 Welcome to Condo Insider, what you show about living in an association. Many times I've said about, estimated about 40% of our population lives in some form of an association. And this shows to help board members, owners, and vendors who work with associations understand our industry better. And I have my wonderful friend and co-host, Jane Sugumur here. Hello. Nice to see you again. I can't wait to interview you. What's going on? We have to stop meeting like this. I know. But anyway, I want to tell you a hot topic today. I was reading the paper, Star Advertiser, maybe two days ago. There's this big headline with this condo association, board of directors, all the lawsuit to prevent an owner from serving on the board, the footnote, the owner is the owner of a LLC, and therefore is a member of the LLC, and the condo association took the position, or he's not the owner, he's really a tenant, and the new role says tenants can't serve on the board. What do you think? Well, coincidentally, Hawaii Council was the initiator of that change back in 2017. And the reason why we made that change is because, you know, a concern was brought to my attention that there were these non-profits, I think it was a church, who owned several units in a condominium. And apparently they were allowing the tenants that they rented to, to basically be their surrogates and run for the board. And you know, tenants have a different perspective than owners. And we're talking about doing the budget and spending money and making policy that affects all the unit owners. There was a concern that these tenants of this non-profit, you know, just, you know, didn't have the proper perspective, you know, and the statute says that if you're going to be on the board, you've got to be an owner. And so the bill was basically to clarify it so that in this particular building that the non-profit would have to have their officers, directors, or somebody that was affiliated with their organization, you know, serve on the board. Not their tenants. And that was all the change, that was all that that was all about. And this lawsuit that was in the newspaper, I think it was the person who was trying to run for the board, Mr. Siddiqui. He was the one who filed a TRO, which was granted by the court. And basically the court said that he could place his name on the, be nominated for a board and at this annual meeting, you know, run for a position on the board. My recollection was when we first talked about this issue of tenants back, I'm on your board at Hawaii Council, was that the current statute has some language for like entities like corporations or LLCs that says that they can have a quote authorized representative, which in a way is vague. And so in this case, it was a church, the one, although there's other projects that have similar problems, the church would print as their authorized representative, the tenant. And the tenant would look at this as, well, I don't want to spend any money because then the rent will go up if the maintenance fees go up. And so their interest was not, with the fiduciary role, a typical board would be to protect the property and protect the values. And there was a lot of discussion that the tenants were not engaged in the same level as owners. Is that kind of how you- That was the concern that was addressed and that was why we moved forward with the bill. And it was basically to clarify that language, an authorized representative. But the authorized representative had to be an officer or director or somebody affiliated with the corporation couldn't be the tenant who was occupying that corporate owner's unit. In this case, in the paper, if I remember correctly, the owner, you can pronounce his name better than I can, but- Yeah, I think it's Siddiqui. And he and his wife were the sole members of an LLC. And so, I guess from my perspective, looking at that, I mean, they would have the perspective of an owner, not a tenant. So I think the Dutch made a correct decision by granting the TRO and allowing Mr. Siddiqui to run for the board. Well, I agree with you. I was thinking this thing through. And you have an LLC owned by the husband and wife. They certainly have a financial interest in the property. And then the board, I guess, refused to put his name because he probably submitted the eight and a half by 11, I want to run for the board. And they probably refused to put his name on the ballot. And he thought to get a TRO saying, well, I'm really an owner. And then the board took no, you're a tenant. Well, I have a hard time with that because if you're an owner, typically, even if I run it out to you, I can still run for the board as an owner. I don't know what the tendency issue is. He's truly an owner through his LLC. Right. And they are the sole owners of the LLC. It's not like there are other owners. So they are the sole owner. So basically, it is just ownership in a different format. And that's consistent with the change that we made when we changed the law because we really wanted to make sure that people who serve on the board do so with an owner's perspective, with a financial interest in the decisions that are being made so that you're not holding back and not wanting to raise maintenance