§441-12  Mortgages and liens; consumer contracts; sales prohibited.  (a)  Cemetery authorities may secure pecuniary obligations by mortgage or lien upon their property, whether or not the property has been set aside for interment purposes, and may sell plots, crypts, niches, or contracts containing pre-need interment services subject to such mortgage or lien within the limitations and conditions imposed by this chapter.

     (b)  All mortgages and other liens of any nature hereafter contracted for and recorded on the property which has been and was, at the time of the perfection of the lien, dedicated to cemetery purposes pursuant to this chapter, shall not affect or impair the dedication of the property to cemetery use, or the title of any plot, crypt, or niche contract, or the obligation of the cemetery authority to fully perform any contract containing pre-need interment services, but the mortgage or other lien shall be subject and subordinate to the dedication and title of any plot, crypt, or niche contract and the obligation of the cemetery authority to fully perform any contract containing pre-need interment services, and any and all sales made upon foreclosure, insolvency, or federal bankruptcy proceeding shall be subject and subordinate to the dedication and title of any plot, crypt, or niche contract and  the obligation of the cemetery authority to fully perform any contract containing pre-need interment services.

     (c)  A statutory lien is created, without recordation of the lien, upon all real and personal property held by a pre-need funeral authority upon the filing with the department of audited financial statements, audited by an independent certified public accountant, that indicate that its pre-need funeral trusts are not fully funded as required by applicable law.  The amount of the lien shall be equal to the amount that the pre-need funeral trusts are underfunded.  This lien shall have priority over all subsequent real property mortgages, security interests, and liens created upon the real and personal property of the pre-need funeral authority and shall terminate at the time when the pre-need funeral trusts are properly funded, as evidenced by records and certification of the trustee and subsequent assurance from the independent certified public accountant that the underfunding was corrected.

     (d)  Notwithstanding any other language to the contrary, sales by a cemetery or pre-need funeral authority of accounts receivables from contracts containing pre-need interment, pre-need funeral, or perpetual care services shall be prohibited.  Sales made in violation of this subsection shall be void.

     (e)  Any transfer of pre-need funeral trust funds and the obligations related thereto shall be to another person subject to section 441-20 or 441-30.5.  Any transfer of pre-need funeral trust funds and pre-need funeral contracts and obligations related thereto in accordance with this section shall include the transfer of pre-need funeral contracts made, entered into, or purchased by the pre-need funeral authority prior to the transfer. [L 1967, c 199, pt of §1; HRS §441-12; am L 2007, c 188, §3]