 This is Think Tech Hawaii, Community Matters here. Hello, huh? Welcome to Condo Insider, and let me be one of the many to wish you a happy new year. I'm sitting here with my co-host, Jane Sugimura, who's very well known by all of you. We decided it might be helpful to just review the legislation that took place in 2018 and kind of the status, and then if we have time take a look at 2019 what we might be see happening in this year's legislature. So again, happy new year and welcome. Happy new year to you, and thank you for having me here again. Well, you're the boss, I mean, I don't have a choice, but you're like, I keep calling you the godmother of our industry because you certainly deserve a lot of credit for your many, many years of hard work on behalf of the association industry. Well, thank you very much. You know, I appreciate it. But I have a bunch of people who help. Well, you do, and I would say I just worked with you recently on a matter where an association, road association, forgot to be formed 40 years ago, and you solved the problem. Well, thank you. Yes, that was a challenge for everyone. Yes, it was. I mean, it's amazing that for 40 years, nothing happened, and all of a sudden someone said, oops, who's going to repair the roads, and there we were, you and me together. Right. I just think I've made a little note of some of the bills that were passed, and we spent quite a bit of time in the last couple of months on the fire sprinkler bill. So let's start with the city council and just give us a short update of the fire sprinkler bill. The fire sprinkler bill is in place, and it basically mandates that all high rise residential be retrofitted with fire sprinklers unless you're exempt or you can pass the life safety evaluation, or in the end you can opt out. But there's a new bill, and it just got introduced, and it is basically bill 72, which the mayor vetoed, without the two year extensions on certain deadlines. And the reason why it was reintroduced is because there were some important things in it that got thrown into the dump when it got vetoed. And one of the important ones was language that changed the instructions about who was going to do the examination, and so there's language in the new bill now. I think it's 64, bill 94, but I'm not sure. It includes language that the life safety evaluation will be done under the supervision, by or under the supervision of licensed professional. And that allows the licensed professionals to use association staff, or lower paid people rather than licensed professionals. And I hear that Dana Bergman, a Bergman group, has got an ad in this month's building management magazine, where he seems to be the first one offering to do life safety evaluations. Well, I think that's good. I think there's a lot of confusion and some lack of clarity on that particular bill. But we've always said in the past we support the safety of the residents and the first responders, and we're just concerned that the process be clear. And in some cases, because the buildings may be so old and have unique engineering problems, that residents have the right or owners have the right to opt out if they knowingly and willingly choose to not spend that level of money. Because we've talked in the past about it. Some associations said their budget quotes have been up to 50,000 in apartments. So I think we're on a process and we should be happy. But it's here, it's been done, it's been signed, and maybe Bill 94 will get approved. Probably it sounds like a will. Yeah, it included the things that the fire department didn't object to. I mean, about extending deadlines if you have to apply for a permit. Because the first big deadline is completing the life safety evaluation, which is three years, and the second big deadline is actually getting a passing score, which is six years. And so for the second part, getting a passing score, some of those repairs are going to need permits. And so to the extent you apply for a permit and it takes you a year to get the permit, then your deadline for completing, getting a passing score is extended by the length of time it takes you to get your permit, which is fair. And the fire department had no problem with that the last time around. Well, it's here, it happened. So it reminds me, though, the other thing that was going on in the city council was, I think it was Bill 17. Yes. Where there was other mandatory structural engineer of the envelope. Building envelope inspection. And that one is not quite dead. If nothing happens by the second week of February, it will be dead. And I think because of the life safety evaluation has been passed under Bill 69. I mean, that kind of encapsulates a lot of what would have had to have been done under Bill 17. Yeah, indirectly. But they were primarily following, I think, a New York law where older concrete buildings, it's called spalling, you get the edges deteriorate, fall off. They fall down 20 stories. If they hit someone, then they're probably dead. And the idea was to mandate these building envelope inspections. But I think we got, I don't want to use the word sidetrack, but we got intent on the fire safety sprinkler. And that one kind of got pushed aside for the time being anyway. And with the building envelope inspection, I think with the buildings, the high-rise buildings, they're pretty good about doing the painting and the spa repairs all at the same time on a regular basis, like every 10 years or when it starts to look like there might be a problem. And so that, I think, takes care of the building envelope inspection. Because when you have to do a paint job, paint