New Hawaii bills aim to ease financial strain for condominium communities

Date Published : Jun-13-2024

Written By : Kim Brown

What if your condominium’s insurance premium increased from $400,000 to $3.3 million in one year?

That’s what happened to the Peninsula at Hawaii Kai. The Hawaii community, consisting of 630 single and multifamily apartment homes and condominiums, was shocked, to say the least.

   

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Sadly, this type of increase is not unique to the Peninsula. The insurance industry isn’t exactly good in any state right now, but Hawaii is experiencing a “hard market.”

Affordable insurance seems to be non-existent, and exaggerated premium increases are pummeling condo owners. Experts believe the market is beginning to stabilize, but that doesn’t bring any real relief to condo communities.

There is a bit of good news though. A series of bills created to provide modest financial relief to condominium communities and owners was signed into law at the end of May.

The bills aim to modernize condominium management, make clean energy more accessible, and encourage more efficient, cost-saving operations.

   

HB2315 – Improves procedures for condominium meetings and voting

HB2315 HD1 SD2 CD1 states that, notwithstanding any provision to the contrary in the association’s declaration, bylaws, or Robert’s Rules of Order, electronic meetings, electronic voting, and mail voting may be authorized by the board in its sole discretion:

  • When approved by adoption of a special meeting rule at an association meeting that permits the board to authorize electronic meetings, electronic voting, and mail voting

or

  • When approved no less than 3 months and no more than 18 months before the electronic meeting, electronic voting, and mail voting by:
  • written consent of a majority of unit owners

or

  • majority vote at an association meeting

In a previous version of the bill, electronic meetings and mail voting were only reserved for state of emergencies, or if there were other circumstances authorized in the association’s declaration or bylaws. Electronic voting has replaced “electronic or machine voting.” The previous terminology could have created confusion for boards.  

For any electronic meetings, electronic voting, and mail voting, the voting deadline shall be within 60 days of the date the notice was first sent.

Provisions governing the use of electronic voting devices at condominium association meetings were repealed as the instructions were confusing and arguably tedious. Instead, association meetings are to be conducted in accordance with the most recent edition of Robert’s Rules of Order Newly Revised.

Communities looking for a simpler way to host virtual or hybrid meetings are encouraged to use something like Condo Control’s virtual meeting feature. Not only will they receive human support while they prepare for their virtual meeting, but they are practically guaranteed to reach quorum.

   

SB2600 – Permitting documents to be emailed when purchasing a condo

Senate Bill 2600 HD1 CD1 gives condo buyers the option to deliver certain condominium-related documents through email. This bill helps buyers, and whoever is responsible for handling the documents, likely a manager, as it reduces burdensome paperwork processes and speeds up delivery times. Moreover, this reduces the amount of paper that managers have to keep track of.

   

HB2685 – Multi-family residential property owners can invest in solar energy initiative and offset household costs

HB2685 HD2 SD1 CD1 relates to Hawaii’s Solar Hui program. It is a progressive initiative that aims to give lower-income households access to solar energy, while also giving multi-family residential property owners, including condo unit owners, the opportunity to invest and benefit from green energy.

The Hawaii Green Infrastructure Authority is managing the Solar Hui investment fund which will be used to:

  • Enter into energy services agreements with low- and moderate-income households to install solar energy systems
  • Invest in energy projects
  • Pay administrative costs of the Solar Hui program
  • Pay any other costs related to the Solar Hui program

   

Owners who invest in this fund may be eligible to receive:

  • Any tax credit associated with the installation of a solar energy system, subject to the requirements of the tax credit
  •  Any income derived from:
  • repayment of an energy services agreement with the low- and moderate-income household ratepayer provided by the Solar Hui investment fund

or

  • generation of energy from an energy project entered into by the fund manager

In short, since condo owners cannot install their own solar panels to offset energy costs, this bill gives them an alternative way to benefit from green energy. 

   

HB2801 – Allows condominium associations to be eligible for commercial property assessed financing

HB2801 HD1 SD1 CD1 transitions the administration of the Commercial property assessed financing program, also known as the C-PACER program, from state counties to the Hawaii Green Infrastructure Authority, allowing condominium associations to be eligible for commercial property-assessed financing.

C-PACER financing is an alternative option that finances 100% of qualified capital improvement costs, with terms matching the useful life of the equipment installed, thereby making payments more affordable than a typical equipment loan.

C-PACER financing can also help condominium associations finance the installation of fire safety and other energy efficiency, renewable energy, water conservation, and resiliency measures at more competitive rates and terms than may be available with conventional financing.

Before entering into a contract, the commercial property assessed financing lender shall reasonably determine that:

  • The property owner or association is able to borrow the money using reasonable commercial underwriting practices
  • All property taxes applicable to the property, and any other assessments levied on the same bill as property taxes, are paid
  • There are no involuntary liens applicable to the property, including but not limited to construction liens, that will not be paid or satisfied upon the closing of the financing

Considering that roughly 70% of Hawaii condominiums are at least 40 years old, this bill couldn’t be passed soon enough. Many condos already need to or will need to replace major components in the near future. But with the increased insurance costs, communities might be struggling with how to pay for those projects.

C-PACER financing helps condominiums fund big projects without having to levy a big special assessment. Instead, owners pay off the loan in smaller installments over time.    

   

SB2726 – Legislative Reference Bureau to conduct a study on best practices for sharing documents and resolving owner disputes

SB2726 SD2 HD1 CD1 requests that the Legislative Reference Bureau, a nonpartisan legislative service agency, create and submit a report on best practices employed by other states.

The Bureau will be studying California, Delaware, Florida, Massachusetts, Nevada, and any other jurisdiction deemed relevant by the Bureau to see how these jurisdictions approach the following issues:   

  • Condominium ombudsman or similar position to specifically oversee condominiums
  • Mandatory licensing for condominium managers
  • Alternative dispute resolution, or similar programs, that solely address issues brought forth by condominium communities
  • Governmental regulation and enforcement of condominium operations and governance that are separate from an ombudsman
  • Requirements for owner education at the point of sale of a unit
  • Requirements for owner access to condominium documents

A condominium property regime task force will deliver the findings and any proposed legislation by June of 2026. This task force was assembled to help lawmakers craft new legal frameworks for governing condominium associations, specifically when it comes to owner disputes.

Hopefully, new legislation created as a result of the study will ensure condominium managers have the skills and knowledge to help condo communities solve financial and operational issues. Furthermore, condominium associations should benefit from having a more cost-effective and efficient way to solve problems.   

   

Conclusion

Approximately 1 in 4 Hawaii residents live in condominium buildings, meaning some 360,000 people are impacted by the issues plaguing condo communities.

While the new laws won’t suddenly make financial problems disappear, they will make a difference over time.

Not only can owners unlock a new source of modest revenue, but communities as a whole can reduce labor costs by taking advantage of modern operational processes that should lighten the workload for managers and boards.

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