 Our weekly show on Kondo Insider, we talk about association living and I've invited my good friend back, Jane Sugimore, to talk about an important call to action. We need your help and your help we need is good for you because it will potentially save your association a lot of grief, a lot of money and a lot of anguish and we're going to be talking about that on the show. But part of this is maybe a little bit of a legislative update and recap. There's a lot of bills, thousands of them introduced every year. When you get down to the association issues, beginning ones that may touch on associations, there were really six bills passed this year by the legislature that affect association living. Very briefly, we have three bills that have been signed into law and we have three bills that are pending a decision by the governor and they can either be vetoed, signed into law or become law because he takes no action on them. And so just by his lack of veto and his lack of signature, they become law and kind of the due dates on that is June 24th, he's required to list those bills that he may veto. So of those three bills, if they're not on the potential veto list, they will become law either by signature or by him just allowing the time to elapse. There are three bills that could potentially be on the veto list and one of them is critical to every association in the state of Hawaii. But before I discuss this with Jane, I'm going to call the elephant in the room bill. The other two bills, one of us fairly benign in my opinion is Senate Bill 552, which basically extends 514A for 12 more months for developers, not for your association for developers, because there's maybe a half a dozen associations out there that the public report was under 514A and 514B is now the standard of the industry and developers in some cases didn't do what they should do by amending their public report, so this basically gives these developers with unsold units and condos that are under 514A another year to get their paperwork and orders so 514B applies. Pretty benign, I don't see any particular issues with the governor from my perspective. The second one was House Bill 61, which we've talked about priority of payment where the prior year basically the legislature passed a law disrupting an association's ability to have priority of payment. And what House Bill 61 does is restores the ability of a board to have priority of payment after certain check blocks have been marked, and that means that first of all you have to apply all payments initially to common expenses. So it kind of allows and restores priority of payments, but in a limited fashion in the sense that any payment first has to go to common expenses. And this is important because we live in an electronic age and there's so many different types of assessments by associations from buying an HO6 policy, an insurance deductible, the storage fees, boat lockers, you name it, and this electronic age when you pay your visa bill you don't say pay first to Macy's, second to Bloomingdale's, third to SAC's. It's all kind of an electronic function. So associations for efficiency needed to have the ability to have priority of payments after the payments are first applied to common expenses. And that's House Bill 61, and there wasn't a lot of negative tenacity on that. So we're hopeful that that won't make the veto list either or move forward, become wall. But now back to the elephant in the room, which we've talked about in several shows, Senate Bill 551, and I took a lot of time introducing this, and welcome, Jane. Well, thank you. Thank you. Do we have any time left to discuss it? Oh, yeah. My long introduction. I don't know. I think that was very helpful to the audience. Just briefly again, remind everybody what's Senate Bill, where it came from, why it's important before we talk about our call to action. Okay. Senate Bill 551 is basically to address a court decision that was made by the Hawaii Intermediate Court of Appeals. And that court last summer found in a foreclosure action that associations can only do non-judicial foreclosure if there was a specific authority in their governing documents, which is their declaration or their bylaws, or there was a written agreement between the unit owner whose unit's being foreclosed and the association. And that just didn't exist. And the reason for 551 is because of this, and that court opinion basically claimed to have looked at the legislative history and said, we don't see anything in the legislative history that would support associations using non-judicial foreclosure. And that's probably because whoever was arguing the case before the appellate court didn't point out to the court, you know, because there is documentation. There are committee reports. There is testimony that shows that the legislature clearly, in fact, they changed the law. And they basically put into the law that, you know, that associations could do non-judicial foreclosure. This was back in 1999, okay? And so the law was changed to specifically allow them to do the non-judicial foreclosure because at that time, because of the recession and all these court delays, it was almost impossible for an association to complete a judicial foreclosure within a year. Well, think about it. There's a lot of associations that were formed in the 70s and 80s before the law was amended or made into law non-judicial foreclosures in 1999. Certainly their governing documents would never have any provision in there with respect to power of sale because no one really knew about it until 1999. And I would just point out to you, we know we had the big recession in 2008 that I had a project on Maui that's 64 units. It was primarily absentee owners, mainland owners, nothing against them. The 30 units walked away from their units in 19 and 2008, meaning that associations had almost