 Think Tech Away. Civil engagement lives here. Aloha. Welcome to Kondo Insider. It's Thursday. Our show is all about association living, mostly Kondos. And what our show does is try to educate board members and owners alike on the issues before our association. And I have my favorite guest, who's my boss, who I ask her every week to fire me on this show, but she won't do it. And that's okay, we both enjoyed doing it for the community. And I asked her to come back and follow up my last week's show, which was about Kenan Association banned American flag. And because of response by people who watched, we're going to expand it to talk a little bit more about house rules. So we have us today with us, Jane Sugimura, a prominent lawyer, smartest girl in the industry in my book. Welcome to the show. Well, thank you for having me here again. Well, you know, it's kind of like who's having who, you know. It's like we've been together so many times on this show. And just remind everybody about what you do and what HCCA is Yes, HCCA, I mean, we're an advocacy group. We go out and, you know, we advocate for condominiums and community associations before the state legislature, the city council, and other groups. And we educate. We do the seminars and we do the show mainly because we feel it's important to educate boards and condo owners and people who make their living serving condominiums. What is the volunteer job being on the board? And there's a lot of responsibility, both legal and your governing documents. So hopefully many directors want to learn more to execute their job better. And that's what this show is all about. And we've had tremendous positive feedback. And I was looking at the register today. We've done about 115 shows, believe it or not. Oh, wow. I hope people are watching and learning, you know, because I think it will result in better living arrangements for everybody, the board, and the people that they serve who live in their associations. Well, two bills, just kind of finishing up last year's legislature, that we as an industry advocated for. I look at it as somewhat balancing owners' rights and the board in a meaningful way where House Bill 1873 and House Bill 1874. So what happened to them? Okay, they became law, and I'm not sure if they got signed by the governor or they became law by default because if he didn't veto them, they became law yesterday. And any bills that didn't get signed and didn't get vetoed became law. And so 1870, House Bill 1873, which relates to the priority of payments policy is now Act 195. Okay, and that bill, what it does is it tries to clarify, you know, payment plans between associations and unit owners, you know, that could result in foreclosure. And the big deal here with this bill is the priority of payments is a policy that associations have adopted in the past, and then they use that to apply current payments and sometimes it results in defaults and foreclosure, you know, because the unit owner just doesn't understand the priority of payments, doesn't understand that the current payments are being applied to late charges that maybe they didn't know about and legal charges that they didn't know about. And so now this bill says if you have a dispute, I mean, the prior law says if you had a dispute, you have to pay everything. By the time you find out if it's $2,000 and maybe your assessments are only $100, you have to pay the $2,000 before you can even object to that amount. And it's the pay now dispute later. Under this bill, which becomes effective, in fact it became effective July 1 of 2018, all you have to do if you have a dispute is you pay your assessments. And the assessment is a common expense monthly charge. And the statute defines assessment as only those monthly charges, late charges, attorneys fees, penalties, interests are not assessments under the statute. So that means they just pay their assessment, if they only owe $100, they pay the $100 and then they can dispute the late charges and the attorneys fees without paying them. And they can do it through mediation and a value of mediation that we've been talking about over many programs. I mean, they can use that form of alternative dispute resolution to try to resolve that issue. And so when we talk about assessments, we're talking about maintenance fees for the common watcher. And it's all those other things you described aren't included with respect to that. How about House Bill 1874, what happened then? Okay, 1874. And that basically deals with the mediation and arbitration provisions that are in 514B. And it expands the mediation to say, because right now it was only an owner and the board. And now it expanded it to include a board member against other board members and managing agents. And it added a remedy, because one of the issues is trying to get the board into the mediation arena. In other words, it's very easy to do mediation. You just call either mediation center of the Pacific or dispute progression resolution, which is when those two entities are in contract with the state of Hawaii real estate commission that supervises the condo ed fund. You just call one of those entities and you say, look, you know, I want to do evaded mediation. And they will start setting it up. But trying to get the board to sometimes come is like pulling teeth. They just won't come. You get all kinds of excuses. And I had one that went on for 18 months. And we had to go to court. And the judge basically, you know, chewed us both up and said, you know, get out of my courtroom. So we went and mediated it. It was over in half a day. What's interesting, and I showed you about House Rules, I'll just sum this up by saying that HB1874 is now Act 196. Right. So it is like the last bill, now law effective July 1. No. That one's January 1. January 1. January 1, 2019. And it also provides for voluntary binding arbitration. Right. To be subsidized