 and welcome to Kondo Insider, Hawaii's weekly show about living in an association, not always Kondo, sometimes homeowner associations, and I'm your host Richard Emory. Someone asked me how I got to be a host on this show and I guess the sign is because I'm old because of the fact I've been in the industry for about 30 years serving on the legislative action committee and boards of our industry and engaged in the growth of our industry over all these years and one of my roles is a member of the Community Association Institute Legislative Action Committee. Now CAI, as we all know it, out of Virginia the headquarters appoints in each state a legislative action committee because we have one for the state of Hawaii. It consists of members equitably proportioned so we'll have three homeowners for example, we'll have three property managers, we'll have three lawyers, three vendors such as an insurance company who represents CAI who reviews all the proposed legislation each year and basically advocates on your behalf before the legislature to make sure responsible bills get adopted is part of our law here in Hawaii. In addition to the state responsibility, one person on each committee, meaning the Hawaii LAC, is appointed what they call the federal liaison. That means that person is responsible to be the coordinator between CAI National and the local branch of the local chapter, Hawaii in this case, on all federal legislation and so I mean I think there's much federal legislation that affects associations but there's a lot of it and so I'm going to give you a brief report today what's going on on a federal basis. Tie it into some of the things that are going on in other states because we attend meetings where all the states talk about the trends and priorities in their states and give you kind of an overview of where the landscape is in federal and in some cases state legislation in our industry. I would tell you the buzzword in 2022 is Champlain Tower South. Some of you may not be familiar with that so I'll give you a brief overview. In Florida, the county of Surfside, a condominium association, High Rise, collapsed. Killing, I'm not sure exactly how many people but more than dozens of people because the building collapsed and it collapsed because of the failure of its structural integrity of the building. What I'm going to call spalling where if you know buildings in high rises particularly within that concrete is rebar which is the structural integrity and if water gets into the concrete which gets in the rebar and rust and you lose your structural integrity. So anyway what happened in Florida was a building that was old its association did not make the structural repairs necessary to protect the building and then one evening it collapsed killing many many people and the building is gone and let me give you an update kind of what the issues are in this because what happens when you have a problem like that all of a sudden all over the country including Hawaii states run to say I can't let that happen here and start proposing all sorts of laws which happened here in Hawaii in 2022 to make sure that boards are protecting the structural integrity of the building. Let me go back to Florida for a second and talk about what the issues are and compare them to Hawaii. Number one in Florida the association's board of directors cannot assess the owners for repairs without majority approval. So what that means is when the board identified it several years ago maybe eight years ago the structural repair is necessary the homeowners were not in favor of it because it was a required assessment because the structural repairs initially were estimated at nine million dollars and the owners didn't want the assessment kind of like the view what's a few cracks. So the board had the local building department inspect the building who expressed in writing their concern about the structural integrity of the building but of course they didn't do any testing they just looked at all these cracks and said you know this is a potential problem and then what happened is over time they kept asking over and over again the board for approval to make the repairs and now the bill was up to 15 million dollars after all these years and still did not get the approval until a few weeks before the building collapsed. Now when you compare their law which basically said that you had to have the homeowners approval to assess the owners for this repair that's the first problem with respect to why this building collapsed and why people died because nobody wants to pay an assessment no one wants to pay more money we see this battle all the time in condos nobody wants to pay more money I'm dealing with another condo here on Oahu today that's not a high rise it's it's mid-rise we'll call it some of the owners don't want an assessment to repair the building and they don't want to borrow the money and so in that case the board gets to have their hands tied if they need to borrow the money but the difference is if I can explain it to you this way in Florida to make the repair needed the homeowners approval in Hawaii you're obligated as a board to make the repair there's no thing short about that in fact of the bill before the legislature today that strengthens the responsibility of the boards that maintain the building now in Florida you had to have the homeowners approval in Hawaii you do not you have to make the repair now if you want to borrow money to make the repair in Hawaii you need 50.0 percent exactly half to consent to a loan so what happens if the owners don't consent to a loan the board has the authority because they're obligated to maintain the building to assess you and so instead of saying you can pay $100 a month for a loan what they say is you have a lump sum assessment of $10,000 and you've got to pay that within a specified period of time so they can make the repairs so more times than not boards in Hawaii go out and say look we have to