fees because your concern is going to cost you more money. I mean, because those decisions that the board makes regarding maintenance fees and reserves, they have to do that. They have to exercise their independent judgment under the condo statute. And they have to do that with the interests of everybody in the building. In other words, you have to spend money to keep the building safe and to keep the condition of the building in a safe manner. So that means you've got to do regular maintenance. Why do you think the board took that position? I really don't know. But maybe this person was a person of express concern. But to me, that is a good thing because boards of directors are supposed to exercise their independent judgment when they act on the board. They're not supposed to all be yes people. In other words, you have a board president who kind of calls the shots. And if you have eight people who are there as yes people, I think they're in breach of the fiduciary duty because they're not exercising their independent judgment. They're not thinking independently. They're just saying, oh, yeah, whatever the president wants, we're going to go with them. That's wrong. I think it's healthy to have a person. I always said, if you're an inclusive board, if you have people representing all sides on the board, that's better because then you have everybody's interest represented and a dissuicing can be made. Right. And you have different points of view. And you may not agree with the points of views that are made. But if you have 300 people who live in a building, not everybody is going to have the same point of view. And the fact that you have board members who are expressing those different points of view is healthy. I agree with you. It's healthy. And it may result in some very interesting and aggressive discussion. But I think it is healthy. Better than having somebody saying, OK, this is the way it's going to be. And eight people just following along like sheep. I mean, that's scary. I believe I'm correct in that, just so the audience knows a little bit about this, I believe it's a five-member board. And I believe that one member by their documents is the commercial owner, which is the developer of the project. So that kind of guaranteed one seat representing the commercial interest. Right. That's provided for in the statute if it's a mixed-use building. Right. And then the other four seats were owners who were elected by the ownership that it wasn't a developer-controlled board where the developer got those four people on. But the owner who wanted to serve on the board's complaint was that the four were so close to the developer that the things they should be doing to protect the general interests of the association weren't carefully being looked into. So I want to run for the board to make sure all the homeowners are protected. And that was kind of the issue. And then under the current statute that if you want to run for the board, you're entitled to put an 8 and 1 half by 11 sheet of paper and the proxy mail out, telling people why they should give you the proxy or vote for you, whatever your business with the association is. And he was soliciting proxies. And they told him that he wouldn't be eligible to serve on the board. And he could not have his name on the ballot because he was a tenant not an owner. And I think that the judge's decision to the contrary by granting the TRO was a correct decision based on the bill that we got through the legislature. Yeah, I just find it upsetting that there's one thing if there's a lot to be on the board and ran and lost, that'd be one thing. But to deny a person's right to run, when he owns 100% the LLC he and his wife, certainly is a de facto owner of some sort and not getting technical in the language. I don't think the statute intended for it to be used to say, well, because your company owns it, you own the company, you're really a tenant so you're not eligible. Right, and in this case, if it's a corporate owner and an LLC is a corporate owner, they could designate their sole holder, interest holder in an LLC to be their representative. And I think he'd be able to serve because he's not a tenant. Well, I was talking to a couple of lawyers, I was down at the legislature, catching up on some bills that were up for decision making. And I ran into a couple of lawyers who kind of represented the association on this matter. And they were arguing that he really is a tenant, you can't call it both ways. If the LLC owns it and the person's occupying it, they're a tenant of the LLC and I'm saying, but wait a minute, the LLC can still appoint an authorized representative and they're saying, yes, that's true, but because the statute now says tenant, you can't wear both hats and so he's really a tenant even though he's also an authorized representative of the LLC. Well, I would ask to see the rental agreement. Is there a landlord-tenant relationship? I don't think the LLC can evict the Siddiqui's from their unit. You know, I would want to see a lease agreement, a rental agreement. If there's no rental agreement, there's no landlord-tenant relationship. And the landlord-tenant relationship is defined by statute. Well, it's just... In HRS