by the condo ed fund. So anyway, as we've talked about those bills many times in these issues, we would tell you that they're now law as of July 1 in one case in January 1, 2019 in the other case. And I know that those of you who belong to CAI on July 19th next Thursday, they have a current update of what happened in last year's legislature in detail on this, plus the sprinkler bill July 19th. And you can check the CAI website for that. Let's go to House Rules. Okay. Okay. What's the purpose of House Rules? The purpose of House Rules is basically to allow everybody who lives in that community, whether it's a condominium or a community association, quiet enjoyment, which means that you should be able to enjoy living in your unit or your house. And so these rules, because you have so many people living in close proximity, you need to have rules like quiet hours and what constitutes a nuisance. In other words, can you turn your TV way up and blast everybody out of their unit? And what about smoking? I mean, can you go out on your lanai and smoke up to the and if the smoke infiltrates another unit, you know, what about that? And so there are rules that either the state passed a law about smoking but it's up to the association to define where your common elements are because I think the state passed a law on smoking basically says condominiums that have in closed areas can set up rules that say where you can't smoke but basically in a condominium in common areas you're not allowed to smoke. And so the association has to set up rules to kind of define what do you mean by a common error. Does that mean the park that is far away from the buildings? Or does that mean the old cuchere area in the front of the building? The walkway to the garage? What about your cabanas? Do you want smoking in your cabanas? It's the common area and under the statue you could ban smoking in that area. So the association has to make these rules to try to accommodate most of the people. You're not going to please everybody. I mean you can't. There's so many people. You're going to offend or there's going to be some people who disagree with those rules but you know if they don't want to live by these rules they should live in a single family home. They shouldn't be living in a condo. On a technical basis where does the board get the right to have house rules? Okay the there's a statutory provision and that's 514B 105 lower B and also the governing documents say that the board has the authority to manage the operations so that means that they can adopt reasonable rules that the residents have to abide by in order to ensure that people aren't going to be interfering with each other use of their space and some of the rules too involve making sure that the property values are maintained because you don't want your place to be a dump. I mean you want people to take care of their premises, the common areas, you want to make sure that you know the building is kept in good shape and so you know that's what these rules are for to ensure that that happens. Well my general question so the board can establish house rules per the statute and per the governing documents the one I see that in my opinion commonly misunderstood that for example the declaration will say dogs are permitted and the board will want to set up a house rule, dogs are not permitted in violation of the declaration of violence. Can the house rule be in violation of the declaration of violence? No they have to be consistent they have to be consistent and so if you have a declaration that allows for pets, if you wanted to change that you would have to change the declaration and that takes 67% of the unit owners to approve. What that kind of morphs into is that okay the declaration says you can have pets a dog and then someone passed a house rule, dogs can't be more than 25 pounds and maybe be not certain breeds because there are a list of breeds by the American Kennel Society, one of those white man's society that are considered a little more dangerous than others, not that all of them are dangerous, but can the board then take that declaration and it says you can have pets and say yes you may have pets but the dog can't be more than 25 pounds. They can adopt reasonable rules and I would suggest that anybody who's listening to us before they come up with these rules they got to run them by their council and the council will check them out to make sure that you know they don't violate existing laws or discrimination and you have to understand too that there are service animals that might be over a certain weight or might be a breed that the board in its draft rules about dogs besides it's not appropriate to have in the building but if it's a service animal under fair housing because they're specially trained you can't prohibit them from being in the building so you got to be really careful so if you're going to come up with rules for animals I mean they can be reasonable because you don't want animals in the building creating a nuisance that are going to interfere with another resident's use of their space. I would generally say about house rules and I've seen this before and a lot of associations have not reviewed their house rules in a long time. We know our society and laws have changed dramatically. It would probably be incumbent upon every association who has not done this have their house rules reviewed by their attorney because even the issue of having a pool rule such as children under 14 can't swim alone in the pool have been proven to be discriminatory. Because the issue isn't about age, the issue is about ability to swim. And I see people get sued and get complaints because even though their practice might be different the rules are inconsistent and I would just say in general I don't know what your feeling is that most associations should have their house rules reviewed and then as they propose