make this repair we can assess you $10,000 or if you sign this consent to borrow the money we'll raise your maintenance fees $100 a month those are examples by way the real numbers would determine what the calculation is so in Hawaii that particular problem of Florida doesn't exist because the board had the authority now whether they'd use it or not that's another question but they had the authority to make the repairs without the homeowners consent and I would tell you again that in Hawaii right now there's legislation pending that doesn't really change much to me but basically reaffirming is the board's obligation to maintain the building and frankly all the mortgage holders the banks and the and the mortgage companies alone money expect you to maintain their collateral and so that's an integral part of it the second issue with regard to Florida was that the basic design of the building there's nothing wrong with the basic design however it had unique characteristics on how it was designed that made it more vulnerable to problems if not maintained so was it built in accordance with the code is structurally correct yes but as the problem and the building began to deteriorate over time it became a higher risk building than another type of building which didn't have in the middle of its courtyard a swimming pool and parking lot and a structural integrity tied into that so when that deck failed the whole building came like a cusp of cards and fell down so in Florida the issue is that there had to have homeowner approval in hawaii don't so now we had the big problem the building collapse there's all these deaths there's all this lost collateral in the sense of you're a homeowner and you're forced enough not to be home you've lost your home you don't have insurance for it you remember insurance covers perils like hurricanes and fires but not poor maintenance so what happened they lost all their equity how else was the mortgage company that had mortgages well they would have some claim against the insurance policies but you know they're at risk as well with respect to this to this problem so anyway that became a hot topic in the Florida legislature what are we going to do to prevent this from ever happening again and there are the bills introduced all sorts of bills and all sorts of discussion and all sorts of debate and let me give you what the Florida legislature did pay attention to this this is what the Florida legislature did to solve this problem nothing in the end the Florida legislature said when you look at all the buildings all over our state this is what we call a one off it happened to one building we haven't had this problem reported by anybody else most buildings aren't designed that way and so they kicked the can down the road and made no decision with respect to that by changing the laws and so essentially they're back to square one that associations still need to get the owner's approval to fix the building I'm sure that those owners today might be more alert more aware it might be easier to vote for it but in the end Florida basically said we're not going to do anything it's a one off we can't react to a single development like that we kind of did that here in Hawaii with Marco Polo building we had that mass of fire twice in the same building over time and so all of a sudden our city council comes and passes the fire sprinkler wall which you have to have life safety evaluation you have to have done by certain dates and you have to put fire sprinklers in they should pass certain tests all because of one major fire which caused the life and the loss of well I want to say three or four deaths it wasn't more than four certainly tragic for anyone to lose your family but what they did was a all of a sudden the city county here passed all this life safety evaluation all this stuff you know what they're doing now the city council rightly so they're walking it back because of the fact there's not enough engineers enough people the costs are extreme not every building is designed you could fire sprinklers in it becomes a bigger problem than one anticipated so but in Florida just so you know that's kind of how it got started so what happened on the federal scene with regard to Florida first of all there was a bill introduced in congress recently called the safer condo act excuse me safer condo actually a good deal what they determined it's not so true in Hawaii from my experience but what they determined was that borrowing money to make repairs is sometimes difficult for associations to get where HUD through its government bank back financing has a rehabilitation home loan program that is the bill proposes to open out the condo association to make structural or safety repairs so if you had a structural repair and qualified and the bank could get the guarantee by HUD it's just straight to be lower the terms would be easier and then on top of that you end up with an opportunity to get a loan although here in Hawaii it still needs 50% of the elders approval so the safer condo act and that applies to a fire alarm systems and anything else that would be structural or safety in nature but if you just want to remodel your lobby or do things that are aesthetic or add some new innovation like a hot tub or something by the pool it wouldn't qualify it's got to be related to structural repair and safety and the and the bill was just introduced in congress under the called the safer condo act so the other kind of problems has been when we had the problem in florida is HUD which says he's government back loans all of a sudden changed the loan criteria for condo association that they aren't eligible for the most popular loan in the book a HUD loan fanny may fanny mac if they have structural repairs that are necessary if in fact they've ever had to evacuate the building there's a whole bunch of criteria I'm not going to go through today that basically takes away under the new loan lending requirement guidelines your