 Welcome to another episode of The Condo Insider, everything you ever wanted to know about condominium living, owning, buying, whatever the case may be when it comes to condominiums. And today we have, as our guest again, I don't know how they let you into the room, but we have Mr. Richard Emery, who is here to join us today on discussions of condo related issues. First off, I'd like to congratulate you. I understand you've been appointed the co-chair of CAI's legislative action committee. Well, that's correct. For 2018, a lot of people don't realize that there's several industry lobbying groups and CAI Community Association Institute out of Virginia appoints a committee of about 12 persons each year to represent the industry before our legislature. Well, a lot of people don't know about that as the 12 members are equally divided between homeowners, vendors, lawyers, and management companies, so that the diversity on the committee that makes decisions on how to proceed with legislation is a very well balanced group of people. And in 2018, Phil Nerney and I, as a local lawyer, and I have been appointed co-chairs. Oh, that's good to know. And I know Phil Nerney as well, so I think you two will both do a great job. Disappointment, however, for 2018 brings up the issue of there's a lot going to be happening in 2018, because what most people don't realize is that our legislature runs on a two-year cycle, and we just finished a one-year cycle, and a lot of bills were deferred, which means they may be coming up again in 2018. Do you have any speculation on what we may be looking at for 2018? Well, that's a four-part show in itself. But the reality is, let me just briefly start the conversation that way, that yes, it is a two-year legislature, and a bill that we promoted as an industry last year, along with owners, was House Bill 1499 that had unanimous testimony and support until the very end where it's stalled in the last committee, the finance committee. The superintendent is still alive, but let me just tell you what that bill is about. I call it kind of a bill rights for homeowners. Okay. When you look at people today, we have people being foreclosed upon because they got a fine or a legal fee related to a fine, and they basically, when they were getting their letters from everybody, basically ignored it and didn't do anything, and all of a sudden they find themselves in a foreclosure lawsuit, because we have a pay-now dispute-later provision on our statute. Well, this particular bill does not want to take the board's authority to foreclose a person that legitimately, they're under maintenance fees or other assessments related to the common expenses, but what it said was you can't foreclose on a fine or a legal fee related to a fine without additional notice and a notice to the owner giving a right to this Act 187 evaluative mediation. What it did is add another step to protect that individual who just doesn't understand obligations under the condo law, and when they get a fine, probably ignores it and just throws it in the trash, and then all of a sudden they then are finally being foreclosed on it and have $5,000 of legal expenses because it has basically shined on all these demands. So this particular bill provides that more nervous has to be given the honor, and they have to be told the right to Act 187 mediation and a right to participate in that mediation before you can foreclose on a fine or a legal fee. Well, it's interesting you bring up the mediation side of it. I've actually helped a couple of people who were having issues at their own condo association, and I told them to request mediation. And both times, a few months later, I get a message back from them saying, completed mediation, we resolved the issue, which is good to hear. I think you may remember you did a show with me as your guest where I talked about all the statistics of mediation. In the original statute provided what we call facilitative mediation, which means the mediator can't take sides, it's couldn't buy the audits all get together. And they were somewhat effective but not very effective. When evaluative mediation came into play in 2015, we used retired judges who can act more like a settlement conference judge that can say to either party, if I was the judge, I'd rule against you and make you pay all his legal fees. So he can actually, these retired judges who have a great deal of authority with people and presence with people, can act as more of a settlement conference to somewhat put on the table and force a solution by being hard-nosed and responsible based on what the law is and each's obligations are. And that has an extremely high rate of success. Well, I think you and I on that particular show also looked at the statistics and found that those that were not resolved at that mediation did not escalate to litigation, which means that the discussion still continued, probably. I don't hold me to the data. My recollection is that one out of five mediation didn't occur because one side or the other refused to go. But then they didn't pursue anything and it got resolved that the mediation request was withdrawn, which kind of sends a signal, let's not spend any money with a mediator, even though under this new Act 187, only the first hour you're responsible for were split by the two parties or about $175 a person and the rest is paid for the real estate education fund. So we've seen a great deal of success. So the whole trend of the industry is to try to educate people about alternatives and to get them to try this before they go to the next level. And even those that were unresolved or maybe the mediation was withdrawn, we can still look at it as being somewhat of a success because it didn't escalate to litigation or anything like that. But back to your question, 1499 has hung up on the Finance Committee. It balances people's rights because the mediations we did have would tell you, I want to say it's 30% had to do with enforcement of a fine or a House rule and those were almost all resolved satisfactorily that we can give these people a right where someone, the rogue boards say, pay me first, I'm not going to do this. We get them