Column: State must address HOA owners’ plight

According to Hawaii’s Department of Commerce and Consumer Affairs (DCCA), there are more than 1,800 registered condominium associations, which include more than 173,000 condominium units. Approximately one-third of Hawaii’s population are condominium owners and residents, show data combined with the Census and the state Department of Business and Economic Development and Tourism.

Association-governed communities — which include condominiums, planned community associations and cooperatives — also known as “homeowners’ associations” (HOA), are the fastest growing housing segment in Hawaii. The HOA development model optimizes density and utilizes shared infrastructure and shared common expenses, which serves to offset Hawaii’s extremely high housing costs and reduces public infrastructure costs.

Despite benefits that flow from these communities to the rest of the state, Hawaii’s HOA owners are in a highly vulnerable situation as our government openly favors the interests of those who profit from the HOA-industry, over the needs of those who reside in and own association-governed units.

When HOA owners sought government’s assistance to resolve systemic problems, lobbyists who represent property managers and association attorneys’ interests insisted that government oversight would subvert associations’ “self-governance,” allowing abusive practices to be overlooked because of biased representation.

Condominium and other HOA issues affect Hawaii residents’ rights, finances and daily lives, more personally than almost any other issue. Despite the usual reticence of the local population to “create waves,” complaints from HOA owners and residents have been so numerous that, in 2020 alone, the DCCA received nearly 50,000 requests for assistance from “condo owners and interested parties.”

HOA owners’ vulnerability to abusive practices is further evidenced by an unnerving statement made by local insurance experts: Despite our state’s comparatively minute population, Hawaii has more D&O (directors and officers) insurance claims than any other state.

Hawaii’s government does little to address these concerns. The DCCA is merely administrative. It registers condominiums but does not regulate them and has minimal oversight of property management companies, requiring only one person per company to hold an irrelevant real estate broker’s license.

Owners in Hawaii’s homeowners’ associations pay several billion dollars each year to property management companies to oversee administrative, managerial and financial tasks, and to maintain the physical property. Such a significant industry should have proper oversight for consumer protections, but continues with minimal requirements.

Among their practices, property management firms may levy fees that require no detailed billing statements; and if unpaid because disputed, a lien may be placed on the property, requiring payment before sale of the property. Usurious interest charges and unreasonable attorneys’ fees may be tacked onto those contested fees. Compare those practices with owners’ attempts to enforce violations of the statutes committed by an association’s board: These owners must use their limited resources against the association’s almost unlimited ability to access financial and legal resources.

Reform of association-governed communities does not necessarily involve any taxpayer funding because it can be self-funded using the Condo Education Trust Fund (CETF) fees mandated from condominium-owners, and to which other HOA owners may similarly contribute. The current CETF fee is an affordable $5 per unit per biennium. Such reform should eliminate many abusive practices for which owners pay through increased association fees, including attorneys’ fees, legal fees and rising costs for association boards’ D&O insurance policies.

The savings to consumers would far exceed the cost to administer the program.

HOA reform is needed to improve the quality of life and the costs of homeownership. But with only unfunded grassroot organizations pushing back against condo-industry lobbyists who seek to preserve their pecuniary interests rather than the needs of HOA owners, this effort is a long-drawn, uphill battle.

Lila Mower leads a 300-plus member coalition of condo and HOA owners, Hui Oiaio (formerly, Condo Owners Coalition of Hawaii).