 Good afternoon and thank you for joining us today. This is Condo Insider. This is a show where we talk about condominiums and things that affect condominium owners and people who work in the industry. And today our show is about the repeal of the Hawaii Revised Statute 514A. And we have with us today, as our guests. We have Nathan Choi and Carol Rieschler from the DCCA, the State of Hawaii DCCA Real Estate Commission. Nathan and Carol, can you tell us a little bit about yourselves and what do you do with the DCCA? So I'm a condo specialist and I handle mostly the registration process. Some of the governance issues as well and some of the legislation. And by the way, thank you very much for having us on your show. I'm Carol and I'm a senior condominium specialist. And so therefore I get to work a lot in governance, education, outreach, rules writing, and some having to do with the registration of developer reports. Also legislation. Oh yes, and lots of legislation. Okay. And in fact that's why you're here today. Because last year the legislature passed the law that repealed Chapter 514A in, and why don't you tell, what is 514A? Okay, well Chapter 514A is a statute that applied to condominiums that were formed prior to July 1st of 2016. Oh, wait, 2006. 2006, thank you, I'm so sorry. And just to explain a little bit, this relates only to condominiums. So condominium is actually a form of ownership. It's not a structure like a high rise, a low rise, a single family dwelling, a lot of slip and a harbor. Those could all be condominiums, but it's merely a form of ownership. And it has nothing to do with like use, land use, zoning, subdivision or anything else like that. It's just a form of ownership. And actually to form a condo is a fairly straightforward process set forth in the statute, basically by filing a declaration and the bylaws and the condominium map with either the bureau convences or if applicable the land court and that forms the condo. Now not all condos are registered with our office, the real estate branch and real estate commission. Some folks just form a condominium for whatever purposes, purpose of ownership or they wanted to get a loan or something like that, but they never register it because they don't intend on selling the condominium. But where this repeal is very important is for those that are meant for eventual sale. And that's why this is a very relevant one. So if the condominium was formed and registered before July 1, 2006, then it's 514A is applicable and that is the one that's being repealed. Now if the condominium was formed after July 1, 2006, then it's 514B like boy and that one is not being repealed. So that is why we wanted to come on today to just kind of explain about, it relates to sale, the only legal way to sell a condominium is through the statute and what happens is that the developer files paperwork for what they call a developer's public report and the point of that is disclosure, protection of the public, protection of prospective buyers and buyers and the commission wants to ensure that there's proper disclosures so that these folks are protected so they know what they're buying. And these reports that are filed, they are available online. You can look at them online. Yes, yes. And we encourage, if someone doesn't know whether they have a condominium, please look at our website and you can ascertain. We've got it flashing now on the screen. Right. And they can ascertain whether they are a condo or not because remember it's not what the structure looks like, it's the form of ownership. So that's the important part. Why is it being repealed? Why is the statute being repealed? My understanding is there was apparently some confusion about the part of the statute having to do with governance. That part shifted over to 514B while the other sections of 514A were still effective. But some folks misunderstood and they thought the governance section of 514A still governed when in fact it had been supplanted. So my understanding is they decided to just get rid of 514A so everybody will be under 514B so that there wouldn't be a confusion. If you're a condominium. Not any other form of ownership. This doesn't affect cooperatives or any of those other forms of ownership. So who in fact is affected by the repeal? I mean if you're a condo owner are you affected or if you're a renter are you affected? Who does it affect? So this should hopefully only impact a relatively small number of people mainly being developers of 514A projects and people who inherited or gifted it from the developers say like your uncle was a developer and he made projects like 20 units and he gave one to your brother maybe for essentially free as a gift and that gave inherited back down to you you would be affected if the report was expired and inaccurate. So people who purchased from the developer or someone who purchased it from a previous buyer from a previous buyer so on and so forth they should not be affected at all and renters should not be affected at all. It's that relatively small set of developers and people who inherited or got it gifted from the developer. Except when we were talking before you said that I mean your task now in the last couple of months is to notify these people who might be affected and so and and before the show we were talking you have sent out thousands of letters and you've been talking to various groups and notifying various groups like the city and county and and title companies and lenders and so so we're not I mean talking about you know a hundred people we're talking maybe a few thousand people that might be affected. Possibly we don't keep necessarily track of who purchases it but we have gone through some of the addresses and we have noticed more than we thought would be affected by looking at the developers who still own the units or people that were like trusts from one of the partners in in the