 This is Think Tech Hawaii, Community Matters here. Hello, how I'm sitting here with my co-host, Jane Sugumura, President of the Hawaii Council Community Associations. And we're having another edition of Condo Insider. And our topic today is 2019, the Hawaii Legislatures in session. My wine bill will go up. I mean, there's a lot of things going on in the legislature. Every year we seem to have all these things come from nowhere on the condo side of it. But let's take a minute first to remind everybody kind of how the legislature loosely using the word works. Okay. We have, I think today is the cutoff for building introduced. Which is amazing because the legislature only reconvened last week on the 16th of January. And so it's really been eight days. And today is a cutoff day for the introduction of new bills. And so you can imagine what's been going on for the last week. It's been crazy at the square building. They've been cranking out bills. And I think what it does is it might lead to a whole lot of errors or miscommunication. And so we're going to be spending maybe the first half of the session trying to fix those miscommunications. Where do the bills come from? It's like, you know, I used to have this belief that the legislatures would be carefully pondering, making a better government and make things work. And they would introduce meaningful legislation that really was applicable. And now I see that 68 bills were introduced affecting homeowner and condo associations. And that's just one issue. That doesn't cover all the issues that the legislatures deal with. And what happens is the legislators all have constituents. Like you and me, we all have our representative and our state senator. And so we are constituents because we live in the district and we vote, I hope. I hope everybody out there is a voter. And so you pick up the phone and you call your friendly legislators and say, I want you to make me a bill to do X, Y, and Z. And they can do it. And that's what happens. And when people look at these bills and you see a B.R. on the bottom of the bill, if you go on the website, that means it's by request. And so that doesn't even mean that the legislator has to agree with it. They are doing it as a favor for their constituent. So the short answer is they want to make their constituents happy. So they either get donations and or a vote. And so a lot of bills go in without much thought to them. Right. It's a B.R. by request. And the people who have put some thought into their, you know, bills that get introduced, I mean, they've been working with their constituents or with special interest groups during the off session. The session ended in May of 2018. So between now and between that date and today, they've been working on legislation to introduce within that seven-day period. And so it's been crazy at the legislature because over almost 2,000 bills were introduced in an eight-day period. Wow. I know that when I get the list of bills, and I don't hold me to the exact number, but going back two years ago on the condo association side, we had 157 bills introduced. Last year, because it's an election year, we only had 29 bills introduced. And you rarely see any controversy or any requiring money in election years. Right. This year, the first count, which I think is a little in the low side, was 68 bills introduced in the legislature of trying to change condo or homeowner association practices. Right. And last year, too, at the end of the session, we had less than 10 bills that we reported out. Right? That's right. And I think only two got passed last year. Right. Two major bills got passed from that dealt with condos. I don't want to spend a lot of time on this, but let me just give our viewers a brief view. The bill cutoffs today, they get assigned, the bills get assigned to committees, and the committees hold hearings. The first thing I always look at to see if it's a triple referral, if it gets assigned to three committees, it's pretty much dead. Dead on arrival, yes, because there's no way it's going to get through three committees. They can't meet their timing and get it through three committees. Especially if the last committee is a money committee. Right. Then I also look at who introduced the bill and whether they have influence and or what political party they belong to, because that may influence whether those bills are going to go anywhere, from my experience anyway. But what happens is they hold these hearings from one hearing to another hearing, for instance, let's say it goes to consumer protection and judiciary, which is normally in our case. And then they have what they call first decking. What's first decking? First decking is when you take, it's like culling the bills. All these bills that get hearings, not all of them what they call crossover. First decking means you decide which of the bills that have had hearings actually go to the other side, right? So you're basically cutting down the number of bills that survive the halfway point. And the ones that don't go anywhere go to the dark side. But the good thing about it is we are in the first year of a biannual session. The legislative sessions are basically two-year sessions. So anything that gets introduced this year stays alive for two years. So let's say it doesn't get a hearing or it gets a hearing and it doesn't go anywhere. Next session in 2020, it can be revived. Theoretically, it's still alive. It's still alive. Okay. I did a quick, brief, down and dirty list of the topics that seem to be coming to the surface in this year's legislature. Oh, before you get to the topics, what I want to tell the listeners is that everything is online. The bills are online. You can go to what, you just Google Hawaii State Legislature, Hawaii Legislature. And you can go to a page and you put in the bill number. And if you want to submit testimony, you can do it online. You don't have to go to a hearing and it will end up before the committee that hears that bill. And from my experience, testimony is very important. Even though it's just a short roll in the comments section, I oppose this bill. You know, having people weigh in does influence the legislatures and legislatures on whether they move a bill forward or amend it or whatever. Right. And yes, it means more, I guess, if you show up in person, but if they get 100 emails or 100 online testimonies saying, we hate this bill, we oppose it because then, you know, the legislator is going to have to stop and think, well, geez, there's people out there who are watching what I'm doing. And, you know, so I better be cautious about how I move this bill out or how I deal with it. And so that's why it's always really important if you can't make a hearing to go online and at least let the legislators know what you think about it. Yeah, it's bizarre enough, about 400, 500,000 of our residents live in some form of association, counting the husband and wives, children, you know, the total population. And you get testimony, typically 20, 25 people, but that really moves the legislators. Someone took the time to write it and say, I'm opposed, we're in favor or share their comments. So I would just echo Jane's comments that become engaged, get involved, go to Hawaii Legislature, follow the bills that are important to you, and it's a free service, send in testimony. And because the legislators are big, big on doing things paperless, the legislators all walk around with laptops. And in fact, in the Senate, they are assigned a laptop. So nobody has any paper. So anything that you send in online is reviewed by the legislators. And so people have to understand that, you know, when you go to a hearing, I mean, they are looking at a laptop and they can see how many people submitted their comments online. And so your online comments count as much as the person who has taken the time to show up at a hearing and to testify live. So it's really important for people to weigh in on all of these issues. And all this is going to happen between now and May 2nd when the legislature adjourns. It's 60 days, total. I've always said everybody reminds me of a sausage factor. What comes in is not what comes out. So it's a crazy time. But I just, you know, went through all the bills in general terms. We just got them. I mean, the cutoff was today. So let's just talk about a half a dozen of the issues. We can't go through the bills in detail. I'm sure our future programs over the next six weeks are going to have a lot of focus on individual issues and the bills and what the issues are. But it seems to me we have the proverbial problem of emotional support animals or assistance animals in several of the bills. Yes. And, you know, and the problem with these assistance animals bills is that, you know, you have a lot of condos who have gone to the trouble of amending their bylaws. So that they are a no pets building. And of course, under fair housing, a support animal is not a pet. Technically, definitionally wise, right? Yeah. In theory, one of the bills I think is interesting says that on the emotional support animal side, it says that public facilities have to allow you to bring your emotional support animal, not a service dog, for example. In the facility, if that emotional support animal has been provided to you because of some therapeutic persons says you need to have it. It makes me think immediately of all the news last two or three days of the emotional support alligator that's all over the news. So if that bill was to pass and you had an emotional support alligator, that particular restaurant or facility, movie theater, whatever, couldn't refuse to allow you to take your emotional support alligator in? I think that bill is going to face a lot of resistance. In fact, in the letters to the editor in the newspaper every day, they've got one letter for and one letter against allowing these special emotional support animals to be allowed in public facilities like restaurants. And to me, I feel for these people who feel that they need these special support animals, but there are lots of restaurants that have outdoor tables where they could go in and get their food and come and sit outside with their animal and not interfere with people who don't want to be in a restaurant with an animal. And it could be because they have allergies. And a lot of people when you go to a restaurant, you don't usually think of a dog or a cat or an alligator being in the restaurant with you. I imagine you're sitting there in the restaurant with your little chihuahua and the guy with your emotional support alligator is next to you. That would be very stressful. You're not going to enjoy your dinner. It's going to be stressful. But I think we went back to about two to three years ago, one of our senators introduced a bill on emotional support animals. It basically said that if you're the therapist, the provider, the person with the license, for you to falsely say someone needs an emotional support animal with a misdemeanor. And that's what other states, United States have done, Colorado, California. I would like to see a bill like that. I think that would be more useful. And they found that put enough caution in the therapist, for lack of a better word, thought wave, that it was harder to get the certificate saying I need an emotional support animal. Realizing that three years ago, I bought my emotional support certificate for my miniature elephant. And I got it approved for $69. Except this was an online certificate, right? That's true. That's the problem. Yeah. Another thing that comes up all the time is that condos are poorly run, the boards are bad. They need more education. So now we have bills coming in to mandate educational requirements for directors. And some of them include making them go to new directors to go to a two-hour session with their association's attorney to learn about their kind of obligations. Well, I think this has a lot to do