SECTION 1. The legislature finds that condominium ownership is enjoyed by a large number of people in Hawaii, all of whom are members of their condominium unit owners' associations. The legislature further finds that full participation by condominium unit owners in the self-governing condominium association process under existing law on matters such as holding annual meetings to conduct required business, having the authority to terminate managing agent contracts, transparency in association budget and accounting matters, and the efficient processing of requests for association records, is challenging.

Therefore, the purpose of this Act is to enhance the effectiveness and efficiency of self-governance in condominium living by amending chapter 514B, Hawaii Revised Statutes, to:

(1) Require that a duly noticed annual meeting be held at a location convenient and easily accessible to a majority of condominium unit owners;

(2) Allow for two subsequent duly noticed adjourned annual meetings if there is no quorum present at the initial annual meeting and a reduced quorum requirement if quorum is not met at the third duly noticed adjourned annual meeting;

(3) Limit association business at an annual meeting conducted with a reduced quorum to the adoption of a tax resolution and the election of a board of directors for positions that have expired and are expiring;

(4) Restrict the time between the originally-noticed adjourned annual meeting and the reduced-quorum adjourned annual meeting to no longer than ninety days;

(5) Authorize the board of a condominium association to terminate a managing agent's contract upon a majority vote of the association of unit owners;

(6) Require a condominium association with fifty or more units to prepare its budget on an accrual basis in accordance with generally accepted accounting principles; and

(7) Require the use of standardized forms prescribed or approved by the commission for the condominium unit owner's request for records and the association's response to the request for records.

SECTION 2. Chapter 514B, Hawaii Revised Statutes, is amended by adding a new section to subpart B of part VI to be appropriately designated and to read as follows:

"§514B- Association meetings; failure to obtain a quorum. (a) Any association shall hold an annual meeting to conduct business that shall include but not be limited to the following:

(1) Electing, where applicable, to file Internal Revenue Service Form 1120 or 1120-H as may be amended and adopting a tax resolution in accordance with any accompanying revenue ruling as may be amended; and

(2) Electing a unit owner to the board of directors to fill any position that is expiring or that has expired.

(b) If an association is unable to obtain a quorum at any annual meeting, then the association shall adjourn the annual meeting and shall set another time for the adjourned annual meeting in an attempt to obtain quorum up to two more times within ninety days of the adjourned annual meeting.

(c) At the third attempt to obtain quorum, if a quorum is not achieved, that meeting shall then have a quorum requirement of one-half of the requirement as stated in the bylaws. Association business conducted at this meeting with a reduced quorum shall be limited to:

(2) Electing a unit owner to the board of directors to fill any position that is expiring or that has expired.

An adjourned annual meeting shall be duly noticed in accordance with section 514B-121(c)."

SECTION 3. Section 514B-107, Hawaii Revised Statutes, is amended to read as follows:

"§514B-107 Board; limitations. (a) Members of the board shall be unit owners or co-owners, vendees under an agreement of sale, a trustee of a trust which owns a unit, or an officer, partner, member, or other person authorized to act on behalf of any other legal entity which owns a unit. There shall not be more than one representative on the board from any one unit.

(b) No resident manager or employee of a condominium shall serve on its board.

(c) An owner shall not act as an officer of an association and an employee of the managing agent retained by the association. Any owner who is a board member of an association and an employee of the managing agent retained by the association shall not participate in any discussion regarding a management contract at a board meeting and shall be excluded from any executive session of the board where the management contract or the property manager will be discussed.

(d) Directors shall not expend association funds for their travel, directors' fees, and per diem, unless owners are informed and a majority approve of these expenses; provided that, with the approval of the board, directors may be reimbursed for actual expenditures incurred on behalf of the association. The board meeting minutes shall reflect in detail the items and amounts of the reimbursements.

(e) Associations at their own expense shall provide all board members with a current copy of the association's declaration, bylaws, house rules, and, annually, a copy of this chapter with amendments.

