 Aloha and welcome to condo insider. It is January 2017 and again I want to wish everybody a happy new year this past year We produced about 40 plus episodes of condo insider with my host sitting next to me Jane Sugimura Good to be sitting next to you today. Yes, it is. It's very good to be here. Happy new year. Happy new year to you Well on January 18th, you know, it's the beginning of a new legislative year here in Hawaii that our Legislature will meet and begin looking at a multitude of bills of which there's I've been told four or five thousand bills a year get introduced and About 80 to 100 get introduced to affecting condo living and so those who don't remember this that the legislature has two houses the Senate and the House bills get introduced sometimes as Companion bills in both the House and the Senate they get assigned to committees the committees hold hearings and take Testimony and bills either move on or don't move on and eventually go to other committees and get crossed over and may become law That's a simple explanation of a very lengthy process that goes from January kind of through May 2017 so Jane, what are you the things going to happen this year in the legislature? Well right now? Um, I don't know But we are hearing things about certain bills certain and certain issues that are coming up And one of them is the priority of payment issues and tell everybody what priority of payment is I think that's a common problem Owners don't understand that there are priority of payment policies right and and this is a bill that was introduced by Senator Baker and what it does is it tries it's a consumer protection measure and What it tries to do it tries to? inject some kind of fairness Into the payments that are due to the condominiums like under the The condominium declaration. I mean when when you buy condo you have to pay your maintenance fees as a contract that you make with the Association you you as an owner agree to pay your fair share of the common expenses But in collecting those fees, you know, there's a process and if you're late there are late charges and sometimes if you break a house rule there might be fines and The problem is is that there is a statute that says that if you're you know, if you have these Charges is like a pecking order except that the associate a lot of times the unit owners don't know about it So if you send in if you're a condo owner, you're sending in your payment and let's say you're late one month and And so a late charge, you know is applied. It's automatic, you know 10 days and then it and it applies But what they don't understand is that when you make your payment the next month your maintenance fee let's say it's 200 and You you and the late fee is $25 and so the very next month when you pay your 200 It goes to the $25 late charge and then you're delinquent and then you get another let again and then you get another late charge and sometimes these multiply and Some condominiums, you know, they're late charges are based on the amount So it's not like a $25 or $30. It's like a 5% you know, so it can escalate and sometimes these result in foreclosure and There's something, you know, just you know as as you know, Senator Baker says it's you know, it's something unfair about Losing your home because you didn't make your payments on time and it's because of late charges And so with her priority of payments, I mean, she's kind of adjusting the statute so that You know these things cannot be you know the prior she's doing away with the priority of payments In other words, you pay your maintenance fees and if you get a late charge fine that goes kind of like on the side and you eventually have to pay it but it's the the primary thing is that you need to pay your maintenance fees and There is a provision in the bill that says that if you don't if you're delinquent and You know, you can't even go to arbitration and mediation or file a lawsuit Unless you pay all of the fines all of the late charges And if there are any attorneys fees incurred because of the you know, you're now in the collection process You got to pay all of that before you can even dispute it. It's pay now and and dispute later And and that portion is is being revised so that You know, if you have a dispute you have to pay your maintenance fees and then you can dispute the attorneys fees the late charges and any fines and penalties you can go into mediation arbitration or even file a small claims and Get that resolved without you know having to pay those charges. Let me summarize that another way and see if I'm right Boards establish a priority payment policy and they basically say when I receive a payment from an owner First it goes to legal fees second the late fees second the house rule fines So an owner who maybe have a fine and say I'm just gonna ignore that and stick my head in the sand and avoid it That owner doesn't realize that when they make their regular maintenance fee payment It's first paying off legal fees late fees if any and then the the fine, right? So that leaves them with delinquency with the maintenance fees Which will create more late fees, right? So they're they're always delinquent and so in essence because they're delinquent on their Maintenance fees because of how their payments were applied They can actually be foreclosed upon and lose their home if they don't make payment, right? And if they wanted to make payment while they've fought this out According to the current statute they have to pay it in fall before they could they could right they have to pay In full all of the late charges that they're disputing and any legal fees that they may be disputing in order to dispute those those charges and And and and this bill says well, that's not fair And so what you have to do is you have to just pay your delinquent maintenance fees and not that the other Charges will go away, but you can initiate a mediation arbitration or a lawsuit to dispute those charges and Eventually you may have to pay them, but you know, you're not precluded from challenging those amounts because Under the current law you have to pay first and then dispute. Yeah, so the idea behind it would be where an owner gets himself in that situation They would file for an act 187 mediation probably they certainly could follow lawsuit But certainly act 187 is a fairly efficient way to address that issue And so that board would then would be prohibitive from any kind of collection action such as foreclosure Until that mediation occurred and owners had a chance to be be heard with respect to that because you could end up with all these multiple late fees and and I've actually seen experiences where owners basically had a Parking violation. They got a $50 fine and they'd get reminders and they would then get legal letters You owe the fine and all of a sudden this little $50 fine plus the late fees because it applied against the maintenance fee I owe three or four thousand dollars, right? And I think the new bill under Baker also requires At the time this becomes that level of delinquency If the owner received notice from the board that we have a priority payment policy This is how your funds are going to be applied and you have a right to mediation To the to yes, the bill does provide for that. Yeah, so it's a consumer protection thing, which I know the industry Has supported in the sense that we feel owners should have a right to it But again, I think one of the obvious issues that comes up is it can't be used as a stalling mechanism The mediation is going to have to be completed within a certain period of time 60 days That's right 60 days and so you can't just file it and then never go to a NAS for extension and drag this out right, I think the way the bill is written you you file for mediation and You have to start within 30 days. It's got to be completed within 60. So so it's it's a relatively quick process and It's fair to the homeowner consumer because they get a chance to challenge these Charges without having to pay the entire bill. They only have to pay their maintenance fees And it's really important, you know to pay those maintenance fees because what that does is that money is used to pay The the expenses to maintain the common elements. So that means the common electricity for the condominium employees for you know for the Expenses that the condo of the association has to operate the building and so they have to have that money And so so it's fair that the the owner occupant or the owner Pay those charges be while, you know, they're disputing the well to me I can correct me if you think I'm wrong But thank the first words of wisdom we would give to an owner is when you get a letter from your board And it says you have a fine or you have a delinquency You shouldn't ignore it, right? You should ignore it. You should go to the board meeting at appeal after reconsideration Because what happens is owners who just keep delaying delaying for a year or two all of a sudden these legal fees mount up When they've been given some notice as a problem that they shouldn't ignore these things They should get on I go to the board meeting figure out what happened and try to Compromise yeah, I can't agree with you more. I mean a lot of oh, you know I've seen it in all the years I've been involved that you know when owners ignore these notices it just makes things worse It doesn't make it go away. It generates more attorney's fees and And it's a mess and and in the end I mean they have to pay those maintenance fees and maybe they will get you know some reduction on Some of the penalties or the attorney's fees, but in the end they you know They're going to have to pay those maintenance fees And I think also the bill going to be introduced on legal fees with respect to foreclosures, correct? Yes well not foreclosure this This address is just that particular Provision that says that you can initiate a complaint or a challenge Against the unpaid Maintenance fees fines, whatever if you're delinquent in your account the bill of the current law says you need to pay everything pay now and then dispute it and The bill that we've seen in draft form that circulating says that You don't have to pay the fines or the attorney's fees until Until the matter has been resolved. I think the first the first draft on this bill was to Reduce the attorney's fees, which is something you know that would be harmful to the association because you know They have to incur the attorney's fees to do the collections And it's really not fair for them to have their attorney's fees capped You know when when they're doing the work, you know that benefits all of the unit owners, but anyway that bill Basically says that you don't have to pay the legal fees in order to challenge the validity of The amounts that the association is claiming you owe and I know you can't speak for everybody But we all belong to these various industry organizations and then of course there's always different people with different thoughts Do you feel for the most part the industry supports this consumer protection? proposals yes, Senator Baker and and Shumbo Kuro have come up with yes I I believe I mean I've talked to you know the condominium attorneys who are involved in these matters and And they've they've you know basically agreed with the concept that it's it's the maintenance fees that are the important thing And any other things like the penalties or the legal fees we can leave them to be resolved later And and it's important that you know if the unit owner wants to dispute them that they have that opportunity Yeah, my final comment before we take a short break is is that you know boards don't budget from fines and late fees When they have this issue and you have an owner now who's generated some additional fees It's best for them to sit down and keep it a friendly place to live and find a solution and work it out Then they continue this this this legal thing because for a small amount of money and the board takes a hard stand the legal fees grow and they grow and they grow and they want to make it a friendly place for people to live and Make sure they enforce the rules and they collect their maintenance fees But always thinking a hard line isn't the best approach of my I agree. I totally agree Okay, we're gonna get a short break and your two hosts here Jane and Richard. We back in a short minute Hey, how you doing? Welcome to a botchy talk. My name is Andrew landing. I'm your co-host and we have a nice program here every Friday at 1 o'clock Think tech studios where we talk about technology and we have a little bit of fun with it. So join us if you can. Thanks, Aloha Aloha and happy New Year. It's 2017 please keep up with me on power up Hawaii where Hawaii comes together to talk about a clean and just Energy future, please join me on Tuesdays at 1 o'clock. Mahalo Okay, I'm here with Brett over guard of the faculty of the School of Journalism in the Department of Communications at UH Minoa we've had a number of shows we have a movable feast going on and we talk about journals and we talk about a language you Talk about communication in general and we talk about the effect of that on the country and on Divisual people bread. It's so good to be able to discuss this with you in our movable feast. Oh, it's my pleasure This is a great opportunity. You'll have to come back again and again. Okay deal. That's the deal Brett over God I'm Jay fight. Yeah, we care about everything. Thanks Welcome back to condo insider sitting watching Richard Emory and Jane Sugimura talking about what we expect the hot topics for 2017 in the Hawaii Legislature effecting Association Before we took the break we talked about priority of payment and trying to balance the table with respect to home owners Maybe delinquent to fines or late fees to give them a more More opportunity to address those issues before they end up with extensive legal fees So what else you see happening in the 2017 legislature? Well, there's talk that there's going to be this Ombudsman bill and you know, this is the one where you know, you've got a condo czar and And you know that a condo czar who is you know going to have oversight over disputes between owners and their boards and and I guess they're supposed to be the Commission of Maybe six or seven people who are going to be led by this condo czar and basically they're supposed to be addressing The disputes between the owners and the boards. What do you think of that? Well, we saw this last year and they actually had the term condo czar in the bill And although the that bill was quite different this particular bill promotes an ombudsman who would be a Attorney who's hired by the state that has some oversight over the boards of directors that can actually overturn board decisions in some cases even remove an elected director from their position But then that is overseen a lot by a seven member commission appointed by the governor and to me It takes away the basic principle of self-governance, you know, I I don't know what your feelings are about that But I think I do but yeah, but you know When you live in an association, it's like a corporation they elect people to run the association And we have a bunch of consumer protection laws the boards must comply with but to have a governmental agency be responsible for Overturning board decisions or judging the decisions of a board just doesn't seem right to me No, I you know to me that that that goes against the the the core of self-governance That's the linchpin of condominium governance. I mean you live in a kind it's like, you know, it's like Being a citizen of a you know in a government in a government you vote for your elected officials and If you don't participate you get the government that you know you you know other people voted for and so in a condominium You know the owners vote for the board members and if they're unhappy They can unelect them and to have a third party come in and actually undo or You know take action on behalf of this board that was elected by you know a certain percentage of the of the owners I think is is is just undermining all the principles of self-governance. That's in 514 be having been an industry of very long time I go back and we every year here these complaints from a very small vocal minority That the sky is falling these boards don't know what they're doing. They're doing all these bad things if you go back to 2004 the statute was changed to provide for a test program of Called the condo court. We had a ministry of law judge hold hearings on condo manners well between 2005 and 2011 about six years Only 19 cases were filed from the 500,000 people or so that live in condominiums not very much And it wasn't continued. It was a test program in the and the sunset the law And so now we've put together a program called act 187 evaluative mediation Which doesn't cost the owner more than $175 and the board $175 to have someone like a retired judge here Their cases and we've had quite good success with that So I don't think we need government intervention or interference with a board's right to be an elected official and make decisions on behalf of their ownership Right, and I totally agree. I mean we have a process that works. We worked very hard I know the industry, you know, there are a lot of people who worked very hard to get that evaluative mediation program in place and and From people who have participated. I've heard nothing but good things and and so I you know, I think We need to you know keep those programs in place. We don't need another Bureaucracy that is going to use this money that is paid for by condo owners by I mean every condo owner gets assessed every other year and That money gets put into the condo Ed fund And I think that that money can be put to better use rather than setting up a whole new bureaucracy That's going to do do things that other people are already doing what some people will argue against the value of mediation Is even though the statute says They shall participate in mediation Often time an owner or a board doesn't show up for mediation So I know the industry is promoting some amendments to act 187 Basically putting some penalties in forth if you don't show up for mediation And basically one of the penalties I've heard Talked about is that a board would be stayed from taking any enforcement action if they didn't go to the mediation What do you think of that? I think that's I think that that will be very effective because You know, I think the the boards, you know Pride themselves on the fact that they have all this power and the fact that they won't be able to implement You know, uh, certain So-called punitive actions. I think, you know, we'll bring them to the table And and I do find that it is very irritating when you have a statute that uses the mandatory word shall Participate and then they refuse one part one side doesn't show up I mean, so you we do have to add some Sanctions or some teeth to that statute so that people can't disregard the law Because it's in there for a reason and if you can't bring the parties to the table because one refuses to show up Then I think we need to insert sanctions and and the legislators that we've talked to Uh, I'll have agreed, you know with us that yes, they meant when they said shall they meant that you shall attend You shall participate doesn't mean that if you you can participate if you want to You know that that's not what the statute says it says shall it shall mean shall that means you will And if you don't participate then you deserve to have to have sanctions I think there's actually a supreme court case where in fact an owner Wanted to do a removal election. There was an argument whether he had sufficient Proxies or quorum to hold a special meeting to remove the board and then meanwhile he Made basically I think agreed with that and tried to go to mediation with the board They didn't want to go but the board then And went and saw legal fees and spent legal money When he in fact was trying to get the mediation that I think the supreme court Denied the legal fees for the condo association. Yes, they did because they're saying well, you know, you had an obligation to go to mediation You didn't show up and you so you want your legal fees when you could have avoided those fees by attending mediation trying to resolve the matter first with the owner as the statute says so There are risks for boards too that you know, you just can't use your weight in authority and the war chest you have To treat people unfairly right and I think the owners who live in these condominiums should be cognizant You know when when when and they should pay attention to you know, what happens at their board meetings And if they find out that you know, their board was asked to go into mediation and they don't appear I mean they should uh Register their you know unhappiness with the board and to say well, you know the the statute says what it says And it says shall shall means shall and there's no ifs answer buts about it I don't know how you get around that and so uh, I you know, I'm Optimistic that we will get the changes in the bill You know so that uh, we can enforce it and I think one of the other things that we that are going to be added to that build is um Arbitration binding arbitration Oh, and and so how would that amendment work? Well The current statute provides for evaluative mediation and we use various programs of skilled mediators including retired judges And it comes from the condominium education fund which has about 1.8 million dollars in it The first hour split between the attorney and the association the balance paid there's various increments on how much of that's paid Well, we're suggesting in the bill is to also allow The two parties the board and the owner to agree to binding arbitration And the same half the first hour would apply But they could end the case permanently and not have to worry about what happens if they can't agree to mediation So we want to expand it to give owners another option and boards another option to offer binding arbitration versus evaluative mediation for the same costs and effect that we Currently see under the statute. We're hopeful that'll go through But isn't there already an arbitration statute in the condo in 514 b? Well under I can't remember this The site is under b but under a it's 121 where you can go to and demand arbitration And you go through the arbitration process But you see you can't by statute force someone to binding arbitration So if you go through that arbitration process under that portion of the statute You'll get a ruling but if you don't like it you file what they call trial de novo And it goes back to the litigation face. The only risk is if you don't succeed by 10 percent or more You may be liable for the other side legal fees and expenses to take it to the litigation side But it's not going to be as efficient as pay 175 dollars each side And uh, these are more simplistic issues in my opinion that we we see in the evaluative mediation And so with the the the statute Uh, it means that it's it's very expensive then to go to arbitration So this this alternative that you're talking about would be more cheaper and efficient If you want to use it to resolve a dispute size splits the first hour, which is usually around 175 dollars The next 3500 dollars comes from the continued education fund And if the mediator feels he's making progress needs additional funds I believe he can get another 3500 dollars up to 7000 So at the end of the day that whole thing is litigated or adjudicated through this mediation arbitration process at a total cost of 175 dollars for the owner And 175 dollars for the board that sounds terrific. It is terrific. It's like who wouldn't agree to something like that well, I think it's uh It's the right way to go and nationally and otherwise it's been proving that that's the right way to go to get People to the table get them to talk about it. And what we've seen in the short time I've had to analyze all the statistics since 2004 When a value of mediation began in 2015 and you could all the regular facilitated mediations prior to 2015 september They had a very low rate of success and a very high rate of refusing to mediate When september 2015 came along and a value of mediation came into place There's a very high rate of success and a very low rate of people refused to participate in mediation That tells us it's worth a chance to continue to improve that bill and improve that law So we can provide methods for owners and boards to resolve their differences without government interference like an ombudsman Right So so given the fact that the value of mediation seems to be working It really doesn't seem to be a need to have an ombudsman. No, absolutely not I don't think that in any case you once some person has no stake doesn't own there Who's a government official supported by seven appointed people have the right to overturn The decisions of elected board of directors who own there and have in that comic interest in the outcome and And frankly, I think it's unconstitutional because it's a contract and I think certainly if they're violating the consumer protection or laws That's one thing but to interfere with the basic business judgment of the board I don't think it's constitutional personally, you know So anyway, leave it or not We have like 10 more things to talk about in the legislature So we're going to have to have another show To go forward with this because this as I said before we began and we were kind of prepping for this I doubt we'll get through very much of this. There's so much going on So I want to thank everybody for watching condo insider. We hope you enjoy our show We're going to do a whole new series this year Jane who's an excellent co-host and I enjoy doing this most of the time anyway And happy new year to you all and thanks for watching condo insider