 It's that time of the week again when your favorite show, Condo Insider, comes on. And I'm with my wonderful co-host, Jane Sugimura, and we're going to talk about the legislature. It's finally over. What bills pass? And this was the craziest part of this working year, I think, we've ever had with regard to the various bills that came forward, particularly Senate Bill 551, which the governor placed on his veto list along with 19 other or a total of 20 other bills to veto, and it didn't get vetoed. And I think it's due to a lot of work by a lot of people, but let's get right into it, Jane. Senate Bill 551, hi, nice to see you again. Nice to be here. And briefly recap what 551 was about. 551 basically confirms that associations can do non-judicial foreclosure without specific express language in the statute, because that was the issue. The statute doesn't have any express language allowing them to do it. And so there was a supreme, not a supreme court, an IC, an Intermediate Court of Appeals decision that basically said that condos were not allowed to do non-judicial foreclosures. And this statute basically said, yes, they did. And 10 years ago, when the original act was passed, the legislatures expressed their intent in the committee reports that was really clear that even though there's no express language saying you can do non-judicial foreclosures, even though you don't have the language that is based on a mortgage. I know we've talked about this act several times on the show. What was the harm to associations if the governor did veto this bill, which he did not? Well, number one, it affects their collection process, because they wouldn't be able to use a non-judicial foreclosure process, which is cheaper, plus it exposes them to a lot of lawsuits by attorneys out there who are basically looking to sue the associations for these non-judicial foreclosures that happened between 2008 and 2011 before the law was changed. So the associations, in theory, these plaintiffs' attorneys would say, well, the Pellacourt said what you've done is unlawful, and they would go to all the people who didn't pay, they hire me so I can sue them for damages. Right. And besides that, the insurance for associations that has been affected, I mean, there's some carers who won't insure for foreclosure claims, and the premiums have gone up. And if this bill had been vetoed, it would have been worse. And thank God that it wasn't vetoed and that it will become the law, and we have a lot of people to thank for it. I mean, this didn't happen, I think, just by chance. There were a lot of people who worked very hard to make sure to persuade the governor not to veto the bill. Well, what happened is he put it on the veto list, one of 20 bills, and he had until July 9th to firm up which ones he would veto. It was kind of like a pre-notice of what he's going to veto. And so what we did as an industry, we kicked in and did a lot of different things. And tell everybody what was entailed in this. Well, I think what we did is we reached out to our constituency, the associations, the property management companies reached out to their clients and basically passed along a message that was created by some of the condo attorneys in town and CAI. They basically said, okay, this is what you do. You call the governor, this is his email address, this is his phone number, and you call them and tell them not to veto 551 because. And then you just put in a short blurb about because we want to avoid, you know, furlous lawsuits against us for things that happened almost 10 years ago. Plus we need the non-judicial foreclosure so that we can collect our maintenance fees in an efficient manner so that we can pay for our operation. And so the industry jumped up because I was told by one person that they believe that the governor had over 400 email or website messages from our constituents saying please allow 551 to go through and why it was important to them. And I know the CAI said their email list down. Hawaii Council did the same, they did their email blast. And Paul Ireland came up with a form basically that said, this is how you contact the governor. These are all his numbers and contact information. And this is what the bill is about. Here there are some issues or some talking points. And all of that was sent on the Hawaii Council email blast to all of our members and constituency and basically told you that you need to do this. We all need your help because if you do nothing, the governor's going to veto the bill. Let's take just a couple of the main players who really put a lot of hours and energy into that. Let's recognize them by name. OK, I know Ann Anderson and Larry McGuire put in a lot of time. They did a lot of writing. And John Morris was the one who authored the article that appeared in the, what is it, the Hawaii Civil Beat newspaper. And Paul Ireland also from Ann Anderson's firm. Right, and Bryson Chow. And Bryson Chow. And we can't forget you, Jane Sugimura. I mean, you put a lot of time and energy in that. And I think the people out there need to know that this didn't come cheap. There were thousands upon thousands of dollars spent, not just in people's time, but because we needed to hire PR specialists and people who could help us put together the best picture for this. And as you all out there go to the CAI and the HCCA events, recognize you're supporting and helping build a war chest to prevent bad things from happening to us. So we support all of you out there, and particularly all of you who sent in testimony. That's a very important and critical part. And I'm sure the governor on top of RPR efforts being besieged by, I think 400 is a lot of testimony. Yeah, 400 is a lot of testimony. And you and Phil Nerney went to see the Attorney General to talk about this bill. So you guys, that took time and effort. And so there were a lot of people who were involved in making sure that the governor got the message about why he had to allow Senate Bill 551 to become law. Well, it is law now. It is law now. I think we should mention before we go on to the other bills that the SB 551 also had a couple other parts to it. That was that owners would be notified that if they are being foreclosed on by their association, it doesn't excuse them not paying their mortgage. And furthermore, they would have a right to mediation. And furthermore, if you're in the active military, you can't use non-judicial foreclosure. Right, you have to do judicial foreclosure. Right. So there were some enhancements to the current process to protect our veterans who we thank for their service, as well as to make sure the people who don't understand, they fully understand what their obligation and rights are as a result of this bill. So it's not just we can continue on as is. There's some new obligations in our part on notice and those types of things. Right. Oh, and we have to thank the governor. The governor for not vetoing the bill. Absolutely. I've said many times in this show that our legislators, would it be a representative or a senator or the governor or the mayor or the council people? They're doing the best they can. They don't really understand our industry as close as we might understand it. And so it's hard for them. They get competing points of views. And because they don't live it every day, they have to make business judgments. Well, in this case, we think the governor did the right thing. And we want to thank Governor David Igay for balancing everything out and realizing this added more protection for our seniors and our fixed income people to make sure that association can assure the cash flow for people who don't pay their maintenance fee. So we thank you, Governor. And let's go on a couple other bills that were passed this year. You want to talk about House Bill 61 or I should say now Act 192. That's the priority of payments. And this this is just a carry forward from a bill that was passed. I think it was last year, Act 195. And that's where the priority of payments policy was basically deleted. And that priority of payments basically said that the board could adopt a schedule. As to when the monthly payments came in, how it would be applied in what order. And on that schedule were late fees, attorney's fees, interest, and then the common expenses. And what that did is it ended up in creating delinquencies and some confusion because if you're on sure pay, if you're the owner on sure pay, you don't get notice until there's a substantial amount that's owed. And it did cause some issues and so, but when the Act 195 repealed the policy. But what it didn't do is it didn't clarify well what do you do with this extra money that gets submitted by the homeowner. And so what Bill 61 does, the new bill that does the clarification. It says that the association can prioritize the payments, but the maintenance fees get paid first. In other words, when the monthly payment comes in, it gets applied to the maintenance fees first. And if there's anything left over, then it gets applied in a particular order to do things like submeter electricity and maybe HOSIC insurance policies. But the late fees and interest in attorney's fees on collection are at the bottom of the list. I've been asked about it all the time and I say, well, look at it this way. There's three types of charges. There's common charges. And they might be maintenance fees, they might be reserve assessments. They might be a utility charge with a common single electric meter. In some cases, it might be lease rent if the lease is with the association itself and not the individual owner. So it allows you to say that Bill says you have to first apply money's paid, the common expense. And so the board can say of the common expenses we have, this is the priority we're going to apply the payments. Then you have non-common expenses. It might be storage lockers, it might be parking fees. It might be an HO6 policy and insurance deductible. Then in bucket two, they can have a set of priority payments and how they play the excess cash over the common expenses. And then third bucket is late fees, fines and interest. That always has to be last. And that's how it's done. If you think of your visa bill, when you get your visa bill, your master bill from the association, you can't say when you write your check, you can't say we'll pay the Macy's and not the Nordstroms or whatever. When you write that check, they apply it to your total. In our case, we're electronic too with the bank. We need to have a way to apply it so we know what the outstanding balance is. Is it a common expense, which can result in foreclosure? Is it a non-common expense or is it a fine or a late fee? And so all this did was clarify the intent of Act 195 by fair. And I'm sure people are still confused on it. Electronic voting. Yes, well, that's something that's not mandatory. And it doesn't apply to most associations. I think it was introduced basically to handle time-sharers and large associations where if you had an election, it would take you hours to count the balance. But most associations don't have to go through that. And so it doesn't apply to them. But they can use it if they want to. And should be understood, this is not mail voting. This is this is at the meeting where you have an electronic device that might be your mobile phone that people can vote. And I know of an association in Maui, it's about 7 or 800 units. They have 51% of the common interest. They have cumulative voting and their tabulation takes hours. And so if the board voluntarily adopt the use of electronic voting, and of course, electronic voting has to have an audit trail, it has to be in a secure environment. We can't have Russian voting fraud in our election. And if you can meet all the criteria, it makes sense that even though I don't know of any app today that 100% meets our requirements, I do know of some software developers working on it. So it'll help us in the future. We're just getting up to the current time and the current model of what's going on. And because we're at time for a break, we're going to take a little one minute break and come right back with some more bills that were now law and all of you are obligated to obey. Aloha. My name is Mark Shklav. I am the host of Think Tech Hawaii's Law Across the Sea program. My program airs every other Monday at one o'clock on Think Tech Hawaii. Most of my programs deal with my own life and law experience. Recently, I interviewed Alex Gempel, who I have known for over 30 years about his voyage across the sea as a lawyer from Tokyo to Hawaii. Those are the type of stories that I like to bring and like to talk about. Human stories about law and life. Aloha. Aloha. This is Scott Perry, and I'm the host of Let's Talk Hawaii at Think Tech Hawaii. In this show, we're going to be speaking in English and Japanese. And I'm going to use my 30 years of experience to help many Japanese viewers improve their English skills, as well as learning many interesting things about Hawaii. You can catch my show every other Tuesday, 3 p.m. Hawaii time. See you then. Welcome back to Kondo Insider. I'm sitting here with my co-host, Jane Sugimura, Hawaii Council of Community Associations. The legislature is over. We've just reviewed some of the critical bills. Senate Bill 551, which confirms an association's right to do a non-judicial foreclosure. We've talked about improvement and understanding and the priority of payment with regard to bills, and how you apply maintenance fees. And then we've talked about electronic voting. So what else was passed? Well, there was a bill that talked about retaining properties. And I think the rule now is 30 days. And the bill allows it extended it to 90, 90 rather than 30. And I think most associations were keeping them anyway more than 30 days. And the reason why I guess this is important is when you have an election, the owners have a right. Just the owners have a right to challenge the vote. And so that's why it's important to keep the proxies and to keep the documentation relating to the election so that people can exercise that right. Technically speaking, within 30 days, an owner could submit a petition to the board for a special meeting to do a recount. The board can't call a meeting to do a recount. It has to be an owner's request to do a recount of the ballots. And then you'd have a meeting and then you'd have to have the owners vote at that meeting whether they wanted to recount the ballot. And they could, I've seen many meetings, they've called to recount them and the owners turned it down. You know, so there's a process that goes through, but there were arguments that people were destroying or manipulating or tearing up ballots. And they were destroyed so quickly no one could do an audit. So by extending it to 90 days just gives additional time. But from my experience, most management companies keep them a year or more anyway. And the industry supported it because we didn't see it was really asking us to change anything. And but to get the actual recount is a bigger hurdle than keeping the proxies and the parliamentary procedure. They're going to have to have a special meeting and the owners are going to have to approve it. And that's going to be a challenge. That's the hard part. How about the investment of condominium funds? OK, but this allows the condominiums to invest in government money market funds. But they were already investing in them already. And I guess this bill just clarifies that it's OK. Well, you know, and I don't have the exact language here. To me, the language in the bill allowed investment in government money market funds. Some people argue, no, it's not government money market funds the way the current law was written. Most of the condos, I know, invest in government money market funds. So all this did would clarify what the intent was and prevents problems down the road because it's a simple thing. And as we all know, investing, you require principal protected and there's all sorts of obligations that you have to have to have a legal investment. So I think it's just a notice to everybody that, yeah, one of the bullets in your arsenal is going to be invest in government money market funds. And if your board is, like, not sure what the language means, now they know what it means. And, you know, I think that this is necessary because more and more, I mean, the buildings have to come up with larger and larger reserve amounts. And, you know, it's hard to keep your money. What is it? Two hundred and fifty thousand that your that is government is short. And that's why we have to have different depositories for all of our money. Not to be sarcastic, you know, how hard it would be to keep your balance and reserve funds if you had to pay off all these non-judicial for all sorts of and you had to take your money and use it for something else that would have been a disaster for condos. But thank you, Governor. Anyway, revival revival of 514 a is the title. But because we know the 514 a was repealed as of July one last year and now it's been revived for one year, but it's not what everybody thinks. Right. It's not the whole statute. It's only the portion that applies to developers who because condominiums are created by statute. And so there were certain condominiums that were created by 514 a and those some very few units have not yet been sold. And so in order for them to sell those units under the current law, they have to have for 514 a revive. Otherwise, they'd have to go through this long drawn out process and have their public reports redone and re re approved. And and and I guess it was just too much hassle. Well, I guess what it is. You had a bunch of developers who formed condominiums under 514 a who didn't sell all of them and wanted to sell them and they were too low. The last 12 months to go ahead and get through the act in order is that now all of a sudden they painted himself in a corner because 514 a was repealed and they couldn't sell their units. That's spending gobbles of money to redo their governing documents. The legislature came in rightfully so, save them and said, look, we'll give you another year to get picked up. Right. That's how I look at it. Right. But from the beginning, 514 be the governance part of 514 be trumped. 514 a forever. Right. So this is an effect condos. If you are once a 514 a this doesn't mean you're back to being a 514 a you're a 514 be unless you're a developer owned unit and you're a developer. Right. So we're only mentioning it today because we want to clear it up. It doesn't affect any of you who are 514 be who were 514 a that are no longer controlled by the developer. Moving along on our little topic here, we have the handyman exemption. Right. And this one, the handyman exemption has been raised from 1000 to 1500. And the 1500 doesn't include the GP. Right. Right. It means that you can a lot more of your work can be applied that way. Well, I think people may not realize I'll give this as an example. My my dates may be a little wrong, but the $1000 handyman exemption, which includes both material and labor and then include a general excise stack has been in existence for like 20 years. You know, it's never been raised. And of course, we all know everything's gone up in price. So there was a lot of debate. I mean, certain contractors who have licenses don't like it being raised. But the reality of it is it's time to raise it. It was raised to $1500, including labor material. But the GT is not included in the 1500. So $1560 are simple. So it gave a little more work being able to be done by handyman. It's just kind of brought up the numbers to modern times is how I would describe it. Although you can argue and that wasn't enough money, but you should know that now currently, as of July 1, it's $1500 and plus GT is what a handyman can do. But I would caution every one of you out there. And if you have a job is $3000, you can't write two contracts with the same contractor and give him one job for 1500 and another job for 1500 and get around the law because the law is very clear. You can't separate these parts of the job in order to violate your obligations under the law. Is that right? Yep. I said that correctly. So any prediction next year, what we're going to be facing? I don't know. I know we have to go back and deal with two sunsets. One is for the priority of payment. And I have already spoken to Senator Baker, so she's prepared to draft the bill to eliminate the sunset in that law. What I hear mostly in the industry they've asked us to explore, and we've talked about this, is community association, HOAs. Right. 421J, 421J. 421J trying to create an expansion of that law to provide the basic protections you have in 514B with regard to documents and voting and those types of things. I think as an industry, that's something we should take a close look at and get ready for. And this wasn't a good year to introduce that. We were really busy this year. Right. And in fact, we kind of have a template because Representative Johansson introduced a bill that is part 421J and part 514B. And so we're going to have to start working on that now to get it ready for the legislature next year. I think that's a good thing to do. And at that time, we've always had a time, and I have probably the 20 bills here that kind of touch on our industry, but really don't have that much significance to us. So we'll pass those to a future. Anyway, we want to thank all of you for being interested in Association of Living and watching Condo Insider. And also, we want to let you know that we really appreciate your help in getting Senate Bill 551 passed. And it does take a village. It takes a whole huge village to get some stuff done in the government if you want it done. Well, and we thank you for your special efforts in that as well. So thank you for watching Condo Insider. Ahui Ho. We'll see you next week.