HB2792

SECTION 1. The legislature finds that little fire ants (LFA) are on the top one hundred invasive species list and have become a pervasive problem in the State. In addition to delivering a painful sting, LFAs infest agricultural fields and farms, resulting in crop damage. The purpose of this Act is to require any LFA infestations, past or present, to be included in the disclosure statement of residential real property and agricultural land prior to sale.

SECTION 2. Section 508D-1, Hawaii Revised Statutes, is amended by amending the definition of "material fact" to read as follows:

""Material fact" means any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale[.]; including, but not limited to, any little fire ant infestations."

SECTION 3. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

MANDATORY DISCLOSURES IN agricultural land sale

§ -1 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Agricultural land" means any land that is classified in the agricultural district pursuant to chapter 205-2(d) and the rural district pursuant to chapter 205-2(c).

"Disclosure statement" means a written statement prepared by the seller, or at the seller's direction, that purports to fully and accurately disclose all material facts relating to the agricultural land being offered for sale that:

(1) Are within the knowledge or control of the seller; or

(2) Can be observed from visible, accessible areas.

"Material fact" means any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the agricultural land being offered for sale; including, but not limited to, any little fire ant infestations.

"Real estate purchase contract" means a contract, as it may be amended, by which a seller agrees to sell and a buyer agrees to buy agricultural land which shall include a deposit, receipt, offer, acceptance, or other similar agreement for the sale or lease with option to buy.

§ -2 Applicability. This chapter shall apply to any sale of agricultural land. The failure of the seller or the seller's agent to comply with this chapter shall not affect the validity of the title to any agricultural land sold.

§ -3 Exemptions. This chapter shall not apply to the following sales of agricultural land:

(1) Sale to a co-owner;

(2) Sale to a spouse, parent, or child of the seller;

(3) Sale by devise, descent, or court order;

(4) Sale by operation of law, including, but not limited to, any transfer by foreclosure, bankruptcy, or partition, or any transfer to a seller's creditor incident to a deed (or assignment) in lieu of foreclosure, workout, or the settlement or partial settlement of any preexisting obligation of a seller owed a creditor and any later sale of agricultural land by such creditor; and

(5) Sale by a lessor to a lessee resulting from conversion of leased land to fee simple.

§ -4 Prohibitions on sales of agricultural land. Except as provided in section -3, no seller may sell agricultural land unless:

(1) Prior to the sale of the agricultural land, a disclosure statement is:

(A) Signed and dated by the seller within six months before or ten calendar days after the acceptance of a real estate purchase contract by the buyer; and

(B) Delivered to the buyer as provided in section
-5;

(2) The buyer acknowledges receipt of the disclosure statement on the real estate purchase contract, or in any addendum attached to the contract, or in a separate document; and

(3) The buyer is afforded the opportunity to examine the disclosure statement as provided in section -5.

§ -5 Delivery of disclosure statement to buyer; procedures. (a) No later than ten calendar days from acceptance of a real estate purchase contract, the seller, either directly or through the seller's agent, shall provide the disclosure statement to the buyer.

(b) Upon receipt of the disclosure statement, the buyer shall have fifteen calendar days to:

(1) Examine the disclosure statement; and

(2) Decide whether to rescind the real estate purchase contract.

If the buyer decides to rescind the real estate purchase contract, the buyer shall deliver, to the seller directly or through the seller's agent within the fifteen-day period, written notification of the buyer's decision to rescind the real estate purchase contract. Failure to deliver the written notification to the seller within the fifteen-day period shall be deemed an acceptance of the disclosure statement.

(c) The seller and buyer may agree in writing to reduce or extend the time period provided for the delivery or examination and rescission period. The form of the receipt for the disclosure statement required by section -4(2) shall provide that the buyer has the right to examine the disclosure statement and to rescind the real estate purchase contract in accordance with this section.

§ -6 Later discovered inaccurate information. Prior to closing the real estate purchase contract, a buyer who receives a disclosure statement that fails to disclose a material fact or contains an inaccurate assertion that directly, substantially, and adversely affects the value of the agricultural land, and who was not aware of the foregoing failure or inaccuracy, may elect in writing to rescind the real estate purchase contract within fifteen calendar days of the earlier to occur of:

(1) The discovery of the failure or inaccuracy; or

(2) The receipt of an amended disclosure statement correcting the failure or inaccuracy, in the manner provided by section section -5(b) or (c).

The buyer's right to rescind the real estate purchase contract under this section shall not apply if the sale of the agricultural land has been recorded; provided that the buyer may pursue all additional remedies provided by law.

§ -7 Seller's agent's duties and responsibilities for disclosure. (a) Any person or entity acting in the capacity of an escrow agent for the sale of the agricultural land subject to this chapter, shall not be deemed the agent of the seller or buyer for purposes of the disclosure requirements of this chapter unless the seller or buyer and the escrow agent agree in writing to the establishment of the agency for such purpose.

(b) When a seller's agent cannot obtain the disclosure statement and does not have written assurances from the buyer that the disclosure statement was received, the seller's agent shall notify the buyer in writing of the buyer's rights to the disclosure statement and rights of rescission provided by this chapter. However, the seller's agent shall not be required to prepare the disclosure statement. The seller's agent responsible for delivering the disclosure statement, or the aforesaid written notification of the buyer's rights if applicable, shall maintain a record of the action taken by that agent to effect compliance.

(c) If the seller's agent is or becomes aware of any material facts inconsistent with or contradictory to the disclosure statement or the inspection report of a third party provided by the seller, the seller's agent shall disclose these facts to the seller, the buyer, and the buyer's agent. Nothing in this chapter precludes all other obligations of the seller's or the buyer's agent under Hawaii law.

