An effort that could have redefined who can serve on Hawaii condominium association boards was derailed in state court Tuesday.
A judge ruled against a board representing owners of the luxury Waiea condo tower in a case testing a relatively new change Hawaii lawmakers made to state law governing condo boards.
Waiea’s board, which is dominated by the company that developed the Kakaako tower, Howard Hughes Corp., attempted to prevent Mahbub Siddiqui from seeking a board seat because he bought a unit in the building through a company.
Siddiqui, who has been critical of Hughes Corp.’s role in operating the building, said he was stunned by the attempt to bar him from a board election set for Monday.
“This was shocking,” he said. “How can it be?”
Under Hawaii law, only the owner of a condo can serve on their condo association’s board. The definition of an owner includes individuals authorized to act on behalf of a legal entity such as a trust or company that holds title to the condo. However, two years ago the Legislature amended the law to “clarify” that tenants who occupy a condo and don’t own a unit in the same property can’t serve on the board.
Waiea’s board claimed that Siddiqui, who bought a unit in the building with his wife through Lee Capital LLC, is a tenant.
Siddiqui filed a lawsuit in March to oppose the board’s move. Siddiqui’s lawsuit said that he and his wife, Yi-Rong Lee, are the only members of Lee Capital and that Siddiqui as the firm’s managing member is its legal representative.
Circuit Court Judge James Kawashima said Siddiqui should be allowed to run for a board seat, and issued a temporary restraining order against keeping Siddiqui off the ballot.
“I do not find an exclusion appropriate,” Kawashima said.
Kawashima’s preliminary ruling is based on initial written briefs and arguments made in court Tuesday. The judge said Siddiqui appeared more likely to prevail on the merits of the case, though Waiea’s board could continue litigation with evidentiary hearings and more arguments after the election.
Michele-Lynn Luke, an
attorney representing the board, told Kawashima that she respectfully disagrees with his ruling.
“Mr. Siddiqui meets that definition of tenant because he is occupying a unit that is owned by Lee (Capital) LLC,” she said. “It doesn’t matter if he is paying rent or not paying rent.”
Hawaii law specifically
allows a member, partner or officer in a legal entity that owns a condo to serve on a condo association board. Thomas Wong, an attorney representing Siddiqui, said it makes no sense to say that someone who qualifies as an owner under the law can also be a tenant.
“He’s not a tenant,” Wong said of Siddiqui.
State lawmakers in 2017 approved adding the word “tenant” to clarify who can’t be on a condo board. Previously, the law stated only that owners of a condo can serve on condo boards with the exception of resident managers and employees of a condo who also are owners. So, under historical
interpretation of the law, tenants could not serve on condo boards.
However, state lawmakers thought clarification was needed, so they added the word “tenant” as a new
exception and specified that the definition of a tenant is someone who isn’t an owner.
The change was inserted with little public discussion into House Bill 1498, which mainly intended to ensure that condo owners have
access to contracts between their board and a resident manager or general manager.
John Morris, another attorney representing Waiea’s board, said in an interview that he isn’t aware of other litigation over Hawaii condo board members being tenants and doesn’t think the amended law is particularly helpful.
“We struggled with this,” Morris said, adding that he advised Waiea’s board to try to follow the amended law under a simple determination where anyone who sought a board seat needed to be listed as the titleholder to a unit in the building.
Wong said a ruling against Siddiqui stood to harm many people in Hawaii who use companies and trusts to hold title to their homes and shouldn’t be barred from serving on condo boards overseeing property they own.
Siddiqui suspects that Hughes Corp., which completed Waiea in late 2016 and has company officials in five of nine board seats, wants to maintain its majority for making decisions that affect how the building is operated.
Andy Riley, another Waiea unit owner, supports Siddiqui’s view and is also seeking a board seat to end the developer’s dominance. “We want to be in power of our own destiny,” he said.