section 521. I hate to say it because every year I go to the legislature, you go to the legislature. And this year we had maybe 40 bills put in the legislature. And we see all of these bills that come into play sometimes of quote, the rogue board, the board who beating up and the poor innocent homeowner. And more times than not, you know, I find boards trying to do their job through the best of their ability, their owners, they gotta pay the assessments like everybody else. Not to say there isn't a board who makes a bad business judgment. These types of things don't help us with the legislature. No, they don't. To me, I think it's common sense. And, you know, if someone is saying that the Siddiqui's are tenants, then I would suggest they come up with a rental agreement or a lease agreement. I don't think there is. You know, I doubt if there is because they own the company. And I don't think they pay rent to the LLC. Especially even pretend for a second, they had a lease agreement between their LLC and themselves. Okay? Well, can't the LLC still point them as the authorized representative? Yes, because they have an ownership interest in the company. They were trying to argue technicality. Well, because you own the interest and I can point you the authorized representative. But because you're living there and you have your quote, in this concept, a tenant. That, because also the tenant can't serve. We're gonna ignore the fact you're an owner. We're gonna ignore the fact that the LLC appointed you. We're gonna decide because of the contradiction in the language of the law, you can't serve, which seems undemocratic. Yeah. And, you know, and in this case too, it seems like they're, that while it appears, I think, you know, from just reading the article, that, you know, the existing board is trying to keep this person off the board because he may be a so-called troublemaker. But, you know, to me, I think it's refreshing. If, I mean, it's not always fun to have people on the board that disagree, but it's better than to have people who do nothing, who don't speak up, who don't, you know, provide a point of view. To me, that's more frightening, you know, to say, okay, this is the way we're gonna do it. Is there any discussion? And there's nothing, you know? And to me, that's scary. That's frightening. We're gonna come back and help this thing some more and also the legislature. But we're gonna take a short break for a minute. We'll be right back with Kondo Insider and James Sugimura. Hi, I'm Rusty Komori, host of Beyond the Lines on Think Tech, Hawaii. My show is based on my book, also titled Beyond the Lines, and it's about creating a superior culture of excellence, leadership, and finding greatness. I interview guests who are successful in business, sports, and life, which is sure to inspire you in finding your greatness. Join me every Monday as we go Beyond the Lines at 11 a.m., aloha. Hey, aloha, my name is Andrew Lanning. I'm the host of Security Matters Hawaii, airing every Wednesday here on Think Tech, Hawaii, live from the studios. I'll bring you guests, I'll bring you information about the things in security that matter to keeping you safe, your coworkers safe, your family safe, to keep our community safe. We wanna teach you about those things in our industry that, you know, may be a little outside of your experience. So please join me, because Security Matters, aloha. Welcome back to Kanda Insider. We're talking about the story and the star advertiser a couple of days ago, where an owner asked for a restraining order because he was the owner of an LLC and lived in the project, and the board refused to put his name on the ballot. And meanwhile, they argued, well, the law says you're a tenant and you can't serve. And because the LLC owns it, and yeah, you own the LLC, but you're still a tenant, you can't serve. And we've been kind of going through, that doesn't make, doesn't pass the common sense test. And we talked about the legislature, gets involved in these things, they think of the rogue boards, these problems. And the best example I can think of is House Bill 347 this year, where the bill's proposal was, when boards have a, where you can send in your proxy, you have four choices. Climb only, board majority, board equals, we call it, and an individual. And the proposed bill was to do away with board majority, and they were saying that because the board majority has a great deal of control, it votes a lot of proxies theoretically, not always, but theoretically, that they control the election and we don't want the board to be able to do that. What do you think? Well, my response to that is, if that's their concern, then they need to educate their membership and the other unit owners to not mark that box. I mean, there's four choices, and some people want to give it to the board as a whole. And if they are, if there's a group that's concerned about it, they need to lobby and they can send out letters and flyers and say, don't mark it. In fact, when people call me and say, you know, which box should I check? I said, quorum only. I tell them, and they ask me why. I says, because unless you really are, trust this board or there's somebody that you want to give your proxy