with the fact that what, you know, and Sue Savio who owns insurance associates, she said this at two seminars that I went to recently is that Hawaii has the most claims of any state in the country for D&O violations, officers and directors. In other words, there are more claims being made against associations for conduct by the boards of directors than any place else in the whole United States, which is kind of amazing given that Hawaii is such a tiny state. We have more claims in California than New York and in Florida. And not only do we have more claims, the amounts are larger. In other words, if it takes $25,000 to settle a breacher contract claim on the mainland, it might cost $42,000 in Hawaii. And the result is that the insurance is, in fact, I got my bill from my association and my officers and directors liability premium went up 57%. It went up from $3,500 a year to $5,700 a year. And our umbrella policy went up 1,000, which is 27%. And we had no claims made against our association. So you know what that means? That means we are paying for everybody else who is getting sued. And what Sue says is it's because all the condos are in the same risk pool. And so if there are a bunch of lawsuits in the state of Hawaii and like the one in Maui where there's a $3 million judgment against the association, the rest of us end up paying for it because our insurance goes up. Well, what that means to me is I have a headache. We're going to take a break and come back in one minute and continue this discussion. We'll be right back. This is Think Tech Hawaii, raising public awareness. This message was brought to you by UnitedHealthcare and AARP Foundation. Hello, everyone. I'm DeSoto Brown, the co-host of Human Humane Architecture, which is seen on Think Tech Hawaii every other Tuesday at 4 p.m. And with the show's host, Martin Desbang, we discuss architecture here in the Hawaiian Islands and how it not only affects the way we live, but other aspects of our life, not only here in Hawaii, but internationally as well. So join us for Human Humane Architecture every other Tuesday at 4 p.m. on Think Tech Hawaii. Welcome back to Kondo Insider. My headache is better. A little brief rest from all this pressure from the legislature. I want to finish up on the education. Every year we go through this issue of education. But the Hawaii Real Estate Commission has set up an ad hoc committee bringing in all the stakeholders in the industry to look at better ways to educate board members. And based on that, I think this is a good year to defer all this until they have a report from the Real Estate Commission since they have all the money for education anyway and the Continue Education Fund. So I think we should work on that. He has a good idea. Every year we also get the issue of smoking and the debate about, I don't want people smoking in my apartment, I don't want people who smoke on the lawn eyes. And as a villain, I've been presented today to allow the board of directors to adopt rules that allow you to put in a lease, so it's a rental apartment, a no smoking requirement for inside the apartment. If you own there, it's a different story. But if you're renting the apartment, it's law for you to put in a lease that's non-smoking. And number two, it'll allow the board to make the decision whether smoking on the lawn eyes is permitted or not. I think that's going to be kind of controversial. It's probably going to be a little bit difficult because there is already provision in the condo law that says that the board cannot regulate conduct inside the four walls of the condominium because basically that belongs to the unit owner. And so I think, and what this bill kind of places is treating renters different from owners. And I think because of that provision in the statute, they're going to run into problems with that. The one about regulating smoking on the lawn eyes, I think is going to be, I don't have to say, I think it's going to be easy. I think it's going to be a lot, it won't have as much controversy because in most condominium documents, the lawn eye is a limited common element. And the boards can regulate conduct in those areas under state law. I kind of support the concept, but the theory, most of these hospitals talk about noxious odors. So it could be incense or a type of cooking you're doing or whatever on the lawn eye. That would be the smoke from the barbecue or whatever. And it's second hand smoke, which is already, which experts have concluded is dangerous to your health. The next one was an interesting one. This last couple of years, basically saying for multifamily units, they have more than 20 stalls that you have until the year 2020 to have 25% of those stalls made so they can handle an electric vehicle. I think, you know, the legislature is trying to send a message about, you know, saving energy. And I don't, you know, disagree with that, that policy. The problem is they don't understand condominiums and if we're going to make these stalls suitable for electric cars, who's going to pay for it? Are you saying that the owners of the condominium have to pay for it? And what are you going to, and in most condominiums, those stalls are assigned to the unit owner. So you're going to take stalls away from the, you know, so I think that, you know, the legislators probably had some good intention as far as saving energy. And they don't understand condos and how condos work. And so I think this one's going to be problematic. I think it's going to be problematic, too. I think, and the industry has spent a lot of time with all these environmental groups trying to explain to them our problems, you know, because even the electrical infrastructure of that condo may not support that many electric meters for the electric vehicles. And it could cost hundreds of thousands of dollars to comply with that. So if somebody wants to, you know, has an electric car and wants to, you know, put in a meter, they have to go to the board