 Hello, welcome to Kondo Insider, Hawaii's show about association living, mostly Kondo's. I was reading an article the other day that talked about 38% of our population live in some form of association, which is probably 300,000 or 400,000 people. But if you're feeling a little shaking right now going on, it's probably an earthquake because our city council is voting on the sprinkler bill down at the Capitol or the Honolulu Holly today. So as we sit here at this exact moment, the big debate on fire sprinklers for Kondo's is surfacing and next week we'll have Jane Sugimura to give us an update where that is going. But I'd say optimistically I think there's going to be a balance that makes it okay for everyone. That being said, we've decided to have a review of 514b Hawaii's Kondo Law over the next four or five weeks to give our new board members and people who don't understand an opportunity to kind of get a general review of our Kondo legislation. So I've asked one of my dearest friends, Naland, attorney with Damon Key, Leon Cupjack, Astor, something like that. I can never, the names are too long. Anyway, to come and talk to us about 514b and the series going over the next couple months and welcome back as usual. Happy Thursday everyone. Glad to be here again. Yes, you've been doing this for a long time. You'll kind of just review your background on Kondo stuff and what you're doing so we get it cut up to date. Sure. As Richard said, I'm an attorney with the law firm Damon Key, Leon Cupjack, Astor. We provide full services to Kondo Minions and community associations representing association as their general counsel and general matter consulting, collection for closure, and also their dispute resolution and litigation matters. I graduated from UH Law School and then started my practice in the Kondo industry and I've been representing associations for almost nine years. I also serve on legislative action committee for our Kondo industry, lobbying for associations and homeowners in the state. Well, you've certainly worked with you on many cases, are very talented and very knowledgeable and frankly I like the way you're able to talk to clients and share with them in logical ways. Some lawyers practice law, which is important, but some can apply the business side to it and the reality to it versus the legal side to it to bring quality resolution as the problem. So I thank you for that because you certainly have earned my respect through your professional ability over the last nine years. So I appreciate opportunity to work with you and I'm going to start out this guy. I said this whole thing about 514B, but last year we repealed 514A, January 1, 2019. Just briefly for the 514A Kondos out there, tell them what that means. For associations, really, you're not much more affected. It's more like the developers who want to sell those units under 514A. For associations, the only exception may be one regarding 75% to amend your DAC or bylaws. If you're still under 514B, it would be better for you to make an amendment to your DAC and bylaw to fully adopt 514B. Other than that, all the projects will be automatically subject to 514B. You don't have to worry about anything. But on the other hand, if your project has gone through so many amendments, you've never done a restatement. It would be a good timing to do that because for new directors or homeowners, it would be confusing for them to read like a very old DAC with multiple amendments. A restatement at this stage would be very clean to make sure all the provisions in one document are compliant with the statute and also reflect all the previous amendments you recorded with the state. I know when this came up before the legislature on 514A, the concern was when you look at 514B, part six association governance under 514B applied to 514A condominiums anyway. The legislature felt it was confusing to owners because they'd be reading 514A and they wouldn't understand that now 514B was the controlling document in certain cases, but not other cases. They felt after all these years that having a single document 514B would be the best solution. Realizing the developer who still had projects under 514A would have some problems and that's why they made it January 1, 2019 to give them a chance to clean it up. That's very true. So let's talk about 514B and in a way it's 514A because some of this applies to everybody and let's just talk about documents or I should say the governing documents and I think there's a lot of us understanding what the basic documents are to govern an association. Forgetting the laws, we're talking about the association documents themselves. It begins with the declaration? Yes, that's how you create a condo by filing a declaration with the Real Estate Commission. So the condo is formed theoretically or becomes an entity as soon as it's filed. Yes. That being said, the statute has a whole bunch of requirements for developers before they can sell it or offer it for sale and build it and do other things. So the association may be formed before the project's even built. Yes, they have to file a public report and the REC Real Estate Commission will assign an effective date. From that point on, they can start to offer sale of those condo units. And what is the primary purpose of the declaration? The declaration basically defines the common element who owns what in the common shared property. It also defines the association's responsibilities and their rights and also what are the unit owner's rights and obligations. It also talks about the permissible usage of the condo units, things like that, important provisions on insurance, like other statutory elements required for a declaration. See, I've always said it to make it simple for people listening. The declaration is kind of what you own, what's the common element, what's the limited common element, what's the apartment and what you owe. So how you pay maintenance fees and what obligations you have to pay for and how that's distributed like percentage of the common interest between the apartments. And at the declaration, the sub-document under that would be the declaration establishes that there will be bylaws. Yes, because the association usually run by and through the board of directors. Your bylaws will have all the information about who can serve on the board, how the board will have meetings, how the property will operate, like