidelity bond proceeds, if any, to reduce the association's loss.
�
If more than one association suffers a loss,
the managing agent shall divide the proceeds among the associations in
proportion to each association's loss.
�

An association may request a court order requiring the managing agent to
act promptly and diligently to recover from the fidelity bond.
�
If an association cannot recover its loss
from the fidelity bond proceeds of the managing agent, the association may
recover by court order from the real estate recovery fund established under
section 467-16, provided that:

���������
(A)
�
The
loss is caused by the fraud, misrepresentation, or deceit of the managing agent
or its employees;

���������
(B)
�
The
managing agent is a licensed real estate broker; and

���������
(C)
�
The
association fulfills the requirements of sections 467-16 and 467-18 and any
applicable rules of the commission;

����
(5)
�
Pay a nonrefundable application fee and, upon
approval, an initial registration fee, and subsequently pay a reregistration
fee, as prescribed by rules adopted by the director of commerce and consumer
affairs pursuant to chapter 91.
�
A
compliance resolution fee shall also be paid pursuant to section 26‑9(o)
and the rules adopted pursuant thereto; [
and
]

����
(
6)
�
Report
immediately in writing to the commission any changes to the information
contained on the registration application or any other documents provided for
registration.
�
Failure to do so may
result in termination of registration and subject the managing agent to initial
registration requirements[
.
]
; and

����
(7)
�
Comply with the declaration; bylaws; and all county ordinances and state
and federal laws, rules, and regulations, including mortgage lending
requirements; provided that this paragraph shall apply to all managing agents,
including unregistered managing agents and managing agents of planned community
associations under chapter 421J and cooperative housing corporations under
chapter 421I.
"

����
SECTION
5.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

����
SECTION
6.
�
This Act shall take effect upon its
approval.

INTRODUCED BY:

_____________________________

Report Title:

Condominiums;
Associations; Boards; Managing Agents; Self-Governance; Compliance

Description:

Specifies
that all condominium associations, boards, and managing agents are required to
comply with the declaration, bylaws, and all county ordinances and state and
federal laws, rules, and regulations, including mortgage lending requirements.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.