the entire building, I mean, that's one thing they have to do is to check for spalls. And to do that, they have to do a building envelope inspection. So I think most buildings, and that's the argument we use with the city, most buildings have always done this. And so there's no need for a Bill 17. Yeah, I think the other question is, well, how many reported incidents do you have of an almost injury or whatever about spalling and things falling off the building? I don't know of any to be candid with you. There may be, and it certainly is a potential risk. But I'm not sure, mandating, again, all the associations in the state of Hawaii, which is a much bigger number than the 350 fire sprinkler buildings. To do with this building envelope inspection is meaningful. But anyway, just so everybody knows, being everybody up to date, that that's kind of alive, but dormant at the moment. Yes, it's on the back burner. It's on the back burner. But also in 2018, the most controversial bill under state government was Act 187. Right, that was the priority of payments. And the reason that bill, I mean, that act happened, was because there were homeowners who didn't quite understand the priority of payments. And they couldn't understand why they were making their maintenance fee payment every month. And yet they'd be getting a bill from the association saying, you're short, and we're going to charge you late fees. And what they didn't understand is that the condominium statute, 514A and B, allowed associations to develop a policy called the Priority of Payments, which meant that when the unit owner sent in their monthly check, that if they had a late charge or legal fees, that the maintenance fee would be applied first to those charges, and then they'd be delinquent. Under maintenance fees, because part of the money was used to pay the legal and late fees. Right, and then they would incur another. And with some of these people, they are on short pay or some other type of program. And so they don't always get monthly statements. So they don't know until much later. And sometimes they don't know until they get an attorney letter. And the way the law was set up is that you could not challenge or dispute that amount unless you paid it all. In other words, you had to pay first and then dispute. And this law, what it does is it says that you only have to pay the maintenance fees and that the priority of payments no longer applies to late fees and legal fees so that the associations can't use your monthly payment to apply it to those charges. And I think the interesting thing about that is we know that the industry will be putting in a bill to amend some of that language. Because when you look at condo associations, you have the common expenses, which would include maybe maintenance fees, a special assessment. Some people break out the reserve contributions. You may have a common electric meter and a breakout of the common electric charges. But you end up with parking and storage lockers and fines and HO6 policies that the association has a right to purchase if you don't buy your homeowner policy. And then insurance deductible says to you, and a list was lengthy that the original Act 187 really didn't address the board's right to have an application of payment policy. And so I think the proposal of the industry is coming up with first the common expenses, then to other types of charges. But on those other types of charges, the board does have the right to set a priority of payment or application of payment policy. And why that's important is when you write that one check with whatever you've got in it you're paying, it goes to a bank lockbox. Then the computers of the world take over and start allocating and assigning this. So the board has to have some ability to allocate this. Otherwise, the accounting becomes a nightmare. Yes. So that's Act 187. Right. But as you mentioned it, didn't 514A die January 1 of this year? Is it? 514A, yes. It died as of January 1. So 514A is dead. It is gone. We only have 514B. And I guess there may be some old associations where the developer still owns some units that are still dealing with that. But for all practical purposes, 514A has been repealed. And 514B is the condo law of the land. And we should probably never mention 514A ever again. Right. OK. The other thing you and I have known for several years now, the big issue within the legislature, has been disputes with homeowners. And we had an Act 196, which became from the House Bill 1874, that expanded dispute resolution options. Tell us about that. OK. I mean, what it did is it took mediation and it basically expanded the group of people that could use a mediation. Because what it was limited to was just owners and the board. But then there are disputes between people who sit on the board and the rest of the board and with managing agents. And because there was no provision for those people to initiate mediation, we had to amend the statute to allow for those types of disputes to be allowed to be mediated. And there's some other issues, which I want to address with you in that particular bill. But we're going to take a short one minute break. And we'll be right back with you in one minute. OK. This is Think Tech Hawaii, raising public awareness. I'm getting older. Do I need to worry about falling? Yes, you do. Each year, one in four people, 65 and older, will experience a fall. And many will be serious. The majority of falls happen at home. So remove things that could make you trip and install handrails to keep you steady. To learn more about the steps you can take to help prevent a fall, please