how owners can participate in the process, like voting, election, removal from board directors and some more, like regulations. Some bylaws are more detailed to have regulations on the usage of the units and alterations you can make, things like that too. See, the way, as I said, the declaration is what you own and what you owe. Look at the bylaws, the sub-board is governance, how the project will be governed. Yes. And then the third document's going to be house rules. And what are they? Just the leader of meeting house rules, you know, how things should be down, how you can use your apartment, what are prohibited, what you cannot do in the project, things like that. And then if there's a violation, what the board can do and what owners, what process you can follow to get notified and be heard when you have a chance to respond to those violation citations, things like that. Yeah, I've always said it's the kind of the rules so you can all live happily ever after together. You know, basically the pool hours and a bunch of rules as far as, you know, leash rules for the pets, you know, and all these different types of things. And sometimes the board can approve them based on the governing documents and sometimes changes have to be approved by the owners on the house rules. But more times than not, my experience is house rules can be established by the board and maintained by the board and changed by the board if they want to change it for some reason. So let's talk a little bit about governance. We talked about you have a board of directors, who can serve on the board? You have to be a unit owner or there's special situations like agreement of sale, then the purchaser, but the seller usually reserves certain rights that would affect their security interests in the unit. If it's a trust then the trustee can serve as the board director. If it's a company then the company's representative can also serve. And you can only have on the board one owner per unit. Yes. So if you owned two units you could have maybe your husband or wife one representing one unit and one representing the other unit. Correct. You know, but you can't have a husband or wife with one unit both serving on the board. No, you cannot. So you know I had an interesting question that came to me by one of our property managers just within the last couple days. And what it was was the owner of record was a father who had, I'll use my name, the Richard Emory Living Trust. And at the meeting they wanted to elect his son because he's a beneficiary of the trust that if something happened to the father he would become the trustee. Is he eligible to serve on the board? No, because the current trustee is probably Richard Emory. So you are the only one who can serve if you want to. Yeah, that's what I see. Well, how about if I rent my unit and I have a really great tenant and I want my tenant to serve on the board? The statute basically prohibits tenant from serving on the board. Same thing as a resident manager or the employee of the association. Those people cannot serve on the board. Now, if I, which I do work for a management company and I own a condominium and my wife wants to run for the board and she's not an employee of the management company. Can she run for the board? She can but there will be conflict of interest on certain issues. She has to refrain from participating on voting on those kind of issues like a management contract with your company, things like that. Right. And so she can serve on the board. Actually, even I as an employee can serve on the board. I just couldn't be an officer. Yes, that's specifically providing the statute. Because I as an owner independent of my job certainly have rights to the property I own and live in and so the statute basically tries to prevent management company employees and our resident managers from serving in a role that would be a conflict of interest in that process. So let me ask you this. We now have a board meeting and you know boards sometimes have angry owners. Can they participate in the board meeting? Yes. The owner has a statutory right to participate all board meetings except of executive session. An executive session is illegal and personnel and confidentiality matters. I got an email just today from a owner who was saying my board said a policy I only can speak in the form which is 20 minutes after the meeting. Is that right? The statute does give the board authority to adopt owner participation rule. As long as it's reasonable owners need to comply with that when you participate in board meetings. Right. And the statute does specifically say that they can participate on each agenda items. So we basically say to owners or boards is look, start with we're going to discuss whether we want to paint the building pink today. The board is going to discuss it first. Before we take a vote we'll give owners two minutes to speak on that agenda item. No one wants to speak thank you we're going to vote. But try to provide a vehicle because the statute says they have the right to participate on every agenda item. Try to establish rules so that they feel inclusive which probably makes a lot of sense for transparency that give them why don't like pink I'd rather have blue you know. So it's my understanding that a meeting rules require boards to establish rules to allow them to participate on each agenda item but can also allow them to put limits on it so it doesn't become a shouting match or extend the length of the business meeting of the board. And on that note we're going to take a short one minute break and come back on 514b and the basics. 