new house rules have them reviewed by their counsel. Yes I agree 100% and you know we did do a show on discrimination and they came with this really cute video and the gist of it was if you're going to make signs and then you're going to make rules avoid the term children because children is like a buzz word and there are protected classes when you're talking about discrimination and one of the protected classes is marital it's um what is it the familial status and familial status says that you know you can't make a rule that's going to discriminate against people with children right so that's why automatically if you have a rule that says children have to be thus and so that's probably going to be discriminatory so you should just avoid the use of children and I would say because we're going to take a short break that this is an issue that because of all the discrimination issues that exist today in our society rightfully so in many ways that you'd have to be careful about this as a board to prevent yourself from being into litigation that's unnecessary because you've just been inconsistent we're not clearing your rules to follow the current standards of today we're going to talk with Jane Sugumura about house rules we're going to come right back in one minute thank you for watching this is where we discuss everything that relates to computers that just kind of scare you out of your mind so come join us every week here on thinktecawaii.com 1pm on Friday afternoons so see all our episodes on youtube just look up the cyber underground on youtube all our shows will show up and please follow us we're always giving you current relevant information to protect you keepin' you safe aloha aloha I'm jade fardial founder of thinktecawaii and I'm Andrea Gabrielli the host for young talents making way wait a minute this is not a new episode is it jade that show is over Andrea so what are you gonna do now why don't we have a summer edition of young talents making way where we focus more on education as a mean for our young talents to max out becomes role models and achieve their dreams what a great idea so when do you want to begin Andrea july 3rd 2018 tuesday at 11am young talents making way for the summer edition stay tuned well we're back with jane sugemore talking about house rules in the first half of the show you're talking about the board's authority under the statute and under the government documents to make rules to prevent people from not enjoying their place or quiet enjoyment of their home as well as to enhance the property values of the association and we had kind of gotten through their authority and the next thing I want to say is who gets to approve these rules what are the owners on is it a board decision or who gets to decide these rules are going to be in place okay generally it's the board the board is the one who will you know decide to amend the house rules and the processes is that once they come up with a draft that's approved by the board that draft is circulated to the owners for feedback and the owners are told you know here's a draft make a look at it and get back to us with comments either the property manager or to the board and we're going to make a decision at a board meeting and the date and that way that's the due process requirement to let them know that if they don't say anything then the draft will probably be approved at that next meeting and if they do make comments if the board gets comments then they may consider them they'll talk about it at the meeting you know and maybe they'll approve the change or not but they can make a decision at that next board meeting to approve the house rules as amended by the comments that they received or adopted just the way it was circulated and then and in some associations I've heard that sometimes the owners because governing documents allow the owners to make a decision but that is not that would be a small minority of associations who are allowed to do that. Can they make it retroactive? No I mean they can't make it retroactive because that's not fair I mean under our constitution it's called the de facto law I mean that's unconstitutional you can't make something illegal that happened prior you know so that would be like that would kind of be have that retroactive effect and even in the legislature they don't make laws retroactive So should they in that case they've approved let's say rules they've taken the owner input and after they've got the newer rules approved so they as a matter of practice then send them out to all the owners and say these are the new house rules effective August 1st, September 20th. Yeah the processes that you usually send them out and give them a date 30 days down the road unless there's some kind of peculiarity maybe you have to do something physically to the property before the rules can be implemented but typically it's 30 days you send them out with a notice saying 30 days from now these rules will be in effect And the comment on something you said earlier from my clarification you can correct me if I'm wrong is that almost all the associations I'm familiar with the board of directors under the bylaws has the authority to make those rules I have seen in my life a half a dozen of most association that had a provision in their governing documents saying that owners have to approve amendments to the house rules so when you were talking about sometimes the owners you'd have to look at your bylaws it's very rare to be candid with you but my experience has been 95 out of 100 times or more the board has the authority to make house rules. Yes that's my understanding as well So how about setting fines? I mean can the board say well I think we're going to have if you park illegally in this fire zone the fine is $10,000 what do they have to do on setting fines and amounts and things like that can they just do what they want to do They generally