to, if you're not sure, just do quorum only. That means that they're gonna have a quorum. I mean, you're not gonna be at the meeting, but at least your proxy will allow them to have a quorum so that they can carry on their business. And because it's very political when you say to give it to the board, because sometimes, you know, that's perceived as giving the board a whole lot of authority. Well, kind of boards are very similar, in my view, as the state legislation. People just don't get involved. They don't know who's voting for what, not voting for what, who's doing what. They don't go to the board meetings of the Kind of Association. And you get down to it at the end, you have to have an election per the bylaws. You have to have people to represent the association. And so some owners look at it and say, we know I'm generally happy with the way things are. The board as a whole must be doing a good job. I'm gonna give it to the board as a whole. And if you take that away from them, you're denying their rights to give the proxy to who they want. Right. And that's why I say, if people have a problem with that box, then they need to go out and educate the unit owners in their building, not to market. I mean, I can't see any benefit in removing it, because there are some people who wanna give the proxy to the board as a whole. Well, let's go back in history where that proxy war box came from. Prior to that, the politics don't go away. So prior to that, boards were saying we wanna keep the good of the project going, give the board president John your proxy. So prior to the proxy law, it was actually consolidating more power with the president because the boards wouldn't just keep their mouth shut. They go out and say, look, we wanna keep going what we're doing. We think we're doing a good job. They'll give our president John the proxy. So then all of a sudden, John, my example, the president had all this concentration of power versus the board majority, which would be the majority of those board members in attendance at the meeting. So to deal with that proxy or that option is not gonna change things, it may make them worse. Yeah, and by giving it to the board doesn't mean that the board, because you could have a divided board. And so you have a nine member board and you may have five guys who decide, oh, no, we wanna vote for Joe and Sam. And the other people say, no, we wanna vote for Susie and Marie, right? And so they have to vote. And so the majority wins, right? And so it sometimes can backfire, you know? And it depends on who's on the board and who they wanna support. I'm just glad in your example you didn't say vote for Richard because I'm not running. I've been with condo board for 25 years and I'm not running. It's a tough job and people don't give the boards enough credit because they have to make a lot of tough decisions, you know, that they may even hurt themselves in their own pocket book. But they have a fiduciary duty and an obligation under the statute. And I don't think they get much credit and they get an awful lot of anguish. But you know what today is, right? As far as House Bill 347, right? No. Well, didn't get a hearing. Oh, so that means that it's dead? It's dead. Oh, okay. Because tomorrow, Friday, it has to be out of its last committee to cross over or go to a conference committee. And House Bill 347 did not get a hearing. So as of today, it's dead for this year. It's a two-year biennial legislature so it could come back alive again. And the other bill that's dead, so everybody knows, is the Senate Bill 269, which gave the board the right to make the building a non-smoking building. Oh, okay. That didn't get a hearing either. Oh. So that's dead too. Okay. At least for the moment. All right. You know. But because it's a two-year legislature, it could come to life at the beginning of next session. It could. And, but anyway, the number of bills out there, we're probably now down to five or less that are still kind of out there in some form or another. And probably three of the five don't have much impact on anything. But we have a couple of minutes left. Let's just review real quick the basic process and how you get elected if you want to run for the board. Okay. And it probably begins with the notice of the annual meeting. Right. And then it tells us, it says how many seats are open. Or it says if you want to run, let us know. And so that's when, if you're a unit owner, you want to run for the board. You notify the property management company. They can send out with the annual meeting notice. An eight and a half by 11 sheet of paper. I remember the days used to be a hundred words. We'd get things sent in and a board when they were angry would say, what do we count? The phone number is two words or one word. They'd get down. Oh, that's a hundred and two words. We're not going to send it out. Because the guy put his middle initial and his name there. That counts as a word. And we as the management company just get frustrated because depending on how you look at it, you could argue that forever. And we say, look, doesn't it cost us any more money to have an eight and a half by 11 sheet of paper? Just take a copy and stick it in. And so the law has