half of their cash flow gone because people walked away and said foreclose. If you had to do a judicial foreclosure, it could take years where non-judicial gave the association the ability to get possession around the first mortgage and the other obligations, rent the unit out and help recover themselves financially. So that they could have cash flow to operate the building. And back in 1999, we had a similar situation with recession and we couldn't get the foreclosures through the courts. So the legislature changed 514A and they put language in the statute that said that the associations could do the non-judicial foreclosures just like the banks could and they referred to 667, a section that was later on repealed, but they referred to that section that dealt with non-judicial foreclosure. And that section of the law also said that by us making this new law, that every association's declaration is deemed to incorporate by reference this statutory right. In other words, it acknowledged that none of the associations at that time in 1999 had that language. But the statute said that all these governing documents, this language will be deemed to be in those documents. And so it was clear that the legislature intended for associations to have this remedy so that they could go out and enforce their payment of maintenance fees so that they could operate their buildings. And correctly, if I'm wrong, if you look at the foreclosure history in Hawaii, it began in 1999 with a woman to call part one of 667. And then in 2012, that was repealed and part six became the law. The problem is when the ICA, the Internet Media Court of Appeals, ruled on the Sakal versus the Hawaiian monarch, they actually ruled on part six the newer law and said that there wasn't evidence of the legislative history, which I'm not that bright. But I can read, and it seems to me it's pretty clear in the legislative reports and the law itself that the legislature intended for associations to have this right of power of sale in the law. And Senate Bill 551, after the Sakal decision in 2018, basically says, we really mean it. It's a message to the judiciary that, hey, you guys didn't read far enough. We really did intend to give associations the right to do non-judicial foreclosure. And it is part of the legislative history. It is there why they didn't look at it before they made their decision. We don't know, but this Bill 551 is basically to correct what happened in the Sakal decision. Because it's really unfair when you have all these associations who are trying to enforce their maintenance fee covenants, use non-judicial foreclosure. And they thought it was legal. It's in the statute, and so they think it's legal and they use it, and now they're told 20 years later, hey, you screwed up and it's illegal. And so that's why 551 is so important that we get it passed. I was at a seminar today where a couple of lawyers were talking about this particular issue among others. And basically what's happened is, because of the Sakal decision, now you have a whole bunch of lawyers all over town running around finding people who lost their units because of non-judicial foreclosure, and finding lawsuits all over the place, creating damages, which, whether you live there or not at the time the foreclosure took place, the current owners are going to be liable, saying that this owner who never paid his bills and got foreclosed on was harmed, and so all the paying owners now should give them some kind of award for damages. Right, and the really unfair thing is that you're talking about non-judicial foreclosures that occurred between 2008 and 2011. And it doesn't affect non-judicial foreclosures that occurred after 2012. And the lawyers today at the seminar were saying because of the Sakal division referred to part six, there is some risk for those that occurred after 2011, there is some risk. There is, but that's a different level of risk. The Sakal decision, I think, has confused people. For one thing, the foreclosure law is very confusing and convoluted, especially with all of the recent federal decisions that have occurred because of things that mainland banks have done, and you've heard all the bad things, the robo-signing and not being able to have the promissory note when you file a foreclosure, and things that are local banks like Bank of Hawaii and First Hawaii Bank of Central Hawaii, they just don't want any part of it. And I was on the mortgage foreclosure task force when we were trying to deal with what was happening on the mainland, and the local banks tried to get a carve out, but that's unconstitutional because a bank is a bank and you can't treat a local bank differently from a mainland bank, right? And the mainland banks were doing all these awful things that all of us read about in the newspaper, and so that's why some of the legislature, we made recommendations to the legislature on tightening up the foreclosure statutes. The foreclosure laws that's written today, ignoring this non-judicial judicial, provides that owners have a right to go to the board and request a payment plan if they got the link one. So in these foreclosures, you have situations where either the owner didn't do anything about it and go to the board to look for a payment plan, or in one case, I was reading one of the testimony for people against SB 551, and they were talking about how they tried to get the board to give it a payment plan. And I was talking to the management company, and yeah, they had a payment plan, but it would take 46 years for them to catch up based on the payment plan, which the board redeemed unreasonable. So it's almost like they're looking for, I understand, and SB 551 added some additional protection and provisions to help people, so that's a good thing. But the reality of it is it's almost like the people who didn't pay their bills, I realize people have problems and no disrespect to them, are looking for the pot of gold to the end of the rainbow against these associations, for following what they thought the law said, and when the legislature passed SB 551, unanimously in the Senate, and by a super majority in the House, they said, well, this was our real intent, so why wouldn't the governor wanna sign it? Why don't we talk about that after the break? Okay, well, you reminded me we're on a break, and I have an introductory question on that, I'm gonna come back and ask that again, but after my introductory question. So we're gonna take a little break right now, as Jayne and I recover from all this stress of this SB 551, and we'll be right back to talk about this some more. Aloha, this is Scott Perry, and I'm the host of Let's Talk Hawaii at Think Tech Hawaii. In this show, we're gonna be speaking in English and Japanese, and I'm gonna use my 30 years of experience to help many Japanese viewers improve their English skills, as well as learning many interesting things about Hawaii. You can catch my show every other Tuesday, 3 p.m. Hawaii time. See you then. Aloha, my name is Mark Shklav. I am the host of Think Tech Hawaii's Law Across the Sea. Law Across the Sea is on Think Tech Hawaii every other Monday at 11 a.m. Please join me, where my guests talk about law topics and ideas and music and Hawaii Ana all across the sea from Hawaii and back again. Aloha. Welcome back to Kondo Insider. Hopefully this is the last show on SB 551, but this is a critical matter, and we're again gonna have a call to arms for you to do something in this. It was critical for the benefit of all the associations to take action and notify our governor of their feelings on this. But I would like to compliment the legislature for stepping up, acknowledging what they promised in 1999, and yes, some didn't understand in the legislative body, but I need to compliment the legislature for standing up for what was right and what they promised the associations and protecting the associations. We've talked about SB 551 and how all these associations that in order to protect the association foreclosed on nonpaying owners are now being sued asking for damages from the paying owners because of the alleged non proper use of nonjudicial foreclosure because the Intermediate Court of Appeals said, well, the legislative intent's unclear. So why wouldn't the governor just sign this? Why wouldn't he sign it? Because there is a very strong, not a very strong, but there are people out there who are opposed to Senate Bill 551, and to me, I put them in two buckets. One are the people that you described who want to sue the association and get money from the people who are there now. And we're talking about nonjudicial foreclosures that happened in 2008 through 2011. And if they find one that happened in your building and they sue you, then your building is gonna have to pay for lawyers and defend yourselves and maybe end up making a payment to these people unless 551 is signed. And then there is a bunch, there is a group of residents and they feel that by signing, if they could get the governor to veto 551, that foreclosures relating to unpaid late charges and anything but common expenses will stop. But we addressed that last year when we fixed the priority of payments situation. And so I say to those people, we fixed that issue. The legislature made it really clear that foreclosure because you didn't pay your penalties and late charges and legal fees is not permitted. That's why the act on 195 that was passed last year addresses that. And I think people don't understand that going forward that's not gonna be an issue or it shouldn't be an issue. I have heard estimates that this could be tens of millions of dollars. If you took all these foreclosures, look at all the lawsuits are filed, the associations are gonna be liable, not ASO and association, but all these associations were collectively for tens of millions of dollars if this SB551 does not become law. And part of it comes from the fact that they're gonna have to defend these lawsuits. Some of the insurance companies are denying defense on this particular issue. They're changing policies as we speak now. And these homeowners who think they're doing themselves a favor by preventing foreclosure doesn't understand act 195 cure and cure disorder. They're actually hurting everybody else in their building. That's right. And we're trying to persuade them that that's not the case, but a lot of people don't understand act 195 and it was only passed last year. So it's gonna be a while before the effects of that change are going to be felt in the community. Well, I asked a lawyer at lunch today when we were at this other seminar what he thought and he felt positive about the bill because always two sides to things and the governor's pretty smart and he has a sophisticated staff that they'll probably get to the surface what the issues are, why the governor wouldn't sign it. And his words were, well, the issue he understands the problem is, quote, it's retroactive. Now the attorney general never testified against this bill and it's retroactive issue. They certainly noticed the fact that's what the bill accomplishes, but his words were not mine. I agree with him though, was it's not retroactive. What it is is just confirming what they originally did. So it's not retroactive. It's only confirming that what we've been doing since 1999 through 2012 was what our intent was. So it's not making something retroactive. It's really just confirming what the process has been all along. And in the bill itself, in bill 551, they do spend a lot of time in the beginning of the bill giving the history of how non-judicial foreclosures came about and the fact that it was in 514A in 1999 and when 514B came along in 2004, it got passed by the legislature with the same language in it because they had a chance to change it. Nobody changed it. And so it's like, it was developed in 1999. It was passed, it was fully vetted and it was in operation come 2004, 2006. There was another chance to undo it because we had the recodification with 514B and nobody raised a concern. Briefly, because I know we want to have a call to action here in a moment, but just briefly tell us a couple of the enhancements that came out of SB 551. Like for example, it's my understanding if a person is on active duty military, you can't use non-judicial foreclosure. Right, you have to go through judicial foreclosure and under the Soldiers and Sailors Act, the plaintiff, which is the person who's initiating the foreclosure, has to make a motion to the court and the court will appoint an attorney who is usually paid for by the plaintiff who represent the active duty military. And so he's represented by council, he doesn't have to pay for it. And wasn't there also in the bill now that that owner, if you're gonna do a non-judicial, they have a right to mediation? Yes, you have a right to mediation and you have to do it within 60 days of when you get to your notice of foreclosure, you can't wait and wait, I think beyond a certain time, then it's too late. But once you get that notice of foreclosure, if you apply for mediation, you're entitled to get it. And then another thing is that, and what happens is when you get the notice, I think one of the issues that was confusing for the consumer is when the association did the non-judicial foreclosure, the consumer thought that their mortgage was going away, right? And so that's why they didn't bother to defend it. And so when they get their notice of foreclosure, it's they get very clear language in there that this does not affect your mortgage. Well, let's get to our call to action. The most important part, there's a sitting before the governor, we don't know what he's gonna do. He has until June 24th to announce what might be on the veto list. And then he has until July 7th the veto, otherwise it will become law without signature. The governor needs to hear from condo owners the value of this and the importance of this. So what would you like our listeners to do? Okay, we have a form here and it tells you how you can go on the website and it's to let Governor Igay know that you support Senate Bill 551. And it's the website is governor.hawaii.gov. And you'll see, and this is what you're gonna see on the screen and there's places where you can put your name and address and you need to let the governor know that he should pass Senate Bill 551. And this is really important. And for those of you who feel well, it's not my place, it is your place. Because if you don't act and if your neighbors don't act and if people who live in condominiums do nothing and the governor decides, okay, those guys don't care, he may veto the bill. Because right now, as we speak, there are lots of people, because it's a very emotional thing about losing your home. And so that's the message that's going to the governor from the Opponents Senate Bill 551 is that he should veto it so that people who live in condominiums can't lose their homes through non-judicial foreclosure. And that's a fallacy. Because in most situations, unless you do nothing when you get the notice of default, you won't lose your home in a non-judicial foreclosure. And so it's really important. Non-judicial foreclosure is important for those people who live in condominiums and pay their maintenance fees. Because if you pay your maintenance fees and your neighbor doesn't, I mean, in the end you're gonna end up subsidizing that unit owner. And if you have too many people who don't pay their maintenance fees, then the next year, your maintenance fees are gonna go up. And that's not fair to the people who do what they're supposed to and pay their maintenance fees when they become due. And that's why it's really important to make sure that this focus- It should be noted too, if associations are forced into judicial foreclosure alone, that's a two or three times the cost of a non-judicial foreclosure. So it's gonna become out of the common pot of the association, which means they're gonna have less money, they don't budget for foreclosures. And that means the maintenance fees will go up again. Right, and for the people who are being foreclosed in a non-judicial foreclosure, the person who's doing the foreclosure can't get a judgment. But in a judicial foreclosure, which is more expensive and takes more time, there's gonna be a judgment against the homeowner. Let's put that form up one more time on the screen. And remind you who are watching as individual owners or if you do own an condominium, you're affected by this. If you're on the board, there's no reason you can't go to your board and say, let's have our association submit a form in support of this legislation. But we need not to stick our head in the sand and think everything's gonna be okay. This has got enough political vibrations by those people, particularly lawyers who wanna make some money out of this to have this bill vetoed. And this is a critical bill for the association. Any final words in our last 55 seconds? Go to governor.hawaii.gov and tell Governor Igay to pass Senate Bill 551. And let me echo the same words. Go to governor.hawaii.gov and tell Governor Igay to support and sign or allow to pass SB 551. It's in the best interest of the association, it's members, it's owners, and the law has been modified so many times to protect the rights of individual owners who might be in default by not paying that this applies to the people who just grossly ignore their responsibilities. On that note, thank you for watching Condo Insider. We'll be back next Thursday at three o'clock and we appreciate you watching our show in Aloha.