in a format to try to resolve this as friends, recognizing that the bill last year, if you get a mediation request and you refuse to go, either party, it may be considered a breach of your fiduciary duty. And I think it's interesting, you called it sort of like a owner's bill of rights for condo ownership. And just the last couple of days, I've been doing research on some other educational material and I'm finding more and more states are actually passing bills called homeowner's bill of rights or owner's rights under their their statutes. Well, no one's going to say any law and showing our industry has been around a long time is perfect. There's been suggestions that we need to have some more government oversight with respect to maybe I think one of the bills two years ago called the condos are give them the right to overturn board decisions and they wanted the Attorney General's office to be responsible. But as the Attorney General testified back then, they can't take sides. You can't put the Attorney General in a position to take the homeowner's over the board or vice versa. It would be unconstitutional. So my suggestion has always been let's take our existing laws, look for pukas or things that are perfect and try to find ways to balance the board's needs and the homeowner's rights that there's fair processes and fair hearings to resolve disputes. Well, speaking of boards part of the real estate commission core course for 2017 includes a legislative update which is predominantly condo legislation and one of the areas that I get a lot of questions on even after the class I'll get an email or a phone call is on Act 81 and the owner's right to participate at a board meeting. You know that's an interesting bill and we supported it as an industry because if you look at the bill, the law prior to the bill being passed, it said owners have a right to participate in board meetings. But what happened is the board decided we only can participate in the owner's form or when we want you to participate. And recognizing that owners may buy in and have this duty to pay fees maintenance fees shouldn't they be able to express themselves and so because of a vagueness in the original law the legislature wanted to clarify it that in any part of the meeting an owner has a right to participate and at any time the board can set up and they have to by law set up regular meeting roles and we've got with respect to how the participation exists so they can put reasonable time limits on it and they can avoid an argument in a situation with a hot issue because they have to get their business done. But when Act 81 was put into place it basically clarified and the CAI and ACCA issued draft rules for owners to use or boards to use to allow that participation. Well I understand you also help participate in crafting those rules as well. That's correct. Because actually a copy that I have I believe is the one that you helped create. Steve Glancy and I the parliamentarian we had a short version and a long version. Which in some cases like the short version and we won't go into full detail of this because that's another show in itself. But even the short version pretty much covers it basically saying an owner may participate in discussion of agenda items and that's important to clarify agenda items. So let's just walk in and start talking about other issues. At the meeting at appropriate as time is announced by the chair. You know pretty simple. And I believe the time frame is another important one because even when you testify at the legislature or the county council they usually only give you a three minute window there to speak or testify. Well let me I should have brought this letter with me but let me begin by saying what I've always said to boards that always respect the owners never right to be hurt. So when you have an agenda item we're going to paint the building blue. Our policy is the board will discuss the matter first and we'll open it to the owners. The board goes no I like pink I like blue and they talk about it. Okay before we take a vote many of the owners want to make a comment about that. Thank you for your comment thank you for your opportunity to share with you your point of view. Okay now we'll take the vote. And that works with most non-controversial issues with boards. Sometimes there are more controversial issues that gets into debate and the longer rules proposed by Steve Lansing address those more complex associations. But let me tell you about this letter I got. Where an owner filed a recalculate. Well it's about to file a recalculate I shouldn't let me take today. About to file an AQUA 187 evaluation complaint. And they said I went to my board and I showed them the law. And the board says we have to go to our annual meeting and the homeowners approve it first that this we're going to follow that law. I know you're laughing but that's true. What people have to understand is when the legislature adopted this law, it's law. And no matter what your bylaws say your house rules say or what you think you have to comply with the law. So you have to at a meeting adopt meeting rules. And I recommend you put those rules on your notice of the meeting and put up around the project. These are our meeting rules. And then they come in and treat people with respect and give them a chance to be heard. Because maybe the argument is about a $10,000 assessment. People are hot about that or worried about it. Doesn't it make sense to give them a chance to express their points of view and be prepared for it. But again like I pointed out I believe it's on both your short and long version is the discussion sticks to what is on the agenda. That's important for a home owner to understand it's not a moment for you to go in and gripe for 20 minutes about something that's not on the agenda. Well first of all most boards have a forum where you can owners can bring up other things. That's not technically an official part of the meeting and it's not on the agenda. But certainly your comment about they come in and want to talk about this for 20 minutes isn't going to work. They should be able to come in and say like I'm really concerned sprinklers