 Welcome to the final show for 2017 of Kondo Insider. It's hard to believe that this show began about two years ago and we'll be going into our third year in 2018 of making our good faith efforts of trying to provide useful information to board members and owners who live in an association. I thought it might be fun today to review 2017. I've asked my co-host Jane Sugimura to join me and we're going to talk about the year 2017 and kind of what happened this year and I want to thank Jane for all she does in the industry. You're a real powerhouse industry and I know you're president of Hawaii Council of Community Associations so remind everybody who HCCA is. Okay, HCCA is an organization of Kondo. We represent Kondo Associations and unit owners and people in the industry like you and your people associate and we educate about Kondo legislation and we advocate for the rights of Kondo owners and management. It's important people know that anybody can join HCCA. They can be an owner, they can be a board member, they can be a vendor and we're one of the few organizations you really don't take donations from anybody including the real estate commission. We generate all of our efforts through our educational program where we make a little bit of money that helps sustain our efforts so we're very picky to make sure we're a neutral organization in fighting for good things for the industry. Yes and we're very proud of that. Yeah I am proud of that too. You know one of the things that surprised me last year and it's kind of been growing every year but last year was I never saw I think I had over 150 bills introduced in January 2017 that affected the association living. What happened? Why are all these bills being introduced? I don't know I think it's crazy and you know what I think it does it I think it demonstrates that that people are not communicating because you would think that you know unit owners you know they live in the building with their board and if they had an issue that they'd be able to talk to their board or their management and try to resolve it and for some reason it's not happening and I don't think it's it's it's it's happening wide scale I think it's only happening in certain buildings and so we just have to you know improve our education and dispute resolution options. Well there are three kind of notable areas that last year that failed but the most dominant one which kind of goes right on point to what you're talking about was there was some belief that by having an ombudsman or state-regulated industry to manage condo associations to be responsible almost with a view that this agency could overturn the decisions of the board was one that failed what you're taking all that? I think I think that it failed because it it it disregards the the foundation of what's you know what makes up the condo legislation 514a and b is self-governance in other words the owners of a condominium are the ones who select their board members to manage and run the project and to to to get higher consultants and and and if there are any issues it should be handled internally by the people who live in the building talking to the people who manage the building but for some reason that's not happening. Yeah because of the the tension that's got I took a lot of time looking at what other states do last year and then directly we have an ombudsman in the form of RICO and if there were some things we wanted to change we could do slight amendments to the law to give RICO more authority but I see the same thing you have people thinking they don't like the decision of their board they're elected board and so they want someone else to come in and say you're wrong and do it my way right and I don't think that's ever going to fly. No you know because there are provisions in the statute and in their own declaration for their building that says that this is the way things are going to be done you you vote for a board to manage the building you don't like the board you can remove them and you don't have to wait for an election you can have a special meeting and the statute most declarations and bylaws have the provisions in there on how you have a special meeting to remove your your directors if we without an annual meeting. Well it kind of ties into that for the same people who had this initiative they wanted to as you know we have management companies who have condominium association managers appointed who get education through CAI and HCCA and many other organizations the IROM for example and they want to demand a because we're an agent they kind of thought about real estate agents and condominium managing agents are the same and they're very very different what education requires of it they wanted mandatory licensing that somehow that these managers would have to be in one case the law set a real estate broker but that's kind of apples and oranges. Well you know the way I saw that you know they're trying to affix blame they want they want somebody to be accountable and I think what people have to understand is they have to remember the buck stops with them they are they are the unit owners in a building if they you know they are the ones who choose the directors and the directors you know represent the majority of the people and you know and so if you're not in the majority then you got to make yourself the majority you got to go out and talk to the your other unit owners even if they don't you know live on site and there's a way you can get the the unit owner to address you can ask your association for an owner's list if you're a unit owner you can get that information the statue says you can get it and you can contact them and you can lobby them and persuade them that that you know you're right and they should vote for you and give give you their proxies and and then you can change the people on the board I mean that's how it's supposed to be done it's like a mini government it's like if you don't like what your elected officials are doing you on elect them at the next election related to that which is to me back to fixing blame and everything's wrong everything is broken and I have some sympathy for this they wanted a form of education required for board members now they remember these are volunteers and some of them are very small projects and don't have much really going on with them but they wanted a mandatory education to the point even that you had to have these mandatory classes but you also had to submit personal financial statements because they wanted to make sure you didn't have a conflict of interest which is a little bit over the top for me but I can see as we're trying to do it kind of insider and what we're trying to do with the HCCA seminars we're making good faith efforts to try to educate people and maybe some things we can do to make it better but it all kind of blends together a state agency to oversee the board's mandatory licensing to be what you responsible where an agent can't override what the principal is saying and then mandatory education is fixing blame again so how do you see that same thing same thing and in a way you know there are ways to do this and and and one of the things is to is to educate the board members when you sit on a board you have officers and directors insurance and and so if you do your job then if in case a unit order gets upset and wants to sue you your insurance will cover you and but you know I think what what we need to do is to educate these and I know we've had programs about how you know how to avoid getting sued if you're a board member and but you know I think we have to put more emphasis on it so that board members are aware that they can be sued and they have to take steps to protect themselves which means following the business judgment rule and you know asking outside experts and and you know voting independently you know not because they're the best friends of the the board president or you know but they they need to act independently for the in the best interests of of the unit owners so that they don't get sued and and and I think the way to avoid all this all of this plus the you know lawsuits that you know usually entail is education and and now with technology I mean there's a way for us to deliver education to people without them having to attend seminars they can just turn on their their device their phone right with YouTube programs like our program here I mean they can look at look at the shows on a on a on a phone or on a tablet any time of the day or night and they can you know you you can probably log in and say you know I certify that I have seen this program and and that's it I think you're the head also about communication and we with the end of the show if we have time we'll talk briefly about dispute resolution but we put a lot of effort this past year on trying to get people aware of the various dispute resolution mechanisms we have parts that part of them were funded by the continued education funds so doesn't cost anybody much money to try to resolve disputes among themselves but let's talk briefly about what did pass this year in 2017 I noticed five bills and we don't have time to go through them in detail but let's just kind of review the five things we did accomplish this year as the industry to make our industry better for homeowners and boards alike beginning with proxies okay and what we heard and and a lot of what we do in the legislature is based on what we heard what we hear from the community and the community was telling us that you know when when when proxies were submitted and if there were if they the wrong boxes were checked or if two boxes were checked that somehow those proxies went to the board which is wrong and the statute doesn't provide for that so all we did was clarified and said you know if you check the wrong box or you check more than one so it in effect it's a defective proxy it goes to nobody it only goes to establish a form at the meeting right so the boards can't take that and use it to gain voting power right the second thing that kind of came out which uh is again back to being heard is that at board meetings boards must establish meeting rules to allow reasonable participation of its owners its members in the board meetings it's not just at the forum in the beginning they need to have reasonable rules allow them to participate during a board meeting and get their views accomplished without disrupting the board and preventing them from getting their business done so the big issue on the board meetings was that you have to have established written meeting rules to allow owner participation and the board should welcome that because after all they're elected by the owners right and you know just I just want to add to that because after that bill passed what I heard was some some and it was passed in May I think the governor signed it in June or July even after the governor signed that bill there were some boards that took the position that oh we can't let you speak because we haven't made our rules yet because the statute did talk about making reasonable rules and so they use that as uh an excuse for not letting people talk even though the you know some of the people knew that the the law had passed and they tried to speak at meetings and you know my response to them and I think we addressed it at one of our lunches is if this is happening in your association and you tell your board that they're wrong that that you can speak at the meeting even though they haven't done the rules it's that you know they can make the rules you know and you know whatever they want to but they need to let you speak because the bill has been signed it's it is in place well a couple of three minutes we'll be coming up on a break so I want to try to get the other three bills done in three minutes because we have such a heavy agenda today employment contracts of the general manager site manager right what's the new rule that they you have to produce them you have to produce them and also tenants can't serve on boards as directors and the last thing would be the repeal of 514-8 and that and the repeal is effective on january 1 2019 and let me comment about that particularly because the real estate commission has been sending out letters to all the board presidents saying this is to advise you and of course if you're a developer with unsold units that are filed the public report into 514-8 there's certain very other limited circumstances that may have an impact on you but for all practical purposes boards that we see the letter have nothing to do unless they have a developer controlled association and still under 514-8 or something along that line it's just a notice letter but boards themselves have nothing to do they have no notices to give to the owners it's an informational letter went out it has really no effect from the established associations here in hawaii right but you know and one one other thing too and this question was brought to me you know now that the 514-8 is going to be repealed it's going to be even though it's not effective until uh january 1 do we still have to do the opt-in and i'm saying well no i i i would not you know worry about the opting in because for all intents and purposes 514-8 the governance that is sections are probably you know it's it's overridden by the fact that 514-b is in place and there is language in 514-b this says this applies to all existing condominiums and the only reason why you have the opt-in was because you had 514-8 and that opting in would just basically be insurance right if you were established under 514-8 that's what we're telling our associations who are 514 as well no sense spending the money and written consents and doing all that let the law take effect a year later because the governance section is identical in both statutes anyway so why spend the money to take care of that okay what we're going to do is we're at the midway part of the show want to come back and talk about the one bill that's in the conference committee still and then go on to the biggest fire in hawaiian history marco polo and what's going on at the city council so we're going to take a short break we'll be back with you in one minute i am andrea i am from italy and i've been studying and working here in hawaii for more than three years for my phd hawaii is home to a truly fantastic community of middle and high school students and did you know some of them are currently out there right now using their free time to invent new quantum computers and did you know some of them are exploring cybersecurity and the new frontiers of robotics i am just always amazed as i talk to them at science fairs oh but there's more did you know that these students are coming here on fintech hawaii to share their story with us come and join the new young talents making wayshow and discover how these students are shaping our future starting on february the sixth every tuesday at 11 a.m only here at fintech hawaii mahalo welcome back to kind of insider we're sitting here with my good friend and co-host jane sugi moro talking to the fact that what happened in 2017 good bad and the ugly i guess we could say the last thing we talked about was is there's still one bill as you know we have a bi annual legislation so it goes two years so there was one bill house bill 1499 it was stuck in conference committee didn't get out could be coming out of conference committee this year 1499 what do you think the status of it is explain everybody what it is okay 1499 uh basically um uh talks about the priority of payments the way it is set up now the priority of payments provision in a condominium declaration and in the statute uh you know it it reinforces the fact that you know condominiums are going to get paid in other words if you run start running late on payments your your payments are going to be applied to your late charges and any attorneys fees before get applied to the um um uh assessments and you have to remember that your maintenance fees are assessments the late charges attorneys fees and any penalties and things are not assessments and you know so it's a matter of definition and the the the proponent of this bill was concerned that certain things were going to foreclosure and she didn't think it was right that you would a person could lose their home for non-payment of late charges and you know penalties and so basically the priority of payments basically says i mean this this bill basically says you can't do it foreclosure if that's all it is you know it has to be assessments it has to be your maintenance fees are late and that if and this also says that you know if there is a dispute between you and the association you pay the assessments and you could mediate or arbitrate the attorneys fees and the late charges and tacked on to that bill are all kinds of stuff that we ended up somehow it ended up in that bill our alternative dispute resolution bill though the there's the bill that expanded who could do mediation and arbitration to include board members because you have board members fighting with other board members right and they are technically not covered by the statute so the mediation and the arbitration statute that's been expanded to include board members and to include managing agents and i think the key word we have to add to that is the word fines as well it was right we saw associations we have kind of pay now dispute later so people would kind of thunder knows that the board not pay the fine and they get late fees and legal fees on it and meanwhile they had a priority payment so any fees you paid first went to fines and late fees that's you had a balanced due of your assessment they were getting foreclosed on and the intended bill was to prevent that right that you have to give them notice they have a right to arbitration and they go through this process to make sure owners knew what their rights were before this got into a foreclosure mistake and i do you expect that to come out this year i do i in fact i had i had uh some meetings at the legislature uh a few weeks ago and i i was given assurances that 1499 would come out and i think that's a good thing the industry fought for this saying that we want balance between a board's rights and a homeowner's rights that people need to know that there are consequences for not paying their fines or paying their maintenance fees on times but let's stop it before i guess the foreclosure until we've gone through a meaningful dispute resolution process to try to resolve it and i think that was the intent of the bill but as a reminder to all the homeowners you still got to pay your maintenance fees right you can't you can't use that statue for that let's go on to the hot topic i hate to call it a hot topic kind of the Marco Polo fire yeah the red today in the paper you know they were talking again about uh the bill trying to legislate on certain types of uh condos or at high rise buildings mandatory fire sprinkler systems and there's a lot of pushback because of the cost where that all stand with the uh i know the city council had two bills um bill uh 69 and 107 i think they are yeah that deals with this where that stands 69 is the mandatory bill introduced by the mayor and it it says that sprinklers would be in all high rise buildings within five years okay that one i think is dead i think it for all intents and purposes is dead 107 is the revision uh by the uh residential fire safety advisory committee uh and that takes the recommendations by that committee and that bill sets up something called the life safety valuation which all buildings would have to you know go through and the uh the fire and the fire department led the task force and what that does is it exempted out of 361 buildings high rise buildings in town it exempted uh all all buildings that open onto exterior quarters that are you know open and any buildings that are less than 10 stories so now we're down to 52 buildings okay 52 buildings and a life safety evaluation that all the buildings have to go