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. Hi I'm Pete McGinnis-Mark and every Monday at one o'clock I'm the host of Think Tech Hawaii's research in Monart and at that program we bring to you a whole range of new scientific results from the university ranging from everything from exploring the solar system to looking at the earth from space going underwater talking about earthquakes and volcanoes and other things which have a direct relevance not only to Hawaii but also to our economy. So please try and join me one o'clock on a Monday afternoon to Think Tech Hawaii's research in Monart and see you then. Welcome back to Kondo Insider we've been talking with Nalaan a prominent local attorney on 514b which is the beginning of a series of reviews of the kind of many of statute and we were talking about the basic governing documents declaration by laws house rules we got into some governance with who can be on the board and I'm going to now ask her should boards keep minutes of meetings? Yes it's required by the statute. And are owners entitled to the minutes? Yes there's specific provisions regarding when and how owners can request for meeting minutes and what obligation that association has to comply as to the production of those minutes. How about executive sessions should they keep minutes for executive sessions? There's no statutory mandate on keeping minutes for the executive session but the statutory language indicates that you can do that if you want to. And I think people should know that if you kept minutes they are subject to subpoena if you ever got into a lawsuit. That's very true you may be able to redact certain information under attorney time privilege or some special privilege you have but in general if there is a discreary in a lawsuit you are obligated to produce whatever documents that's within the scope of the discovery request. Well I've seen it all the time in lawsuits where they've requested copies of executive session minutes and in some cases the boards don't keep up minutes and in some cases they occasionally keep minutes of something specific that they want to address in writing but there is no statutory obligation to it and there's a lot of debate whether you should or you should not keep minutes of executive sessions. But I do know that if you did keep minutes that owners are not entitled to the minutes of executive session. It would only be by subpoena or you know some legal proceeding that you had to produce them so an owner couldn't violate the executive session privilege by saying well give me a copy of your minutes after the executive session was over. So that's my understanding anyway subject to my expert legal person here saying you're wrong. I'm sending you to jail for 20 years. I agree with you. You're giving wrong information to everybody so for everybody here. So should the vote of the board be in the regular meeting minutes? All the board voting results should be reflected in the board meeting as official association action. And that's a good thing. Yes. So you know how your people are voting or not voting and I guess they have the right to vote in favor against or abstain and they might not stay in because they say well we're talking about the management company's contract and my husband works for the management company so I'm going to abstain. Yes actually the statute requires you to make a disclosure and that disclosure has to be reflected in the meeting minutes. So we would know and I saw an interesting situation where the conflict of interest thing was argued in a very unique way at an annual meeting and because someone gave an owner who was a board member 10 proxies and they were now going to vote for election and he was up for election they argued he had a conflict of interest for using the proxies given to him to vote for himself. No that's not. Nice try but that's what that's what the argument was you know and that you I mean certainly I'm sure every person who almost every person who is voting is going to vote for himself and you would think that that owner knew that they were going to vote for himself and so he's able to vote and that's not a conflict of interest you know. No yeah. And but you're right about most important thing is it must be disclosed it must be in the minutes and you can't vote. I find it interesting at the last year's legislature we had several bills trying to strengthen the conflict of interest because for whatever reason the legislature didn't know that provision existed already you know and they were trying to make a criminal penalty if you voted you had a conflict and and all the rest of this and the industry's position was well look the statute already covers this but how many complaints have you had if you look at all the mediations in the lawsuits I've only seen one conflict of interest lawsuit in the last 10 years you know so why do we need to scare all these volunteers serving on the board of this criminalization so the bill died but it's interesting the things that come up. So how many records do associations have to keep records? Yes certain records there are specific statutory requirements. And can you list some of them? Yeah for example like of course project documents and like financial documents meeting minutes contracts signed by the association your expenditure records receipts payments that you made to other parties things like that or you know some other like a delinquency records for owners and for the whole project a reserve study you know all those kind of things insurance policies yeah. Are owners entitled to those documents? There are specific items you know the statute is really clear on what you can get what you cannot you know most of the what we mentioned they are entitled to it except of the individual units delinquency documents. Yeah let's talk about that because I get that question all the time about well I think my neighbor is delinquent I want to see all the charges for him and all the fines that he's been assessed and all his payments that he's made on his ledger and we've taken a position you can't get that that it's private privacy information that you're only entitled to a summary of those delinquencies over 90 days not by units so you'd know a person a unit number or an owner who is delinquent over 90 days but in fact we're not going to give out there someone else's privacy information which would be his ledger his payments and and those types of things do you think I'm right on that yeah because the federal law federal debt collection act actually prohibits you know a creditor from disclosing a delinquent owner's information to a third party without that delinquent owner's the return authorization so you got to be really careful about that and that's where you can use the executive session if you're working with a delinquent owner on their payment plan things like that yeah so we we tell boards all the time that our owners all the time you can't have someone else's information and so if you have a delinquent owner they're going to enter into a private payment plan because the statute provides up to 12 months on a delinquency you know that's done in private between the owner and the board but that's