talk to your doctor. You can also visit aarpfoundation.org or Medicaremadeclear.com slash falls. This message was brought to you by United Health Care and AARP Foundation. Hello, everyone. I'm DeSoto Brown, the co-host of Human Humane Architecture, which is seen on Think Tech Hawaii every other Tuesday at 4 p.m. And with the show's host, Martin Desbang, we discuss architecture here in the Hawaiian Islands and how it not only affects the way we live, but other aspects of our life, not only here in Hawaii, but internationally as well. So join us for Human Humane Architecture every other Tuesday at 4 p.m. on Think Tech Hawaii. Welcome back to Kondo Insider. I was actually looking at our playlist. You can go online to Kondo Insider and look at the various shows and numerous topics about association living. And I think we've done 128 shows since the beginning of this program. Oh, really? That's how many were listed on the playlist, 128 shows, if I remember correctly. And we're excited about expanding this program this year and adding some new program material, which we'll tell you about in the future. But back to Act 196, correct me if I'm wrong. We all know that facilitative versus evaluative mediation was a big win for us back in 2015, because it allows the mediator to be very engaged, to give us opinion, usually it's a retired judge, almost like a settlement conference judge. But truthfully, the bill was funded by the real estate continuing education fund. And what it basically did was between a home owner and a board. But what this bill did was expand it to include board member versus another board member, board or owner versus the management company. It expanded the people because it's had such a successful track record with the solving disputes that A, we expanded who could play. B, I think what we said was, if you agree voluntarily on both sides, you can make this binding arbitration versus just a mediation. Right, with no de novo review. That's right. With no de novo. And I think that's what has prevented some people from even using the arbitration alternative dispute resolution alternative. Because why go through the whole process of an arbitration? Because that's like going to trial. And then at the end, the party who loses just appeals. And you'd start all over again. And that's happened, I think, too many times. And so people are really concerned about doing arbitration of the statute. So I think that's a good alternative voluntary binding arbitration where the parties agree that the arbitration is going to be binding. And the icing on the cake is that it's subsidized by the condo. So that means that the neutral is paid for by the condo at fund. And what the Higgs also clarified in that act was, you see, we had a situation where one side would request a value of mediation. And the other side would say, no, I want facilitative mediation. And I think what the act now says is, the requester, if I request a value of mediation, I get a value of it. They don't have a choice. They can't use this lesser version of mediation as a tool to keep me from having my day in court, for lack of a better word. Right. And another provision that we put in here was a motion to compel mediation. And this is the one that puzzled the legislators like, well, why do we need to add that? Because the statute says shall. And my response to that is, yes, it says shall. And it is mandatory. But there are so many instances where one side demands mediation under the statute. And the other side just stonewalls them. Sometimes they don't even respond. Then what are you supposed to do? I mean, so basically, because the other side doesn't respond, you end up not doing anything. And so now there is a provision in the statute. And it was really kind of strange. I mean, when we were drafting it, I remember the senator put in $250 that you would get reimbursed for filing this motion. And I said, no, no, no, no, no. You can't do that because it's not worth it. I mean, the attorney's time to prepare the motion, go to court. And that's basically an hour going to court arguing the motion, coming back, preparing the order. I mean, you're talking at least $1,500. And so there's a cap of $1,500 in fees and costs that the person who files the motion. And you know, the judges hate to deal with condo lawsuits. So the minute you ask for an order compelling mediation, they're going to grant it. I think what's interesting about that, Bill, if you go back two years ago, I don't remember the ACT number, but it was the House Bill 832. It's actually a breach of your fiduciary. Duty as a board, if someone asks you to go to mediation, you don't go. Right. And so that affects your D&O insurance. So I think the message to all of you out there is we're trying to find ways to solve disputes between the parties involved in association management, the owner of the board, the management company. And this ACT is another good faith step towards making all parties involved with regard to interpretation of governing documents. It wouldn't be for an injury on the property or something like that. But it's a good bill that was adopted last year. And I think it took effect January 1 as far as those rights. So I think we'll hear more about that. One thing to remember is, as some people may not want to do the mediation or the arbitration because they figure, oh, it's humbling. I got better things to do. But what they don't understand is that the D&O insurance, I mean, if they allow themselves to be sued and taken where the dispute is resolved by a court and a judgment is entered, I mean, it's going to affect not only their D&O insurance