Hawaii legislators consider allowing foreclosure on problem properties without court proceedings

To crack down on problem properties that rack up thousands of dollars in building violation fines, a bill at the state Legislature would allow counties to proceed through the foreclosure process without going to court.

The bill is raising concerns, however, about how it would be enforced and what it would mean for private property owners’ rights.

House Bill 1434 is part of Mayor Rick Blangiardi’s legislative package, with support from the city Department of Planning and Permitting.

Under the measure, the nonjudicial foreclosure process would be triggered if “all notices, orders, and appeal proceedings are exhausted.”

DPP Director Dean Uchida expressed frustration at the current options for enforcing building violations against property owners who refuse to comply.

The process now starts when a city building inspector signs a notice of violation that is sent to the property owner. The notice details the impending discretionary fines but allows the property owner time to fix the problem before daily fines begin to accumulate.

If the violation persists, the department issues an order, signed by the DPP director, notifying the owner that fines are accumulating.

“In the extreme cases, where you get some egregious violators, the notice of violation, notice of order, doesn’t mean anything to them,” Uchida said. “They continue to basically conduct business as usual and pretty much ignore our orders to stop work or correct the violation.”

At that point DPP may put a lien on the property and proceed with the foreclosure process in court, but Uchida explained that can take a long time and uses significant resources from the city’s corporation counsel.

“It’s not a real priority for them. They go after other things that are higher-priority for the city,” he said. “So, generally, these types of actions get put on the back burner, and that’s why we haven’t had any real active foreclosures being done.”

City Council member Brandon Elefante, who chairs the Zoning and Planning Committee, also voiced support for HB 1434.

“Hopefully, we have property owners that are willing to work and correct violations and work with the city so that we don’t have to explore this option,” he said. “But this just gives us the ability to be able to have another enforcement type of provision for the counties.”

Council Chair Tommy Water and Council members Calvin Say, Esther Kia‘aina and Radiant Cordero all submitted testimony in support of the bill.

Say pointed to a Makiki house at 1421 Pensacola St. that has caught fire twice due to a hoarding situation and accumulated over $300,000 in fines. The Council voted on a resolution in February urging the city to begin the foreclosure process on the property.

Uchida said that if the bill were to pass, DPP plans to go back and look at which properties already in violation would qualify for the nonjudicial foreclosure process. He said in many cases the department has stopped sending notices due to no response from landlords, and some of those properties may be eligible for the nonjudicial foreclosure process if the bill becomes a law.

He added that the city Department of Budget and Fiscal Services has the power to engage in nonjudicial foreclosure for properties with delinquent real property tax payments.

Choon James, a real estate broker and concerned community member, is worried that HB 1434 and similar proposals would strip away the rights of property owners and be difficult to monitor.

“State legislators need to warn and engage their constituents first before any more decision making,” she said. “This nonjudicial foreclosure is giving big government a bigger stick by cutting off due process to the public.”

Natalie Iwasa, a member of the Honolulu Authority for Rapid Transportation board who said she was speaking as an individual, also expressed concern over whether the law, if passed, would be fairly executed.

“I think the danger is that the DPP might not treat all property owners equally,” she said.

Both Iwasa and James pointed to a Hauula property the Council has urged the city to foreclose on through a resolution passed in February.

Iwasa wondered why DPP was targeting the Hauula property, where the owner has had the land for only about 2-1/2 years, when in previous cases other property owners have been allowed to accumulate fines over longer periods of time without triggering the foreclosure process.

Uchida emphasized that if approved by lawmakers, nonjudicial foreclosure would be used only as a last resort. “This is the nuclear option when we cannot get anybody to comply using normal procedures,” he said.

“I don’t see it being used that frequently, especially once the public is aware of the fact that we can do it. I think it’ll help us get more compliance going forward.”

HB 1434 passed second reading in the Senate in March after crossing over from the House of Representatives. It is scheduled for a hearing in the Senate Judiciary and Ways and Means Committee on Tuesday.