changed to, which made our job a little easier. But the reason it's limited in scope doesn't prevent the owner from getting an owner's list, sending out their own mailing, making phone calls, telling everybody they want to run for the board, just like our politicians do. It is. It's just like running for office. It means that you have to get out there and campaign and get your name out there and tell people why you want to run and that you need to have their vote. Right. And so then you go to the annual meeting. Right. And there's an issue they'll say, do we have any nominations? And typically the script will say, Susie, Bob and Jane said they want to run for the board. I'm making you run for the board. When I run for the board, there's no objections or names they've already put on the ballot. Is there any other nominations? And maybe there are or there not that a vote is conducted. Right. And what a lot of people don't realize is that when you say I want to run for the board, you're not running until you're nominated at the annual meeting. Right. You can say I'm a candidate and I want to run for the board. But at that moment in time is when you become officially a candidate. And so you've got to have someone nominate you at the annual meeting. You don't have to be present. Someone has to nominate you at that annual meeting and then there's a vote by a percentage of common interests or there's different ways. Sometimes it's by a lot of it's a homeowner association. And that's when the vote is determined and sometimes there's cumulative voting or whatever but that's when you get elected. Right. Then and there. Right. So what happens if we don't have enough candidates for the board? If you don't have enough candidates then at the next board meeting, the board, it's a vacancy that the board can fill. And so if you're, if you're still, if they have vacancies on the board, all you have to do is notify the board or notify the property manager that you're interested in sitting on the board and at the next board meeting, the board can vote you in and appoint you. And then that means that at the next annual meeting you have to stand for election. The question I often get, I kind of alluded to it in my comments a couple of minutes ago, is that you're nominated at the annual meeting and that's when the vote is taken. There's Robert's rules and procedural issues but there is no provision with the Hawaii condo law for mail-in voting. No. So we're governed by Robert's rules and meetings and nominations and meetings so they're current, that's your by-law stated elsewhere. There are no provisions for mail-in ballots. No, you have to be there in person or have a proxy. Right, and so even if you're a candidate, you may not be there, you can still be nominated and run for the board and then at a majority of the people there and I hate to say this because I respect everybody wanting to run and work their community but a lot of the stuff I've seen in the legislature are by the people who didn't get elected and what they want to do is now steer the proxies or who you can give your proxy to. It's like they're blaming the board for having proxies for getting the free will of someone who gave them the proxies and they're trying to put processes in place so that it'll help them get elected the next time. Yeah, and so it is, it is the people who are disappointed with the process that usually go to the, and they're the ones who go for term limits because they figure this is how I get on the board because if we give current board members term limits, then next year they can't run again and so that allows me to run for that office. And so I think, so you're right that a lot of the bills that are introduced are introduced by people who were disappointed in their attempts to become a board member. And don't get me started on term limits because every once in a while we see the legislature proposal to have term limits for board members. My answer is always the same, well let's have term limits for legislators. They don't have any term limits. And so what do you do if you have the owners who really want Jane again but because you have the term limit, the only other person who's running because you don't get that much interest in this is the person nobody wants. I guess same what happens is that person gets elected and then a moment later in the same meetings no one makes you motion to remove them as a director. So they get removed and you have a vacancy and it just creates all sorts of humbug. And I have to tell you my experience with managing hundreds of condo associations is it's difficult to get people to want to do this. Right. It is in some of the associations it's really hard to get people to run for the board. Well, we're at our last minute so I'm going to tell everybody we want to thank you for watching Condo Insider. This is a fascinating industry. I've been in it now about 25 years and it never ceases to amaze me the things I see but it's important you know if you're an owner you have a right to serve on the board, right to fight for proxies, right to be elected and then you can accept the fiduciary duty of taking care of business. Thank you for watching Condo Insider. Aloha and see you next week.