§ -8 Good faith and due care in preparing the disclosure statement. (a) A seller or the seller's agent shall prepare the disclosure statement in good faith and with due care. A buyer shall have no cause of action against a seller or seller's agent for, arising out of, or relating to the providing of a disclosure statement when the disclosure statement is prepared in good faith and with due care. For purposes of this section, "in good faith and with due care" includes honesty in fact in the investigation, research, and preparation of the disclosure statement and may include information on the following:

(1) Facts based on only the seller's personal knowledge;

(2) Facts provided to the seller by governmental agencies and departments;

(3) Existing reports prepared for the seller by third-party consultants, including without limitation a:

(A) Licensed engineer;

(B) Land surveyor;

(D) Pest and wood-destroying insect control expert; or

(E) Contractor, or other home inspection expert;

dealing with matters within the scope of the professional's license or expertise for the purpose of the disclosure statement; and

(4) Facts provided to the seller by a managing agent of a cooperative or community association.

Notwithstanding this subsection, a seller or seller's agent shall be under no obligation to engage the services of any person in the investigation, research, or preparation of the disclosure statement. The failure to engage the services of any such person for this purpose shall not be deemed an absence of good faith or due care by the seller or the seller's agent in the investigation, research, or preparation of the disclosure statement. The delivery to the buyer of reports or facts within the scope of paragraph (2), (3), or (4) after the date of the initial disclosure statement shall be considered an amendment of the disclosure statement.

(b) The representations contained in the disclosure statement shall be construed to be made only to, and for the benefit of, the buyer and shall be deemed accurate only as to the time when made, except as otherwise provided in section -11.

§ -9 Disclosure form. In addition to the other information required by this chapter, the form for the disclosure statement shall include the following:

(1) A notice to the buyer that the buyer may wish to obtain professional advice and inspections of the agricultural land;

(2) A notice to the buyer that the information contained in the disclosure statement is the representation of the seller and not the representation of the seller's agent (except as to those representations, if any, specifically identified as being made by the seller's agent and not by the seller); and

(3) A notice of the buyer's rescission rights pursuant to this chapter.

§ -10 Indication of receipt of disclosure statement. (a) The buyer shall indicate receipt of the seller's disclosure statement on the real estate purchase contract, or in any addendum attached to the contract, or in a separate document.

(b) Receipts taken for the disclosure statement shall be kept on file in possession of the seller or seller's agent for a period of three years from the date the receipt was taken.

§ -11 Later material facts. Information in a disclosure statement that has not been disclosed or becomes inaccurate regarding a material fact as a result of an act, agreement, or occurrence (or otherwise becomes known to seller) after the statement is provided to the buyer does not violate this chapter. However, if such information directly, substantially, and adversely affects the value of the agricultural land, the seller shall provide an amended disclosure statement to the buyer disclosing the material fact within ten calendar days after the seller's discovery of such information if the seller discovers such information prior to the recorded sale of the agricultural land, and in any event, no later than twelve noon of the last business day prior to the recorded sale of the agricultural land. The buyer shall have fifteen calendar days to examine the amended disclosure statement and, if the buyer was not already aware of such information, to rescind the real estate purchase contract in accordance with section -5(b) or c. The buyer's right to rescind the real estate purchase contract under this section shall not apply if the sale of agricultural land has been recorded; provided that the buyer may pursue all additional remedies provided by law.

§ -12 Additional disclosure requirements. The requirements of this chapter are in addition to all other disclosure obligations of the seller required by law relating to the sale of agricultural land.

§ -13 Remedies; voidable contracts. (a) A buyer may elect to complete the purchase of agricultural land even if the seller fails to comply with the requirements of this chapter. After recordation of the sale of agricultural land, a buyer shall have no right under this chapter to rescind the real estate purchase contract despite the seller's failure to comply with the requirements of this chapter.

(b) If the buyer is provided a disclosure statement prepared and delivered in accordance with this chapter and the buyer decides to rescind the real estate purchase contract, the buyer shall not be entitled to any damages but shall be entitled to the immediate return of all deposits.

(c) In addition to the rights of rescission granted to the buyer under this chapter, if the seller negligently fails to provide the disclosure statement required by this chapter, the seller shall be liable to the buyer for the amount of the actual damages, if any, suffered as a result of the seller's negligence.

(d) In addition to the remedies allowed under subsection (b) or (c), a court may also award the prevailing party attorney's fees, court costs, and administrative fees.

§ -14 Rescission. Notwithstanding anything to the contrary in this chapter, any action for rescission brought under this chapter shall commence prior to the recorded sale of agricultural land.

§ -15 Limitation of actions. (a) Any action brought under this chapter shall commence within two years from the date the buyer received the disclosure statement; provided that if no disclosure statement was delivered to the buyer, then the action shall commence within two years of the recorded sale of the agricultural land.

(b) This chapter supersedes all other laws relating to the time for commencement of actions for failure to make the disclosures required by this chapter.

§ -16 Alternative dispute resolution. If the agricultural land purchase contract provides for alternative dispute resolution, then prior to filing an action in any court to enforce this chapter, a seller or buyer shall first submit the claim to alternative dispute resolution as required in the agricultural land purchase contract.

§ -17 Other disclosures. The provisions of this chapter shall not relieve or release a seller or a seller's agent of any other requirements of disclosure with regard to a sale of agricultural land, including but not limited to the provisions contained in this chapter.

§ -18 Severability. If any provision of this chapter, or the application thereof to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable."

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.

"INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2792
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII