 This is Think Tech Hawaii, Community Matters here. Welcome to The Condo Insider, your show about everything to do with condo living, condo owning, and all that other good stuff. I'm your host, Scott Shirley, and my guest today is none other than Mr. Richard Emory. So you don't need to adjust your TV sets. We have actually did switch places today. Well, this is a chance to talk story about a few things and try a little bit different format, but I'd like to tell all of our viewers that you've all known about the fire safety issues and one of our major high rises, that there is a special seminar coming up on September 16th sponsored by the city and the mayor to talk about fire safety and they'll be announcing where and when on September 16th. I think it's from nine to 12, if I'm not mistaken. Well, I guess that means it was worthwhile having you with us today. Well, that's amazing. What are we going to talk about? Well, we're going to do it a little differently today. We're going to have more of a talk story session rather than an interview type of session. But before we get to that, I wanted to comment on the fact that one of the things we're going to talk about today is requesting condo docks in the sale of a condominium. And I understand you were just in Kona yesterday for the Realtors General Membership Meeting speaking pretty much about the same topic. Well, it really wasn't at the West Hawaii Association of Realtors, which is the adjunct to the Hawaii Association of Realtors. And they actually had a board meeting in the Governance Committee and their concerns were they've had member reports about Realtors asking for documents that they think it's expensive. Number one and number two, they want to make sure they're accurate what to do if there's no problem. So I was invited over, so I spent my day going to Kona's talking story with them. They're very productive, really nice people. And I think it was a good basis of communication. But I think the industry as evidenced by Kona's side are trying to reach out the industry as a whole, not just owners and board members, but vendors and Realtors to try to get better dialogue on issues before us so we all understand what the playing field is. I think that's important that everybody understand what the playing field is. And that's been one of the big topics amongst Realtors. And I've just been noticing it even more in the last couple of weeks. They're concerned about ordering documents and the cost of documents and things like that. Now, several episodes ago, we were talking about the Statute 514B and our two-part series that went on for four parts. And there's a section in that discussion that we had using the Core B course from the real estate commission where it listed a whole bunch of things that an owner is entitled to. It's a little different when you're selling the condo because of the disclosure that's required or expected. That list is not nearly as long of what a buyer wants to see as opposed to what an owner is entitled to. So I think we should start off with that first in regards to- That's the common misunderstanding. Owners say, or I'm an owner, I'm entitled under the statute to all of these documents. So I'm gonna sell my place, so I want all of these documents for free and to give it to my realtor because the sales contract provides that the buyer is entitled typically within 14 days, sometimes 10 days. All of these documents is part of their due diligence. And so what they're saying is that because of an owner that we as management companies have to stop everything we're doing and instantly go and satisfy these requests. But I think there's a lot of things they overlook when they make that assumption. Well, and I agree with you 100% on that. And plus there are times where the contract does say they need these documents within, let's say, 14 days. But they get around to ordering the documents two days before the end of that deadline. That's correct. Rather than at the beginning of that deadline and then it becomes our issue on trying to meet that deadline. And I was talking to some realtors about that particular issue. They said, well, the realtors don't want to order too early because then if the buyer backs out then they have to pay for the documents that they ordered. And so they're waiting for the last possible second to hedge their bets to make sure the documents they ordered, they'll get reimbursed in escrow at the time of closing and that the buyer doesn't walk out on them. So going back to the owners for a second, my general advice in the show we had before was, yes, you're entitled to certain documents as specified in the law. But when you request those documents of the management company or the board, if you're self-managed, take the time to think what you really want or need because I've had so many requests where the owner says, I want all the ledgers, all the bylaws, all the financial statements, all the invoices for the association for the last 10 years. What's thousands of pages? And the statute allows the management company to charge for the administrative costs related to that. And more times than not, because the office ran as expensive in Hawaii, only the current year's records are kept in the office. Everything else is kept in typically a professional fireproof warehouse. So someone's got to pay to go retrieve the boxes and bring them back so someone can review them, then take them back again to restore them. And those are all costs that are charged to the requester or the buyer, not the buyer, but the owner requesting, the records are gonna be charged for all those things. So they may be upset, they may be angry, they may want to go look for the smoking gun, but think through carefully what you're looking for before making a request and maybe even do it the stages that I want to see the check register that you're looking for or maybe things you believe were not properly paid for. And from there, say, I want to see invoices for vendor A and vendor B, but he's broad-based request saying, I want everything for the last 10 years. First of all, you add a lot of time to get them. But B, you're probably talking a couple thousand dollars in expense if you really want to follow through and the management company's gonna request you pay in advance because there had been times in the old days when we didn't ask them to pay in advance and then they'd get there and they wouldn't pay for them. Yeah, exactly. So it's an issue, but owners are entitled to records and my only advice is that they carefully look at what they're looking for and narrow the request and maybe do it over several requests. Well, in a condominium purchase, generally speaking, what a buyer is usually looking for or has been passed via statute legislation is the minutes of the last three border directors meeting, current financials, minutes of the annual meeting, a copy of the bylaws, declarations, house rules, articles of incorporation, insurance summary. That's usually what it's limited to for a buyer. In the old purchase contract, actually used to have a checklist on it and now it just says all documents required by law because over the last few years they've been indicating that you must have this or you must have this in a purchase. Well, let me just try to outline the issues as I say though. Seller wants to sell his condo, hires a realtor, realtor goes and finds a buyer, they sign a contract. That contract between the buyer and sellers, between the buyer and seller, we as the management company, don't even see it, we never get a copy of it. We don't know what they expressed or promised or said they want. However, these forms are really governed by the Hawaii Association of Realtors and they're all copyrighted by the Hawaii Association of Realtors. So when you look at that purchase contract, often called a DROA today or maybe not anymore, but used to be called a DROA. In section M, the Hawaii Association of Realtors said this is what you're supposed to ask for. And this is the document which is supposed to get to give to the buyer so they have full disclosure. But one of those documents is another copyrighted Hawaii Association of Realtors form called the RR-105C, which is kind of a disclosure from the management company with respect to the status of many issues in association. Are they being sued? Has the board talked about raising the maintenance fees? Are there any deferred maintenance? Those types of issues. And so what happens is there's nothing in the statute requiring the management company to fill it out. It's not an obligation. And if you look at the form itself, it says we do it as an accommodation. So now we go back to we now have a four-page, multi-question legal form that if in fact you didn't take the time to fill it out properly could expose someone to liability. And I'll give you some examples shortly if you ask me for the examples. Don't forget to ask them. No, this is talk story. Yeah, I don't have to ask you. All right. So anyway, you look at that form, typically most management companies charge around 185 bucks for that form. Well, do you think you can get a little lawyer to go fill that out for four pages? Probably not. Maybe per page. Right. But what happens is, you know, the realtors don't understand, they think it's a static document. We just drag and give them the same thing over and over again when in fact that form is personally reviewed and signed off for at the time of this transaction because yesterday they may not have agreed to raise the maintenance fees and today they could have agreed to raise the maintenance fees. Well, today you found mold where you didn't find mold yesterday. So it's due at the time the form has completed at the time of this transaction. So they must be personally done and completed. So just to kind of give you an example, this particular owner who I was talking to was upset because they're total cost for all the records, the bylaws, annual meetings, the last three minutes, the reserve study, the declaration of bylaws, et cetera, plus the RO 105C, I went around that office $360. Well, half of it $180 was this legal form that's not an association record. So you had $180 left, which was charged for 711 pages of information, which is about 20-something cents, I think. I didn't calculate it exactly, but they think it's just drag and post to an email when in fact we have to make sure that those are the current minutes. You could have had a board meeting two or three days ago with something important in it that we need to give the draft minutes because of the fact we want full disclosure to the buyer. So I think people underestimate what really work is involved for that program. Well, it's interesting to point out too that that was 700 and some odd pages. The statute actually allows up to a dollar per page. So those documents could have been well over $700. They weren't, because like you said, they averaged out about 20 cents a page. So it's actually less expensive than what people actually could be charged for. Yeah, and of course we're talking about the disclosure portion within the section M of the real estate contract. There's all these other issues that come up because of the escrow we can get back in a minute, but so you have this issue that you want the buyer to have full disclosure and believe it or not, lenders want to see the RO-105C this form. They won't even allow the buyer to give them the RO-105C. That's right. They go and order another one directly from the management company because the concern is the reliability of the information that's in those documents. So real estate brokers will say, well, the owners are gonna give me the last three minutes or they're gonna give me what they think is the budget of the host rules, are relying on that to be accurate. Where if they go to an independent company like the management company, they have relied on an independent source that is the custodian of records. So the likelihood is there's gonna be the accurate records. But there's nothing to say that an owner when selling their unit can't say, I'm gonna go give them these documents from my files and these documents I'm gonna order, which is a lot of cards, so the cost would be much less than 360. However, they're always gonna be stuck with this RO-105C. Well, I think that's the other bit of confusion because I've been teaching this for a number of years as well, is that the RO-105C is a courtesy form. It's not mandated by any statute. So it's completely voluntary. You're not required by law to do this particular form. And some realtors think it is part of the statute that you must provide this form, but it isn't. Well, testing my memory, which is not too bad. The original RO-105C came out in about 1994, 1995. Because I was on the original design committee of the RO-105C, which has changed over and over again over the last 20 years. And the whole concept behind it was that we've always had a seller disclosure of the unit owner, but the unit owner, most of them don't keep in touch with the association or board what's really going on. So asking the unit owner the status of the common elements of the association probably wasn't as high a quality of a disclosure as having the management company do it. So the unit owner surely would say whether they have asbestos or lead pain in their apartment or they've been experiencing problems, whatever it may be. But when it goes back to the common elements of the association itself, back in 94, 95, the real estate Hawaii association realtors put together the RO-105C to have an association disclosure typically via the management company. So the buyers have, you know, if you really think about our industry, we have very few, if any, a year, lawsuits over buying and selling real estate. We have such strict laws with so many forms and so much disclosure and so much straining, you rarely see a lawsuit involving the transfer of title between a buyer and a seller and a buyer. So this form is a good form, but the issue is it results as part of a contract between a seller and a buyer. And the decision by the industry, the realtors, that this is an important document. And so then they come as an accommodation, we complete that form every time it's reviewed before it's issued. So you can have it maybe issued five or six times in a month that every one of those had to be reviewed by someone. And if something were to go wrong, there would be liability issues. Okay, well, we're gonna continue talking story about condo docs, but first we're gonna take a short break. Okay. Okay, as long as I got your approval and we'll come right back to the condo insider. I'm good. I'm good. I'm good. But I have a story and I don't know where to start. I feel alone in a crowd. I can't sleep. I feel overwhelmed. I don't even know who I am anymore. I still have nightmares. I can't live like this anymore. I'm really not so good. But are you ready to listen? Going to the game and it's gonna be great. Early arrive and for a little tailgate. I usually drink but won't be drinking today because I'm the designated driver and that's okay. It's nice to be the guy that keeps his friends in line, keeps them from drinking too much so we can have a great time. A little responsibility can go a long way cause it's all about having fun on game day. I'm the guy you wanna be. I'm the guy, say good morning. I'm the guy with the edit set. Let's go. Welcome back to the condo insider, everything you ever wanted to know about condos. And we've been doing it a little differently today where we're talking story rather than interviewing and of course we have, I guess we basically can say we're both co-hosting this one today. I guess we're both real estate brokers and we've been in the industry a long time and it's a topic that's really misunderstood that we need to do more education in the field about. Even owners have to pay the bill when they sell a property. Always think that it's just a drag and drop and there's no work involved. Well it's interesting when you were talking about the infamous as I call it, RR105C. I had pointed out that there's no mandate in any statute that this form has to be filled out but back when you were on that committee that was putting this together, back then it was to solve a problem and it was basically designed for the banks. That's why you have questions on there is any one person own more than 10% what's the owner occupancy rate and things like that because the banks wanted to know if there is a refusal to fill out the RR105C then the management company will usually get a form that looks awfully familiar from the bank to fill out for this process. Certainly after 2008 with all this catastrophic problems in the real estate market and the economy and financial institutions and loans they become much more strict with regard to data, reserve studies. Even when you get the RR105C they may have their own addendum called a lender's questionnaire of another 10 questions. And frankly the White Association Realtors in the last 48 hours I wanna say yesterday just released the newest version of the RR105C where they added a whole bunch of questions about mold. So it's a moving target that requires some work but let me just briefly share with you an example of why this is important. Okay. Personal requests in RR105C, board in power now comes to the question about cast iron pipes is there any deferred maintenance? Well this is a whole bunch of elements. So you say yes we have deferred maintenance our pipes are leaking. Well that's gonna cause a problem with lenders with respect to getting a loan. So we have that situation. We have the management company look and we put in yes, however the board got an engineer they've studied it, they've gotten bid, they've got a loan that's scheduled for repair in October. That usually satisfies the lender because they see it's being addressed. So then next week the board gets removed by the distant owners and they'll wanna pay for the loan and a new board comes and they say well we're not sure we're gonna do this and now I get a new cast iron RR105C. Now we don't wanna be in a position so we have to actually go and talk to our lawyer at the time what's the best way to deal with this? Because it isn't that they weren't gonna do it. They said we're gonna reevaluate it. We might do it, we might make it someone else to do it. So we then have to change that form. The yes is deferred maintenance. The former board did the following. A new board has been elected as in the process of reviewing all these directions. They are committed to a resolution to the problem but may choose to select a different approach to different ventures. If we didn't do that and by our butt in there and all of a sudden there's an assessment or a loan or a new change, who they're gonna blame? Us. Well, we always get the blame. That's true. So I mean it's very important that the information be accurate and it's not a matter of just checking off a box. We have to look up the questions and go to the manager who's in charge and look what's really going on and try to give in the description side of the question an honest evaluation, not an opinion but more of this is the exact facts at the moment. So if the lender doesn't wanna loan the money because they don't feel it's been resolved, that's their choice. If the buyer doesn't wanna buy because that's their choice but our role in completing that form is to have an honest disclosure so they can make an informed decision. Well, you know, one of my concerns about the RR105C over the years is buyers and probably some realtors out there as well have actually turned it into like a short form disclosure. You have all these documents that you're giving the buyer to read and then you have this RR105C over here which is about four pages long. So they'll go through and look at that and not bother to really go into looking at the minutes the bylaws and things like that. It is still extremely important for a buyer to understand what they're buying and not all the answers are going to be in that RR105C. Well, let's kind of put this in perspective. They sign a contract, there are deadlines of the weather and violation of the contract of disclosing all this so the management company has to do this RR105C and provide all these documents in 10 days and they charge a fee, it's paid for by credit card by the realtor, usually charged back to the seller because that's what the contract says and meanwhile they open escrow. Well, you know, there's other parts of opening escrow and there's other fees there, right? The buyer and seller and you know, an escrow company is not the agent of the buyer and seller, it's a neutral party. And so you know how the issue, what's the escrow company? Well, they want to make sure you get all the conditions in the contract are resolved but then their job is to make sure that when that closes on that day that all the money that's owed is payable. And so there's a fee in escrow for the seller, charge the seller to get a final accounting and people say, well, you just look at the ledger online. Well, I wish that was true, we just looked at the ledger online but let's take another practical example. The contract says that where they had a loan for example, that the buyer or the seller has to pay off the present value of the loan. Well, they would have the option and just continue to make the payments and or pay off the loan. Well, how do we know that? Well, then how does that not get calculated? And what if they're self managing utilities that they have their own metering system? Someone's got to read the utilities and charge that. So that's properly allocated. Then you take on the fact, this just happened a couple of days ago where the owner says, why pay my maintenance fees by sure pay so we don't have to account for that because it's being taken out automatically. And so we're working on this settlement statement but he stopped payment on the sure pay. So we weren't gonna get the money for the current month's maintenance fees. So someone has got to go through and look at all of the accounting, whether it be stop payments, fines unpaid, future charges that may not be in the ledger yet, a whole bunch of items to validate to the escrow company that if we collect this amount all square, everybody will have paid what they owed and so there's a fee for that. And most associations feel that it shouldn't be an expense of the owners. It's certainly not included in our management contract. It shouldn't be an expense of all the owners. It should be expense of the seller or the buyer that's running on the contract to pay for it. And so the cost of this is absorbed by the people involved in the transaction. Well, you know, it was a discussion even while I was on the real estate commission of the need, whether it's a resale or a brand new condo, that buyers really need to, once they get these documents, they really need to look at them because, you know, good example of that is, I wanna buy this condo to do vacation rental in and the bylaws say you can't have any rentals less than 180 days, would you wanna know that in advance as you're going through this purchase that you're not gonna be allowed to do a vacation rental there? Well, I think that was one of the things that the realtors I met with yesterday and Conan said is that, what do we do to get people to read the documents? Because it's not just the R I want to have. I see right now they're complaining about the cost because in my example where they ordered everything that it cost them $360 for 711 pages plus a custom completed questionnaire of four pages that have legal implications. Yeah, well, it's just the cost of doing business. You know, it's not really, as you said under the statute 480 I think it is, we can charge a dollar a page so we could charge $711 plus the wire if I see. I don't think anyone's trying to take advantage of people but I don't think it's fair to put anybody to have to do work and not be compensated for it and also you don't wanna ask them to do the work and not be liable for the work product. Well, you know, there is that old saying if you got it for free it was worth every penny you paid for it. Yeah, that's true. Yeah, sure. But I think, you know, there's a confusion between this and 508D Seller's Disclosure Law. There is a law in the book that says Seller must disclose everything they know about the property. This in a condo is just in addition that it's in the statute that you will provide these documents. Selling everything you know means one thing but if you're an owner and you're not on the board and you haven't been following it you don't know very much and they want to have to these buyers. Cool disclosure. I had a situation where I got a complaint that the R105C was in crepe field because we had checked there's no asbestos in the common elements. And so the owner said I got in the unit there was asbestos in the unit. Well, how would we know that? We wouldn't know that. The forum says common elements in the asbestos because they had remediated it. And so we then chose to point out that when the resident manager showed the buyer around he pointed out the asbestos in the ceiling. But that went away. But you can see that behind the scenes is phone calls, there's lawyer letters, there's discussion with professionals on how to answer questions to make sure we have honest disclosure for the buyer and we represent the seller well on making sure they have the right information. I think what people really do need to realize however is that these documents are extremely important for a buyer. And these are actually reasonable fees compared to what is allowed under the statute to be charged for this. I don't remember all the states. I want to say Arizona is one of them. Some of them have had laws where they've put a maximum on it. Most of these laws are five, six, seven hundred dollars the maximum and that's before the R105C. Yeah, exactly. I think what we need to do is educate the realtors and the buyers and the sellers and maybe put together a brochure explaining this because it's not just drag and drop some document that's already there. There's a whole lot of work involved to make sure the proper disclosure is made for buyers. Well again, it was talk story time with Richard and Scott sitting on different sides of the table this time and our time, it just amazes me how quickly this goes when you and I are doing this and our time is up already. Well, I listened to whining all day. Time for red whining all night. Oh, there you go. I understand that's just a hobby though. It's not a, so it's been my pleasure having Richard here again. Both of us having the opportunity to talk story about condominium documents. You've been watching the condo insider for everything you ever wanted to know about condominium living, condominium ownership and be sure to tune in next week for more great information on condo ownership.