ability to get a HUD mortgage if you're an individual buyer and seller out there and you're trying to do regular real estate and incorporated into that is the reserve study you know some people have argued that well HUD's guidelines say this half 10% of the maintenance fees going towards reserves that's not true that's certainly one of the criteria that might be used but that's not all the criteria and determining whether or not you have to have a low so at the end of the day on the federal side and we're going to take a break after this comment on the federal side what we've done is we've seen a collapse in florida we've seen florida do nothing about it we've seen the federal government get in and implement the proposed the safer condo act which would make financing for repairs easier which is a good thing we've seen HUD basically squash the HUD fanny may fanny mac mortgages for condos by putting in criteria that will affect many of the older condos for being able to buy and sell and get traditional mortgages so that's kind of a scary thing you know and you can see that I was on the national task force for public policy for CAI where CAI jumped into all of this and put public policy on what your reserve studies to include and not include and what you need to do so on that note we're going to take a short break for one minute then we're going to come back and talk about some more federal items on the horizon we'll be back in one minute but I'm back there was a shorter minute than I thought but let me just finish up the federal legislation then talk about what's going on in the industry and what the trends are but one of the things you may not know is flood insurance if you're in a flood zone that bill that authorizes the national flood insurance program sunset it and basically would have died except it's going through these short term extensions including increase keeping the program alive and in a sense that if that program went away those of you who are in a flood zone would not be protected because of the fact the flood insurance program was going to go away the other alternative to that was the rates that they've like they've already done are going up exponentially because of no number of claims that are occurring on low lying flood areas so right now the till September 2022 national flood insurance program has been extended again after extending it again and again and there's still debate among the congress about whether to recast the national flood insurance program the other program is called disaster assistance equity act if you happen to be a condo or a homeowner association and we had a hurricane and you had massive damage to common areas where your roads or things on that line currently you're not eligible for FEMA insurance so when a major homeowner association has to clear its roads from tree and debris there's no money from the federal government to do it so there's a bill before the government to allow a FEMA to step in so I got a question from a viewer and so let me see read the question to you do condos in Hawaii have risks like those in Florida are there any condos that are so damaged that homeowners will have to evacuate I don't know every condo in Hawaii but I'm going to tell you I think that we have a lower risk than everywhere else but because I do reserve studies and I've worked with many boards on problems I can see that if the can gets kicked down the road over and over again like Florida you could have a similar problem you know and it may not be to the extent what causes loss of life and but it certainly would cause the evacuation of the building and certainly destroy your property values so I'm going to tell you up front that I think there are risks by condos or homeowners who don't want to spend the money to maintain their building because they don't want to pay for it now that they can suffer dramatically with respect to not maintain their building particularly concrete buildings and mid to high-rise buildings are very susceptible now being honest with you I see this all the time buildings are sprawling and cracking after repair and most boards assess and take care of it and do the job is supposed to do but I am confident there are buildings out there today in Hawaii that aren't near collapse but have serious issues that need to be addressed that homeowners are debating among themselves what to do about it so I would just tell everybody up front that you know the national task force of public policy and the current law before our legislature emphasizes the need for condo association boards to maintain the building it's if the law gets passed in Hawaii where we do a 20-year forecast of reserve requirements the law changes to 30 years if this law gets passed that's a good thing because national public policy is 30 years and you know what happens when you do 20 years when people do the reserve studies they say I don't have to include that that's got 25 years life left on it and so you end up a bigger assessments down the road where the can gets further kicked down the road or ignored so I think that all in all you know that in Hawaii we don't have the extent of the problems that Florida does but we certainly have some risk with regard to that area and thank you for the viewer for asking that question now what's going on in general in the other states well all over this country we had a whole bunch of legislature introduce bills regarding building structure safety even in Hawaii we had a bill introduced that has since died that said that every five years you have to have a structural inspection you have to report it to the building department and there's all sorts of other things you had to do I testified against that bill because it's kind of like we keep putting all these burdens on the condo to do all these tasks with engineers and there's not enough engineers in town to do that I think the bill had you know we would have over 900 buildings you would have to have a structural investigation and to do that in five years or less would be practically impossible you know the problem is a lot of these structural things are hidden conditions you may not see them today you'll see them next year so I don't think that that was really a beneficial way to approach the problem but across the country because of Florida all these bills regarding structural requirements and safety and inspections and double inspections all came about which probably wouldn't solve the problem the other thing that we saw throughout there's really basically three areas we see in the federal government this year or in the states this year the other had to do with manager licensing we see that here once in a while where the managers who serve your condo association would have to be licensed like a real estate licensee we had one a couple years ago where the real estate commission that I shouldn't say a commission and the legislature proposed a bill that all managers of condo associations meeting the managing agents had to be licensed real estate brokers so those individual people assigned to you would have to have a real estate license well the problem with that is you know our real estate licensing and training today has nothing to do with condo management they don't learn anything in that training they would help them in running a condo better so there was no thought to what the licensing requirements should be and then you throw in all the types of condos we have from parking condos to industrial condos the senior living condos to agricultural condos their condo managers have different needs some of them are doing fiscal only financial there's a whole broader topic on that just to say let's make a license and have them a real estate license because the real estate licensing laws aren't designed to do that for here in Hawaii but we see all over the country people looking at mandating licensing for the condo manager from the management company the things that may make sense is registration the industry itself has a broad educational program so the entity having registration and certain ethics criteria they sign on to may be appropriate but to suggest a massive licensing but only up to cost the condos because the management companies would have to address that but there isn't anything in place doesn't exist already through the industry organization so that's a hot topic around the country that's what I'm reporting on the third was the interesting thing on why call liability what they were trying to do we see that here in Hawaii to a degree they want to impose the liability of something goes wrong on the board and or the management company or both so what they want to do is say well since you're elected and you're responsible if something goes wrong then it's your fault and you can be sued well I'm not sure many people would serve on boards if that was the case number two you got to recognize that within the governing documents association the boards are elected are homeowners too they don't have the right to do whatever they feel like doing and more times they're not they have to have the owners consent sort of the owners don't give consent like Florida so but if you look at the trends in the industry that's kind of what the trends in the industry are basically Florida caused all the structural repair arguments number two you've got this issue some managers be licensed I think they should be trained I think they should disclose your training I think they should be registered but the throw them this into the real estate licensing laws without some plan doesn't make any sense to me and then there's issues of liability because things are going wrong so it must be the boards following the management company and so that in fact then in fact we should hold them responsible even to the extent you look at a structural failure the management companies not an engineer they wouldn't know what the severity is of a crack in a wall they can advise the board to go get an expert but the board may say no we don't want to spend the money this year so the whole liability issue is it goes back to management companies or associations or our self-governance or designed for self-governance where the board itself is responsible like individual businesses are responsible for the things that go right and the things that go wrong summarizing up real quick in Hawaii I only have a minute left is Hawaii right now there's about 15 bills left they overlap one's about electric vehicle charging stations making you somehow address that all sorts of ways smoke detector disclosure buy and sell real estate you have to disclose the smoke detectors and they meet the building code assistance animals there's a couple bills on assistance animals out there trying to define what an assistance animal is basically eliminating the internet vests you buy over the internet reserve study issues focused on 30 year requirements versus 20 years and finally there's a one bill out there on proxies of voting one's the one's designed to allow electronic voting and over the internet under certain circumstances another which I think is pretty dead again tries to take away the board majority proxy saying that that's impairs on people's rights because the boards can control and the homeowners lose their rights even though that's the homeowner who gave the proxy anyway so anyway in the 30 minutes I have I tried to give you an update what's going on in the federal government I like to share this with you because it tells you how complex our industry is and know that your industry works hard to make sure we have reasonable meaningful legislation and thank you for watching condo insider today aloha thank you so much for watching think tech hawaii if you like what we do please like us and click the subscribe button on youtube and the follow button on vimeo you can also follow us on facebook instagram twitter and linked in and donate to us at think tech hawaii dot com mahalo