premium, but it will affect everybody else's because of the limited number of carriers in the state. We know from Sue Savio that there's like two or three D&O carriers in the state of Hawaii. And we have the highest number of claims than any state in the country. And so this is a serious concern that associations should really take the heart. They got to figure a way to resolve the disputes without going to court. OK. Another thing all over the news right now is service animals, fraudulent service animal. We only have a few minutes left. So give us a short thumbnail what that's all about. OK. This bill makes it a misdemeanor, which means that you can be arrested and charged. I think the fine is what, $200, a fine of $100, then up to $500. And I think this is more of a deterrent because most people are law abiding and they don't want the hassle of being cited or being arrested. And so most people are going to comply with this. And I think this is a good thing. I don't know how if it's going to help us with the association because under fair housing we have to accept a request for reasonable accommodation for an assistance animal. Right. And so I don't know if it's going to affect condominiums, but I'm kind of hoping that there's some kind of connection with this new law and people not trying to fake the use of the, just so that they can bring their animals into the law. Well, the other states have enacted laws, making it misdemeanors for the doctor, the social worker, the licensed professional to falsely verify that a person needs an assistance animal. And hopefully that type of legislation will flow down to us. It was introduced two or three years ago. It died even though most of the disability organization supported it. But I think it's a way to see because there's a lot of little technical problems with the current service that an animal bill has passed. But it's a good faith effort to try to get attention to the matter. We'll see where that's going to go. Wage equality, that was another thing that happened this year. Right. That's where, you know, and associations are employers, so they have to be careful when they do the hiring process not to ask a prospective employee what their last salary was or compensation was. You're not supposed to ask that. Yeah, I guess it's to bring wage equality to minorities and to include female versus male issues. But now it's against the law to either put on the application or ask the prior payment history of an applicant. And I want to take a minute and tell you about the national flood insurance. OK. Those of you who are living in a flood zone may not know this. But the ability to issue flood policies expired. And it's been three times now, I think, the Congress, the Federal Congress, has extended the date to allow flood insurance policies to be renewed. And it now extended as of December 21 of this year to May 31 of 2019. But the thing they did differently this time is they didn't give FEMA the right to write national flood for new associations so they could renew existing policies. But in theory, on May 31, there will be no national flood insurance unless Congress renews it. And all the associations out there who have flood insurance may not be covered. So what are they supposed to do? They're all waiting for Congress to do something. But it's one of the few bilateral things that got passed at the end of the year, December 21, where they extended this while they tried to figure it out because the national flood policy program is a big loser. It loses money every year. And so I'm sure there'll be an effect on rates in the future. But the reality of it is, if you have a brand new association and you're in a flood zone, you're not insured for flood. Oh my god. And so unless they do something between now and May 31. So briefly, we're getting to the end of our show and a couple of words. What do you see in 2019? Well, I see. I know that there's a bill going to be or trying to be introduced that's going to mandate education for board members. Require board members to certify that they've gotten some kind of minimal level of education. And this goes back to dispute resolution. Because I think the theory is that a lot of this dispute resolution that ends up in lawsuits is because the board members aren't really educated as to what the rights of your owners are. And what they are entitled to, what information they're entitled to have and what records they're entitled to get. Yeah, kind of to wrap up the show. We're in our last minute. I think 2019, we know, as I mentioned earlier, that we're going to look at amending Act 187 with regard to the priority payment to clarify some of the technical issues. We're going to look at issues with regard to board education. That's been controversial and has been introduced many times with nothing happening in the past. And then we're looking at trying to get started a process to revise the Homeowner Association Act 421J. And that's probably going to take one or two years to work through a major overhaul of that program to make sure that homeowners have the similar rights to that of condo boards. And so in that note, I want to say thank you for coming again. And thank you for having me. Happy new year again. And I look forward to working with you this year as we go through another year. Let's hope that 2019 is a better year than 2018. Actually, you know, the number of bills introduced have been going down, so hopefully we're making progress. And we count on all of you to run your association well and give your homeowners a fair hearing. And on that note, thank you for watching Condo Insider.