developer. Yeah our concern I think is especially for where they've used perhaps as a state planning device where it's like a two unit three four five unit that perhaps the property is too small to subdivide they decided to create a condominium and thinking that later on children grandchildren well this is my you know mine they're inheritance from me so that there never was you know like the registration and the sale and that sort of thing and we have identified possibly about 3,500 of those five or less units so we're also targeting those folks so that they will be aware that in the event that they want to sell the point was for the children to sell the grandchildren to sell their inheritance as a condo that they go through the appropriate steps now because the otherwise the the consequence would be they couldn't sell the unit. So that means that if they inherited their units from Uncle Joe the developer and this was a gift and they didn't pay any money that they may have troubles now after January 1 of 2019 if they decided they want to sell it they might not be able to do so. Right and so that's why we are trying to through every medium possible let people know and we're targeting the groups that we think might be might possibly have issues we don't know for sure but we want to try to let them have the information so that they can take steps and there are steps that can be taken so that they are not put in that predicament. And so when if somebody wanted to take steps I mean if they thought that they were in this group of people that needed to take steps to protect their property interest when would be like maybe the deadline for them to take action. We would prefer to have any any updates or registrations or applications for that update to a public report by August this year so August is not far away no it's not that's why we started notifying last year yep so it's only like six months away and so that means that if there is anybody out there I mean firstly they you want them to contact maybe check the website yes and make sure that you know they are a condominium that's on the website and then they can contact you at the number that's showing on the on on the screen right now five eight six two six four four right and talk to someone and you also have a brochure on it online we have the FAQ on it online and we also have a commission memo online available with the information of course we're available to to discuss in the various options perhaps if it's a developer and I've had contact from one it was actually a 17 unit but they still owned all the units and they were like you know what about this repeal and like in the case that's actually simpler because the developer still owns all the units so in their case they could just sell the whole thing you know let somebody else deal with it or they could do a bulk sale to another developer or because it was before 2006 then they could update their filing their reports or developer public report that's on file and then under the legislation there's a safe harbor provision so if they are updated they're active and they're accurate it'll just sail right through the fourth option of course is just to go with 514b just files a 514b so that means that they would have to file another public report yes and and what would happen to the previous report it would just expire if so maybe we should go over the methods there if you update your 514 a project so you're active and accurate you will automatically get carried over into 514b and you won't have the issues of not being able to sell the one issue with that the way they wrote the safe harbor is if you do have material person changes you do have to file an amended B report that was the deal where you get carried over but if you update you have to go into the new system well you know talking to to the the listeners I mean to a late person what do you mean by safe harbor what is a safe harbor well safe harbor is a provision of the law that whereby there could be a much smoother transition so there are a couple of preliminary steps at least in this case which is ascertain okay my my report is active it's not expired check right and then look say okay is my report accurate and they say yes check then by operation of law it just transitions over without that person having to do anything about it it's just just just by operation of law but they have to fill off the form there's no form they just have to check on their own report saying am I do I meet their quiet requirements to be automatically transferred and it's just automatic there's no form there's nothing that has to be filed but the onus would be on that person say is this an active report and how do you determine how do you determine it's an act you can look on our website under our database and then you find your project and you open up the PDF and it will tell you when the report expired so that tells you am I expired it might not expired so you are not expired by January 1 2019 that means you're active and you don't have to do anything correct I'm assuming there's no material change yeah but it'll just slide right on over no fuss no must like nothing happened but but they have to they have to actually go in and check to make sure or have somebody knowledgeable go in and check to make sure that their report is active and there are no material changes that have to be made and then that means that they don't have to do anything right and that we encourage that would be a really good idea just to just to make sure so that you know once the repeal happens that things won't get complicated for them okay well why don't we take a break right now and what when we come back we're going to be talking about in the details on you know how people can protect themselves so that you know they don't lose their investment in these condominiums that they now own mm-hmm match day is no ordinary day the pitch hallowed ground for