New law clarifies information available to isle condo owners

Hawaii condominium owners got some help from the Legislature this year in monitoring how condo association boards manage their property and finances — a sometimes delicate issue that can divide neighbors.

Gov. Neil Abercrombie signed a bill into law July 1 that clarifies what information must be available to condo owners — such as financial records, association membership lists, and contracts for property management and maintenance — and sets a 30-day deadline to deliver such documents upon an owner’s written request.

The availability of condo association documents is a much more pertinent issue locally compared with many other states given that condo living makes up a big part of homeownership in Hawaii.

There are 1,591 condo associations registered with the state, and an additional untold number of unregistered associations, according to the State Real Estate Commission. Hawaii has more than 150,000 condominiums.

The new law, which originated from House Bill 2401 and became effective July 1, was lauded by a loosely knit group of residents in several condo buildings who complained to lawmakers that their association boards and property management companies had frustrated their attempts to obtain records.

Yet the new law fell short of direct government oversight and investigation that the residents calling themselves the Condo Transparency Group had originally sought with the bill.

"This is a huge change, but it’s only a first step for owners," said Laurie Hirohata, a lobbyist who spearheaded the bill’s introduction on behalf of neighbors in the Hono Hale Towers condo in Moiliili where she rents a unit.

Originally, HB 2401 was drafted with provisions that included having the Real Estate Commission investigate alleged condo board conflicts of interest and submitting an annual report to the Legislature outlining complaints received about board conflicts.

The commission opposed the bill, noting that condo boards made up of volunteers elected by fellow owners are supposed to be self-governing under state law with disputes resolved through mediation, arbitration or litigation.

The state Department of Commerce and Consumer Affairs also declined to support the initial version of the bill, and instead said a brochure it is producing and distributing to educate condo owners about resources available to resolve condo disputes is a better way to address complaints raised by the transparency advocates.

The Hawaii Chapter of the Community Associations Institute, a trade group largely representing homeowner associations and property management companies, suggested to lawmakers that issues cited by bill backers stem from a "couple of bad projects" and are not an industrywide problem.

The Senate Committee on Commerce and Consumer Protection rewrote the bill largely into the form that became law, acknowledging that condo owners could use assistance obtaining documents to which they are entitled.

"These owners should not have to go to court or mediation to exercise their rights to these documents, records and information," the committee chaired by Sen. Rosalyn Baker said in a report.

Hirohata said she got the bill introduced after seeing Hono Hale owners, many of whom she said are elderly or immigrants from China, being duped and lied to by their condo board.

"I took this up because of my neighbors," she said. "We cannot self-govern if we can’t get information or are being lied to. As an owner you have the right to get square answers."

Owners in several other condos — Kukui Plaza, Kapiolani Banyan, Mokuleia Surf, Makaha Oceanview, Sunset Towers, Olaloa and The Barclay — also testified in favor of the bill.

Harendra Panalal has been on a few different condo boards as an investor and submitted written testimony saying that even as a board member he sometimes had a hard time getting information from property management firms employed by the board.

"Many times I was denied information," he wrote.

At Hono Hale, a condo with three towers built in 1969, Hirohata said her neighbors have had issues obtaining a contract for spalling repair work, and question a vote that decided whether to replace old lanai railings with aluminum bars or glass panes.

Hirohata also raised questions about the board’s decision to retain a New York-based company, Intech 21 Inc., to install wireless submeters for electricity so that condo owners get their own electricity bill. In her testimony, Hirohata questioned whether Intech is licensed in Hawaii and would pay Hawaii taxes.

"Some of the owners have asked to review the records on how a particular vendor was selected, and review the details of the signed contract," she said in written testimony. "Most of the time, no documents were ever made available."

Phyllis Kacher, senior vice president of Hono Hale’s property management firm Hawaiiana Management Co. Ltd., said condo boards and their managing agents are easy targets for baseless allegations when residents don’t like board decisions.

With regard to the submeters, Kacher said her understanding is that complaints are from people who may not want to pay their fair share of electricity, including big energy users and renters who could see landlords add the electric bill to their rent. Overall, submetering should save energy and lead to less use, she added.

"I can empathize with people who are scared of it, but what’s more fair than paying for what you use?" Kacher said. "The owners and the board should be applauded for trying to save energy."

Kacher said a local contractor will be installing equipment supplied by Intech.

As for the allegations that Hono Hale owners have been denied association documents, Kacher said she supports the new law and doesn’t believe that any documents that by law are available to owners have been withheld.

Certain documents, such as maintenance fee delinquency lists, are protected. Boards also should exercise caution when owners request lists of all owners out of concern the lists will be used for marketing or other purposes that invade someone’s privacy.

Condo owner rights to documents covered under HB 2401 are not new. They existed before, but can be difficult to find because they were scattered in different sections of state condo law that sometimes produces confusion. The new law consolidates all such document descriptions into one section of the law, and adds the 30-day delivery requirement.

Richard Emery, president of property management firm Hawaii First Inc., said he supports the new law.

"We think it’s a good-faith effort on the part of the Legislature to clarify what homeowners should receive and when they should receive it by," he said.

However, Emery added that there likely will still be problems when condo owners request documents that have personal information that should be protected, such as bank statements with account routing numbers.

Emery said a condo owner sought such a document and refused to accept it with redactions, prompting a complaint to the state Regulated Industries Complaints Office that Emery said was dismissed.

The new law also limits how much condo associations and management firms can charge for documents at $1 per page to cover administrative and duplication costs. The documents may be delivered electronically or made available for free via download on the Internet.

Hirohata and others complained about what they view as excessive document fees — such as $19 for an owners list — as a way to stifle information access.

Some real estate brokers also have complained about the cost of condo association documents that are required anytime someone buys a condo.

Such fees range widely. For instance, board meeting minutes cost $15 at Harbor Court and $45 at Queen Emma Gardens. Condo association bylaws cost $10 at Ko’olani and $40 at Marco Polo.

Emery said he doesn’t expect the total cost, typically around $350 for a set of condo documents required in sales transactions, to be affected by the new law.