and request permission and they pay for it. And to me, that's fair. But, you know, for the legislature to say, okay, you condo associations, we want you to put in, you know, all these stalls to service these electric vehicles and you guys pay for it. And to me, that's not fair. And they don't understand how condos operate financially. Otherwise they wouldn't be trying to do something like this. But one of the most important bills, which the industry supports and help promote, has to do with foreclosures. And the issue has been that most condos use this non-judicial foreclosure to get possession rented out so they have no loss of cash flow. Some of the appeals courts have found that because the governing dockets themselves don't specifically provide for power of sale through non-judicial foreclosure, that these prior foreclosures may be illegal and actually have been lawsuits saying that they're illegal. And what the appeals courts have said is, well, the legislature hasn't really made it clear that you can use non-judicial foreclosures. So the bill that, there's two bills, one from the Senate and one from the House, basically reaffirms the right of a condo association to use power of sale through non-judicial foreclosure. Yes, and, you know, to me, I think the legislative history behind this policy, you know, is something that, you know, those of us in the industry have been aware for a long time. It's just that the courts are not aware of it. And so I think this bill is a good thing, and especially because it saves money for the people who live in the condominiums to do a non-judicial foreclosure, and it keeps the cash flow coming. And so in the end, you know, I mean, and there are safeguards, so it's not like, you know, you can get it faster or it tramples on the rights of the unit owner. I mean, they get notices that say that if you don't pay, we're going to foreclose. It is potentially tens of millions of dollars of liability if all the non-judicial foreclosures were overturned for all these condos. All the existing owners would end up with tens of millions of dollars of liability because of what was everybody believed to be the right action. But they're also trying to limit another bill, the attorney fees the 25% of the debt. What do you think? Well, that's consistent with another statute, and that's for breach of contract. And there is a statute, it's HRS 60714, which we, you know, who do collection actions, like, you know, a breach of, if you don't pay your promissory note and you sue on a $10,000 promissory note, and let's say there's $8,000 principal and $1,000 worth of interest. So it's $9,000. So the most you can get for recovery of attorney's fees is 25% of whatever your judgment amount is. And the 25% is only the upper limit. In other words, if you only, okay, 25% of $10,000 is what? $2,500, right? If you only spend $1,000 in attorney's fees, you get the actual... The thousand. Right, the thousand. And so to me, I don't have a problem with that because I do collection work, and so I've worked with that statute. And so under the condo law, I think the way this statute reads is that the association is entitled to reasonable attorney's fees with no cap. There's no 25% cap. Well, that'll be interesting. I know we're running out of time. We only have like two minutes left. There's always been the argument for what I call homeowner associations, plan community association. They don't have a lot of the rights that condos have. The condo statute of 514B is much more robust. So there's all sorts of bills coming in requiring registered at the real estate commission, requiring an auditor to discuss, establish a separate agency at DCCA, requiring the real estate commission to handle all claims with regard to homeowner association. What's your take on that? I think that what we can probably do, because I mentioned that this is a biennial session, take this year to work and try to consolidate all these bills, come up with one bill that we can move forward next year, but we need to get the stakeholders, the property managers, the homeowner's association, officers and some owners and come together and come up with a comprehensive bill so that we can tailor some type of bill that's going to give them the relief that they want. And I totally agree that the people who live in plan community associations should have the benefits that are in the condo bill. And we don't have time to go through all the governance ones. We have one bill or two bills supporting eliminating the board majority block on the proxy. They want to hold the proxies in balance after an annual meeting for 90 days, not 30. The industry supported that idea last year. They want the managing agency required to do a disaster preparedness plan for all condos. Of course, we don't have the experience to do that. We want to allow electronic voting devices under certain circumstances for annual meeting elections. But the most important one is clarifying Act 195, priority of payment issues. And last year, there was a bill 195 that was passed that basically changed how the priority of payments was implemented. But what it did is it created confusion as to well, when a homeowner makes a payment, then where do you apply it? And so what this bill does is it sets out the priorities. So after the common expenses are paid, it defines the priorities after that. Right. And that's a big area because the whole industry is upside down right now. And we are out of time. We could go for hours on all these bills, but we're going to have to say to everybody, this is a little primer on what to expect in the future next couple of months of shows. It'll be quite a big rating as we drill down on all the issues within these bills. We again remind you your testimony, whether you're for or against, is valuable to the legislators. We ask you to consider that. And thank you for watching Condo Insider. Thank you, my guest, Jane Ziggumara. Thank you very much for inviting me.