can do what they want to do but you know the caveat is it's got to be reasonable you know when you do house rules they need to be reasonable so if you start getting into large numbers then you know on review and everything is subject to review in other words if you don't like what the board decides you may want to appeal it I mean by doing mediation or arbitration under the condominium statute and then you have some third party neutral either a mediator or an arbitrator who's going to chime in and maybe that person will you know based on hearing both sides will find that the $10,000 fine was unreasonable under the circumstances and then that way it gets thrown out Well you know I had a parking ticket the other day because I forgot to feed the meter and got to the meter late I should say it was $35 So for a board to establish $1,000 for improperly parking I've seen judges throw that out to be honest but it's actually gone into litigation that we know are reasonable it's got to have some basis and if you look at the general practice to create these huge rules or huge fines thinking that they're going to be enforceable at the end it's probably questionable you know at the best So okay so they have the house rules and they have fines and my experience has been they begin typically with a lot of cases warning maybe some instances are no warning like throwing something in the pool or something like that or throwing something off the line right so maybe some but they usually have like steps the first time you do it's $100 The process is usually you know it's like a graduated penalty type of thing you have warnings and some associations have maybe one or two warnings at least one warning and maybe a second warning and by the third time you start getting a fine graduated schedule $25 $40 $50 $75 $100 and then maybe it'll stick at $100 and it has to be and usually it has to be the same type of offense in other words if you broke a rule regarding noise you had your TV up too loud okay and that's you got the notices and finally you got hit with a fine and maybe next time it has something to do with you're not taking care of your car you let the oil drip onto the parking that's different from the noise so you start all over again you have to get a warning and then you get the $25 I mean you can't it's not cumulative I mean it's got to be categories and so you know there are different levels of fines depending on what category you know you get the notice of violation on. What I tell boards all the time is when they set up their annual budget their budget doesn't include estimated fine revenues so it's not like they need to have so many fines to match their make their budget balance right and what I've recommended oftentimes when an owner gets a fine they don't think it's appropriate maybe they have a defense they should go to the board meeting and ask to meet with the board either privately in executive session or before the meeting or at the meeting if they feel comfortable with it and talk about it because I've said the board is often times and not what is the purpose of the fine the purpose of the fine is to get compliance with the rule so we many times have said to them look let's not get in a fight about money we're going to recommend that we're going to suspend your fine for 12 months if in fact you don't do it again the fine is waived if you do it again the original fine is there and then the second fine is that amount of the third fine and that way the owner you get compliance you didn't depend on the $40 for the fine to balance your budget and that way you've got compliance at the same time you've kept harmonious community by not looking like the traffic cop mentality every time you do something wrong I'm going to write you a ticket and you know I agree wholeheartedly with you because to me the board and the association should not be you're not there to be punish your neighbors I mean you know maybe some people get you know a thrill you know the power that you can make somebody else's life miserable but to me those type of people don't belong on the board I mean everybody there is your neighbor I mean you're living in this building even if you don't live in the building you are neighbors you're part of this community so the fines should be used to get people to comply not to punish them and beat them up and I agree wholeheartedly with your approach that you defer the fine to see if there's compliance and if there's compliance you waive it and because in the end that's what you want you want compliance you don't want to collect the money the association doesn't need it and more times than not to be honest about this now I see these types of fines from my professional opinion more from tenants than the owner so when you have that tenant violating you're going after the owner with respect to the to the fine and they have to go to their tenant and talk to them about it so sometimes suspending it a fine isn't as effective as the owner going to the tenant and saying look you know I need you to comply pursuant to our lease see it to follow those rules that create some pressure and leverage that way I've been told by our producer we're out of time and so I wanted to tell you the flag story I don't have time to tell you the flag story today but I would tell all of our viewers we hope you enjoy our educational show we think it's important to the community that owners and board members alike have information about how to run a great association and how not to penalize your owners how to create this quiet enjoyment and goodwill among all of each of you so anyway we want to thank you for watching kind of insider we'll be back next week to talk about public relations issues when you have a catastrophe or association what the public relation issues are because it can affect your property values so we'll see you next Thursday three o'clock hello