players and supporters alike excitement builds game plans are made with responsibility in mind celebrations are underway ready for kickoff MLS clubs and our supporters rise to the challenge we make responsible decisions while we cheer on our heroes and toast their success elevate your match day experience if you drink never drive okay thank you we're back now with our guests Nathan Choi and Carol Richelieu from from the DCCA real estate Commission and we're talking about the repeal of 514 a and in the first part of our program you talked about the statute and why it was being repealed and who would be affected and what steps they could take so so they they would be you know to protect their property so that they could sell it someday if they wanted to because you've said in the first part of the show that if they don't take steps to get do their safe harbor or do a transition and we'll talk about the transition that they may not be able to sell their property right that's the that's the downside now for the you were talking earlier about you know the the people they could go on to the website and check and see if they were registered and to see whether or not their register their registration was active and one thing we were talking about during the break is maybe one thing they should do is to hire a consultant to look and to give them an opinion that they don't have to do anything well that's it's always a wise idea in a in a matter that can be complex as to hire a professional that's very true and so what if they don't hire a professional and it turns out that they do it themselves they go online they find their report and they see that it hasn't expired and they say oh good I don't have to do anything what I mean what what could be the downside later on if you know after January 1 2019 if for some reason that report is inaccurate well if they attempt to sell it later on again it always relates to the the protection of the prospective buyers so there could be several ramifications ultimately they might not be able to sell it because the buyer will find out that you know the financial company will not you know loan the money to do it I have the federal government's very sensitive in their loan program to this issue the title companies are very sensitive to the you know this issue as well and if somehow it did get carried through then the seller could be on the hook to buy her for all the inaccuracies in the sale so it would be who somebody who thinks that they are you know they might be subject to the repeal to hire a consultant that who what kind of a consultant would they hire an engineer or an architect zoomably they would hire the attorney that did their report initially because that attorney would be familiar with what the initial disclosure I mean some of these condominiums were done in the 70s and you know and maybe their attorneys are retired or you know they've passed away mm-hmm right so so then you just hire any attorney or an architect or who would you hire if I was doing it personally I would look up a condominium you know attorney mm-hmm like we say attorney yeah that personally you know if I would do it because that would be someone familiar with the condominium laws and and the structure and how it's done if you're not familiar with developers public reports it could be a little little tricky okay so so you'd hire an attorney to look at your public report to look at the statute to look at the safe harbor to make sure that they are in compliance and to get a letter from them and and that would be your recommendation to somebody who might be affected by the repeal exactly because of course the real estate branch itself cannot give legal advice and so we will help people as much as we possibly can but we are not allowed to give that legal opinion or advice to to the person we can direct them to the sites we can direct them to the statute but and and you have the documents because you you are the registry right where all the public reports are filed yes and so they are all online and so they can come on to your website or call you and you can direct them as to where to find it and then they would go out and get their own consultant to advise them on what they should be doing yeah yeah just to be sure I I think it would be good to try to to make clear the repeal if you if if a condominium is a 514b you know after 2006 then this doesn't matter so it is a condominium was created before 2006 after 2006 after 2006 this doesn't matter to you you're fine everything is okay if you're a 514a condo prior to 2006 but and you look at it and your developers public port is accurate and it's active not a problem and has to be active through January 1st 2019 just because you're accurate or active now doesn't mean you'll be active then the report will actually give you a date it expires and you want to make sure that date is at minimum January 1st 2019 right and you were talking about material changes can you describe what kind of material changes might affect this registration I mean these condos let's say were created in the 70s and 80s and here we are in 2018 what type of material changes would would be affecting this property okay this is not a master list so don't take it as a master list but some included would be you changes boundary lines percentage ownership between owners you build the house you remove the house you did serious grading to your landscape as in you like filled holes in any anything that would largely impact someone's material that are value of the property change common yeah limited common got rid of the pool we put a pool in things like that like significant changes to the land or the property itself in other words somebody you have to look at your public report and if their public report doesn't have a pool yes and the fact that now you have a pool that's material or what happened to your pool oh and then so then you have