(f) The directors may expend association funds, which shall not be deemed to be compensation to the directors, to educate and train themselves in subject areas directly related to their duties and responsibilities as directors; provided that the approved annual operating budget shall include these expenses as separate line items. These expenses may include registration fees, books, videos, tapes, other educational materials, and economy travel expenses. Except for economy travel expenses within the State, all other travel expenses incurred under this subsection shall be subject to the requirements of subsection (d).

(g) Notwithstanding any provision in the declaration or bylaws to the contrary, the board of an association managed by a managing agent shall have the authority to employ, renew, and terminate a managing agent's contract.

(h) Notwithstanding any provision in the declaration or bylaws to the contrary, at an association meeting of unit owners a managing agent's contract may be terminated by a vote of a majority of the unit owners of an association. Pursuant to such vote taken by a majority of the unit owners, the board shall terminate a managing agent's contract in accordance with the provisions of the contract. Where any provision of the managing agent's contract relating to the termination of the contract is unconscionable to the unit owners at the time it was entered into, the board may terminate the managing agent's contract without incurring any liability and penalty to the association of unit owners. An example of a termination provision that is unconscionable includes but is not limited to a termination provision requiring the approval vote of eighty per cent of the unit owners. For purposes of this section, "majority of the unit owners" shall have the same meaning as in section 514B-3.

(i) Subsection (h) does not apply to an association with units that are one hundred per cent:

(1) Intended for commercial use; and

(2) Designed and constructed for hotel or resort use that are located on any parcel of real property designated and governed by a county for hotel or resort use pursuant to section 46-4."

SECTION 4. Section 514B-121, Hawaii Revised Statutes, is amended by amending subsections (d) and (e) to read as follows:

"(d) [~~All~~] Except as provided by this chapter, all association meetings shall be conducted in accordance with the most recent edition of Robert's Rules of Order Newly Revised. If so provided in the declaration or bylaws, meetings may be conducted by any means that allow participation by all unit owners in any deliberation or discussion.

(e) All association meetings shall be held at the address of the condominium or elsewhere within the State as determined by the board[;] and at a site convenient and readily accessible to the majority of the unit owners; provided that in the event of a natural disaster, such as a hurricane, an association meeting may be held outside the State."

SECTION 5. Section 514B-148, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The budget required under section 514B‑144(a) shall include at least the following:

(1) The estimated revenues and operating expenses of the association;

(2) Information as to whether the budget has been prepared on a cash or accrual basis; provided that associations with fifty or more units shall prepare a budget on an accrual basis in accordance with generally accepted accounting principles;

(3) The total replacement reserves of the association as of the date of the budget;

(4) The estimated replacement reserves the association will require to maintain the property based on a reserve study performed by the association;

(5) A general explanation of how the estimated replacement reserves are computed;

(6) The amount the association must collect for the fiscal year to fund the estimated replacement reserves; and

(7) Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves was calculated using a per cent funded or cash flow plan. The method or plan shall not circumvent the estimated replacement reserves amount determined by the reserve study pursuant to paragraph (4)."

SECTION 6. Section 514B-154.5, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Notwithstanding any provision in the declaration, bylaws, or house rules providing for another period of time, all documents, records, and information listed under subsection (a), whether maintained, kept, or required to be provided pursuant to this section or section 514B-152, 514B-153, or 514B-154, shall be provided no later than thirty days after receipt of a unit owner's or owner's authorized agent's written request, unless a lesser time is provided pursuant to this section or section 514B-152, 514B-153, or 514B‑154, and except as provided in subsection (a)(14). A unit owner's or owner's authorized agent's written request and any response to the written request shall be made on forms prescribed, or approved, by the commission."

SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 8. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2050.

THE SENATE	S.B. NO.	826
TWENTY-EIGHTH LEGISLATURE, 2015		S.D. 1
STATE OF HAWAII