are going on my car in the morning when the law doesn't get sprinkled and can you have someone to think about it. The board would say yes thank you for bringing it to our attention. Let me talk to our resident manager or our management company about getting that sprinkler head fixed. But it shouldn't be this lengthy argument and debate about things. And certainly boards have the right to have an executive session. So if they have a dispute between two owners or some other issue they can keep it private by taking that to an executive session. We got to take a quick break so you can catch your breath and when we come back we're going to be discussing issues of finance and reserve. Money money money. Okay so we'll take a quick break and when we come back we'll continue our discussion with our guest Mr. Richard Emory. This is Think Tech Hawaii raising public awareness. For every game day a sign had designated driver. Hi I'm Pete McGinnis-Mark and every Monday at one o'clock I present Think Tech Hawaii's Research in Manoa where we bring together researchers from across the campus to describe a whole series of scientifically interesting topics of interest both to Hawaii and around the world. So hopefully you can join me one o'clock Monday afternoon for Think Tech Hawaii's Research in Manoa. Welcome back to the condo insider and we're continuing our discussion with our guest Mr. Richard Emory and before we went to break we were going to talk about money money money. Did you bring any with you? None for you. I didn't think so but in any case I think 2018 is going to be an interesting year when it comes to certain issues in regards to condominium funding, reserves AOA loans and things like that. So what are your predictions or thoughts? Well the hot topic is you know the fire market poll right and so the fire department has and the mayor has put in a bill that's being considered by the council in regard to retrofitting of fire sprinkler systems and no one really knows. There's about 360 buildings involved in this. No one really knows what the true cost of retrofitting is and it's going to vary by how the building was designed whether they have lead paint or maybe asbestos issues to deal with. Do they have a room for a 10 by 10 pump to put the sprinkler system in? There's a whole lot of issues on what we need to do to provide greater fire safety for people and so the issue becomes money money money so where's the money going to come from because even though we seem some low old estimates of $4,000 or $5,000 a unit some people are saying it's $30,000 or $40,000 a unit but time you get the pump room, you get the soffits in to make it look nice, you put the system in you deal with lead paint and other type of remediation you need to do to properly put it under the code so I don't think anyone really knows so well even if it as an industry, CAI and White Council Community Associations is going to put in two bills this year the first bill has to do with well how are we going to pay for this and as I've lectured and spoken before I can promise you government is not going to give you the money these associations are going to have to come up with the money rather there might be some tax benefits that pass by the council or by the state legislature, more for our own arguments because investors theoretically get some form of tax break anyway by filing it as an investment property, forgetting that issue, just looking at paying the bills the issue become really money going to come from well not everybody could handle a $20,000, $30,000 or $40,000 assessment, maybe not even a $5,000 assessment so associations need the ability to borrow money well the borrow money you need 50% of the owners approval it's hard to get to 50% of the owners to do anything that's true so now you have let's say a mandated law to do something and you have to go get the owners approval otherwise you have to assess them in cash and of course if they can't pay the money you don't have enough money to pay the contractor so the bills that we have coming forward are two fold first bill says something to the effect that if government laws or regulations mandate a safety upgrade to your building that the board of directors has the authority to borrow the money without the owners approval that avoids all that cost of chasing people and going over and over again for written consents to our foreign owners because you know the worst case situation would be is they don't give you approval and then the association has to file a motion court to get a declaratory judgment by judge they have to do it anyway they're spending thousands upon thousands of dollars to do something that protects everybody's safety but the same team is mandated by law so part one of the bills going in says that the board of directors has the right to borrow the money for this very limited government mandated safety regulation issue the second part of that is homeowners often say when the declaration says inside these walls is my property I'm not going to let you put the sprinkler system or smoke detectors in my unit this law further says it's kind of like these high risk components in the current law that this high risk safety issue the board has a director to come in and make these modifications within the unit with or without your approval because otherwise you get a loan and you now want to put the same system in three or four owners get together and they sue you can't do it and you spend years and again tens of thousands of dollars fighting something that should be so obvious with respect to the sprinkler system so under bill number one the board would have the authority to go in the unit and be that have to borrow the money without the owners approval under limited circumstances which in turn would save the association a lot of administrative costs to implement well that's similar to when the associations were being approached to put a cell tower on top of the building or solar panels the legislature passed an amended 514b to allow the board to make that decision without having to go get approval of a majority of owners to do so it's a similar type of scenario really and the second bill which was originally introduced and don't hold me through I think it was 2004 2006 basically for owner as I explained investor owners already have some tax benefits owner documents would have the right to take a income tax deduction very much maybe not exactly like solar but similar to the solar credit where they'd be able to take a percentage of deduction off their income tax if their association assesses them for a sprinkler retrofit and upgrade well and it's just my personal observation but I think initially the bills that were being introduced and of course expecting more to be introduced in 2018 at the state level some of it was a knee-jerk reaction without actually sitting down and figuring out how this is going to be accomplished initially it was like we're going to have to do it and we have to do it in five years without actually thinking how long is this going to take and how much is it going to cost well and some of the estimates are this is a $400 million problem but then again I was had a chance to participate in one of the committees with the fire residential fire safety advisory committee and I was on the finance how do you pay for this part of it there was another part dealing with the code they're following examples that originated in Chicago where the buildings have a matrix they get evaluated even if they don't have sprinklers they'll get points for having better fire doors a better fire alarm system whatever it may be and they may accumulate enough points that they are exempt from retrofitting then some conversations have been that retrofitting will be mandated only for the common areas that is just a work in progress so I think you have to recognize going into this that the fire department kind of has to say the whole thing has to be sprinkler but the city council will be the ones that will take these proposals on the matrix and financing and maybe tailor it to provide some relief for some associations but I think it's a long way this hearing is coming up through January on this particular issue there's going to be a lot of testimony foreign against you know so I think you're going to find that hopefully a meaningful legislation will come out of it be candid with you not an expert in this but I've always basically said that mandating an increase to the current fire alarm code makes a lot of sense it's much less expensive to do when you look at the big fire in Dubai which was like 60 stories and they had sprinklers but because they came up the outside of the building the sprinklers didn't kill the fire but no one got hurt, injured or dead because they had the most modern fire alarm system so are we not better off focusing in the short run on mandating that's already in the reserve study it should be upgrading the fire alarm system first as well as maybe fire doors and fire stop systems between floors where the pipes go through and things like that the attitude on that is let's fix what we can fix right now and then we'll work on the other issues well if you put it practically speaking let's just make this up that you have a building that has complex issues needs a new 10 by 10 room needs to have this needs to have that let's just say it's $40,000 an owner well that's about $400 a month more to the owner if they had to borrow the money well that's a lot of money for fixed income people and what's that going to do to the rents for people to talk about the high cost of rents here there's a price to pay for this but also the price to pay if you don't have fire safety so how do we balance those needs so that we can protect you when they get out in time because I asked a question at a meeting today I said you know all these high rise buildings there's fire hoses and fire extinguishers now if you ask the fire department do they want you manning the fire hoses and the fire extinguishers no they want you to listen to the alarm and get out because they don't think you're trained enough to do it I may be there for a small fire something you can handle without much risk but if it's a real fire get the heck out of dodge they don't want you there trying to fight it with the fire hose so are we not better off because the current standard for fire alarm systems are and that's where some people would object to it is you have to have these enunciators in your apartment including every bedroom so if you have a senior who's hard of hearing taking a nap on a pillow it will wake him up right and actually give instructions through the microphone system from the office you know go to the east end of the building or whatever well that's a small inconvenience to have a little box on your wall up in the corner and it's a lot easier to install and less expensive than sprinklers and then if you take the fire code today where they have to have smoke detectors in the common areas that are wired to the central office so the fire department knows where the floor is on and where it's located it seems to me that that's a balance that's affordable in the short run while we figure this all out but to pass the bill after one major fire and simply to the families that lost loved ones in the fire but there's more to this story when you look at the decades of experience we've had it may not just be economically feasible to take old buildings and bring them to the current code I particularly agree on that particularly on the fire alarm type of system that's something that can be done now while we're figuring out the rest of the stuff so that's an important component to the solution you know I don't think you can rely strictly on sprinklers you need to have a moderate fire alarm system I agree wholeheartedly with you and believe it or not our time is up already isn't it amazing how fast it is and some of these topics put these people to sleep we might be a good bedtime show there you go good one to have on after the tonight show or something thank you for inviting me today well thank you for being here today and thank you everyone for watching the condo insider we're on every Thursday at three o'clock and be sure to tune in next Thursday for more information on what it means to be a condominium owner right here on the condo insider aloha