STAND. COM. REP. NO. 2374

Honolulu, Hawaii

RE: S.B. No. 2493

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2024

State of Hawaii

Sir:

Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 2493 entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUM ASSOCIATIONS,"

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Require that the fees for attorneys retained by a condominium association be paid from an association's funds or reserves, unless the fees incurred result from attempts to collect delinquent assessments against an individual unit owner;

(2) Limit the total and final legal fees to twenty-five percent of the original debt amount;

(3) Require attorneys retained by a condominium association to confine their communications to the condominium board, except when the attorneys must request and require materials and responses directly from owners for each matter; and

(4) Prohibit attorneys retained by a condominium association from billing unit owners directly.

Your Committee received testimony in support of this measure from the Kokua Council and eleven individuals.

Your Committee received testimony in opposition to this measure from the Community Associations Institute; Honolulu Tower AOAO; Sky Tower Apartments; Law Offices of Mark K. McKellar, LLLC; and sixteen individuals.

Your Committee finds that when a condominium association board seeks legal assistance to protect the collective interests of their association, it is the association, not the individual unit owners, who are the clients of the attorneys. Therefore, this measure would require that fees for attorneys retained by the condominium association be paid from an association's funds or reserves and clarify other matters pertaining to association attorneys and individual owners. Separately, this measure limits condominium associations from seeking reimbursement for its total and final legal fees to twenty-five percent of the original debt amount sought.

Notwithstanding, your Committee has heard the testimony of those in opposition, raising concerns that this measure, in its current form, misunderstands condominium governance and potentially conflicts with state condominium law.

Accordingly, your Committee has amended this measure by:

(1) Deleting language that would have:

(A) Required that the fees for attorneys retained by a condominium association be paid from an association's funds or reserves;

(B) Required attorneys retained by a condominium association to confine their communications to the condominium board; and

(C) Prohibited attorneys retained by a condominium association from billing unit owners directly;

(2) Amending section 1 to reflect its amended purpose;

(3) Inserting an effective date of July 1, 2040, to encourage further discussion; and

(4) Making a technical, nonsubstantive amendment for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2493, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2493, S.D. 1, and be referred to your Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,

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JARRETT KEOHOKALOLE, Chair