not public information to the rest of the owners yeah and that's because of the federal law on that and so that's kind of the one misunderstanding but the other question we always get is that the statute's pretty clear that if an owner signs an affidavit and they want to get a list of all the other owners in their addresses they can get that under the statute so they can write them to say I don't like this or I like that or whatever it may be but we always get the request for email and phone numbers well I want their email and phone number are owners entitled to other owners email and phone numbers by law no and actually a lot of the associations they don't want to collect owners emails or you know like special emails that's a privacy matter and whatever you know the snail mail address you get and the owner's names are also only for association matters you can't use that to do like commercial solicitation or for political matter you know so you've got to be careful about that's why using an affidavit from the user would be a good idea yeah we think we think that's a good idea that they have an affidavit list we'll give them the regular mail list but we don't give them the email or the phone numbers figuring that owners have a right to privacy and in fact the last thing they want is maybe someone who's angry barraging them with emails on their political cause or phone calls you know they want to just enjoy their life and they should have the right to choose who gets their privacy information you know I would tell you just a quick side story as our companies introducing a new app mobile app on the phone where all sorts of records and information and payment abilities exist for a wide variety of of information that's you're allowed to have by statute what I find was interesting there's certain features you can turn on or turn off and they had a optional feature that we could turn on that all owners could communicate with all owners by this blog for lack of a better word and I said no don't turn that on and here in Hawaii there's too many people who get upset and they just barrage this stuff with endless information they just can't let it go and owners are just gonna get upset that they're included in this then you're gonna have to turn it off and I think transparency is good but I think it's up to each individual's rights to pick who they want to hear from or not hear from yeah I mean new technology does provide us with an opportunity to bring in more you know varied ways to communicate with each other but you know there are like boundaries that we should be careful about so can an owner get legal opinions they should do the board usually the legal opinion would be covered under the attorney kind privilege you know the association shouldn't disclose it to a non board director who would waive the attorney kind privilege that would open the floodgate of any communication relevant to that topic relevant to that communication it's very dangerous they should refrain from doing that if there's potential litigation that document could also be covered under the work product as the attorneys you know I hate the key words you said related to that topic sometimes I know boards will say well who's responsible is it to maintain the lanai railings and they get a legal opinion from the attorney and the the analysis of the declaration and the law and they want all the owners to know that they could certainly write to all the owners and say because of this issue we went to our attorney and here's his opinion that it is the owner's responsibility to maintain the lanai railing in my example and they could do that if they elected to yes and it would only be related to that topic it doesn't mean because they did another legal opinion on something else that they would get all the legal opinions yeah it's the communication between the attorney and the client that's the privileged part if you just you know let's see you copy and paste some of the contents make in a separate communication between the board and the unit owners then that will be a different story how about association bank statements and signature cards that open up the bank account for security reason you know for those stuff I think the association should redact that you know to just avoid any you know internet crime or any you know financial crime that could somebody could you know forge those signatures or use it in an improper illegal way right technically speaking that the statute doesn't define bank statements and signature cards we've taken a position to redact those things versus not giving them because not way much to them but you know in bank statements you get electronic information bank account information signature cards you get signatures who's the authorized signers and in cybercrime is a big problem today so we are very cautious about that I know we're getting near the end of the show so I'll ask you one more and that is who's responsible for paying all this the owner the requesting owner you need to pay for the reasonable copy and admin charge but the association should let you know 10 days before charging you that whether you want to incur the the cost if the owner decides oh no I want to withdraw my request that's fine if you want to proceed ahead then the managing agent or the association they can charge a reasonable fee that's there's a ceiling of one dollar per page you know the thing I found most times you get an owner who's angry and so he'll say I want all of the records he'll take everyone listed in the statute for the last 10 years instead of thinking what they're really trying to accomplish but to be candid with him you tried to copy that a dollar per page there'd be thousands of dollars you know we suggest they request the boxes come down and review them in the office and there may be some retrieval costs and some other admin costs related to that but just to get angry and throw the dart of I want everything that's probably not going to be as helpful if they don't really think through what they're trying to get but anyway I want to thank you again for being on condo insider we are going to continue our show with 514b and trying to highlight some of the major parts of the law I see the earthquake has stopped so I guess the city council has done something on sprinklers and we'll know more about that next week with Jane Sugimura thank you for watching condo insider