through make sure that they're safe and that life safety evaluation and the tool that you use to measure it is called we call it the matrix it's online on the city website so that and all the buildings you know and and with through this show and through our seminars you know we've been telling people it's on the city website it's on the city website please go and look at it and then go and take a look at your building and see how you can do it and let me tell you there was a hearing on December 18th and it was packed at the city those changes the hearing chambers were just packed and they were all in the hallway and I was so proud of the people who came they came and they testified all all of them I mean they two or three minutes but they said I you know I I I sit on the board and I'm from this building and we had this many units and we've you know done this we've checked our fire alarms and our elevators we've upgraded our elevators and we've closed in our very vertical openings I mean they're looking at the the the matrix you know so and they said we were doing and we did all these things before the market full of fire and after the market full we didn't done more and you know when we bought into the building we knew there were no fire sprinklers and so we have assumed the risk of the fact that there are no sprinklers and we don't want the government telling us you know what what we can and should do you should leave it to us to to make those decisions and and and you know I'm paraphrasing but that's the gist of what people were saying there's a practical side to this I mean no one can argue fire safety we don't want to lose lives but when you take old buildings there becomes a lot of structural issues and and engineering issues that affect it for example to have a high-rise building with a fire sprinkler system you need a minimum of 10 by 10 room for the fire pump right well there may be buildings that don't have 10 by 10 room or a larger for a fire pump right and they their their their footprint has taken up all of the usable space on their property so now they got to apply for variance from the city if they want to add the pump room and I know nothing but I saw estimates from four to I don't say $12,000 to put a sprinkler system in well that doesn't take any consideration what if you have has asbestos abatement or lead paint abatement I mean you know people I've talked to our engineers this field said some of these buildings maybe 30 40 or $50,000 a unit to put a fire sprinkler system in which it creates about four to five hundred dollars a month per unit owner if they had to borrow the money to borrow the building I'm not sure we're rushing to get this done I understand the sense of urgency but I don't know if we thought this through really well and I think that's the that is the concern of some of the council members and you know and they're getting all kinds of calls from their constituents about the cost and the fact that you know the same buildings that are being told that they have to put you know they may have to comply with mandatory installation of fire sprinklers I mean they're being faced with you know a huge capital improvements that you know call for spa repairs replacing their pipes I mean these are not cheap capital improvements and they have to be done because these buildings are old already what is the worst scenario because the older buildings are going to have to deal with the ones that don't have the new fire code sprinklers the other ones are dealing with the cast iron sewage pipes are the ones dealing with the electrical system with the spa repair because they're older buildings and so you throw this on top of it I'm not I certainly support a hundred percent the matrix requiring everybody to look because there are things you can do with new sprinklers or new fire doors for example new fire alarm systems we're closing up the poo because it may allow a draft to help the fire to accelerate there's things you can do but I'm not sure that it shouldn't be left to the buildings themselves to look at what they can best do to provide additional fire safety for the residents than mandating fire sprinklers for everybody because frankly I just don't think it's affordable well you know and you know the the matrix that they use I was you know I was representing Hawaii council on the fire safety advisory committee and so they used my building when they were doing it explaining the matrix and my building didn't pass with a minus two score and that's because one of the items on the matrix is the installation of partial sprinklers in the hallway and in the you know in the common elements and and so they have a minus eight you start off with a minus eight so if that minus eight was a zero or a minus one just like everything else on the matrix my building would have passed without sprinklers it was skewed to fail it's skewed that's right and and and and you know Hawaii council hired engineers who advise us on our position and they when they looked at the matrix and they saw the minus eight they said that that that that's you know really not supportable that a zero or a minus one can be installed and then that way you have buildings like mine because we renovated our elevator two years ago and a lot of buildings already have it on their budget and reserves and that's one thing that they can start looking at doing because they have money socked away for that they could renovate their elevators because that way their fire alarms will then have to come up to code and this and they have money you know already budgeted for this repair a lot of them but we're down to a minute left so I gotta ask you a question what do you see 2018 gonna be about I see um I well first of all we got to get this thing resolved with the fire sprinklers but you know I what I see is we're going to be back in the legislature talking more about dispute resolution because we we need to get that resolved we need to get it working so that basically we're forcing people to talk to each other to resolve their differences well let me conclude the show by first of all thanking Jane for all you do throughout the year it's really wonderful to work with you how we enjoy being a part of Hawaii council community associations and the show here and I know you're a big advocate that's I want to thank you because you've been a tireless worker in our industry for decades I also want to say to people who watch our show thank you for watching it's been an incredible two years we hope to continue to make improvements in our show and provide you valuable education I want to wish all of you a very happy and safe new year and see you again in 2018