to do then what do you do you file another report like an amended report to describe to to deal with the explanation as to what happened to the pool or now we have a pool and now we have a playground area for children and we've done this and that and so that's what you have to include in the new report all all the things that that are considered material changes that affect maybe the value of the property to the person who's buying it you don't want to have a report that says unit A has 5,000 square feet when it really only has 3,000 square feet now make sure that would be a major material change so that we should be changed that I'm noted on an amendment or a supplement to report you would you would supplement the report if the if somebody looks up the report and it says it's preliminary or contingent and then it matters to those folks that has to you know the that kind of report but that's getting a little little technical professional would know the difference to that but and then another class of people too I think that you know if all the units have already been sold like you say they were built in the 70s or 80s and they were all sold fine their five buyers down at this point it doesn't you know wouldn't affect them but if you know if they bought it an arms-length transition from the transaction to developer or anything and then I think you'd mentioned earlier also you know like renters doesn't affect renters at all okay yeah and then so so in the transition if they have to file an additional report that would be something their attorney that they hire to consult with that attorney could do the additional right report it would go through the normal procedure we would check you know preliminary with our checklist and internal and then it would go to the consultant and it'd be a regular procedure yep that's why we don't want them all coming in at the last minute the only difference with this is based on a prior 2007 law you can actually transition from a to be without without withdrawing or any registration how do you do that act 244 of session law 2007 actually details it the problem with this act is it requires a section that goes away in January 2019 so only can be done in this year so the transition ends once the a chapter 5 on for a is repeal so they can do under that other law that was passed in 2007 they can file a report by the end of the year which is December 31 2018 and that would be sufficient you they can go from a chapter 500 a to a 5 and 4 b and not just slide right through but now you're a b instead of an a instead of just being treated like a b as you would it's someone complicated yeah but I think we're trying to the we don't want the worst-case scenario happening which is you know that they don't go through the safe harbor they don't update then they can't sell and basically they would have to withdraw out of 514 a because it's repealed and then you'd have to refile entirely new and we're concerned you know if it's several generations down that that might be a difficult process as far as obtaining the documents and because they wouldn't have the documents for the original public report yeah missing documents on structures the way them safe harbor and the transition work you were actually exempt from a number of requirements disclosure which is way better than missing the bone entirely and have to do every single disclosure so it really is beneficial to either do the a update your report or transition now to be and skip a number of somewhat onerous disclosures mm-hmm so but I guess I guess the message that you want to get out there is first of all check the website and see if this affects you yes and if it affects you you go right out and you hire a consultant even if you think that you can just you know slide through you know even if you think you know you go on the website say oh geez my report hasn't expired yet and I can just sign through you you really want to hire an attorney to to assure you that you have complied and you don't have to do anything else well generally I mean it is better to be safe and for most of us our most significant investment most valuable thing will ever own happens to be you know your your condominium your house or the case and this applies to condominiums but for a lot of us in Hawaii it is the condominium that is our major asset so it deserves to be protected and so you know people need to take steps and not wait till the last minute like don't wait till June or July to start thinking oh maybe I should look into this because I have six months before you know the law the section you know goes away it gets repealed mm-hmm by then it's almost too late yes there is a process and it can be somewhat timely lengthy in time so the more timely people are in submitting their changes to our office the better because we only have a certain number of consultants and they cannot handle thousands of these to come in at the last minute get a whole bunch of applications to review on July 31st it's a good a lot of people may not get their reviews completed by the end of the year that is not a matter of like when it's postmark because that's not the way the law is written it's just automatic disappears you know January 1st so even if people think we got it into the office by December 31st it doesn't it's not done by the postmark date it's it's a hard deadline well you know we're running out of time so you know I'm so glad you guys came and shared this information with us but now you know people have to go on to the website yes please go on to the state website and there's a phone number there to find out if this affects them and if they it affects them they should take action now right yes and thank you very much for you know coming today and sharing your message with us and for you listeners out there please join us every Thursday at 3 p.m. for another episode of con one cider thank you for joining us thank you