HB1824

SECTION 1. The legislature finds that Hawaii's condominium and homeowners' association reserve requirements are intended to promote financial transparency, long-term planning, and the protection of unit owners from unexpected special assessments.

The legislature further finds that while third-party reserve study reviews can be an effective tool for larger and more complex associations, the cost of obtaining such reviews may impose a disproportionate financial burden on very small associations with simple infrastructure, limited shared components, and active owner oversight. For these associations, the expense of a mandatory third-party reserve study review may exceed other essential annual operating costs and reduce funds available for actual maintenance and repair of common elements.

The legislature notes that existing law already recognizes the distinction between large and small associations by permitting associations comprised of fewer than twenty units to waive certain audit and financial verification requirements by a vote of unit owners. The legislature finds that a similar, narrowly tailored approach is appropriate with respect to the triennial third-party reserve study review requirement.

The purpose of this Act is to provide limited flexibility for small associations, while preserving transparency and owner protections, by allowing associations with fewer than twenty units to waive the requirement for a third-party reserve study review upon a majority vote of unit owners; provided that annual reserve disclosures are maintained and the waiver decision is clearly documented and available to unit owners.

SECTION 2. 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 a summary with at least the following details:

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

(2) Disclosure as to whether the budget has been prepared on a cash or accrual basis;

(3) The estimated costs of fire safety equipment or installations that meet the requirements of a building fire and life safety evaluation required by the applicable county for any building located in a county with a population greater than five hundred thousand; provided that the reserve study may forecast a loan or special assessment to fund building fire and life safety components or installation;

(4) The balance of the total replacement reserves fund of the association as of the date of the budget;

(5) The estimated replacement reserves assessments that the association will require to maintain the property based on a reserve study performed by or on behalf of the association; provided that [~~the~~]:

(A) The reserve study, if not prepared by an independent reserve study preparer, shall be reviewed by an independent reserve study preparer no less than every three years; provided further that [a] an association comprising fewer than twenty units may, by the affirmative vote of a majority of the unit owners present or represented at a duly noticed association meeting, elect to waive the requirement for a review by an independent reserve study preparer every three years; provided that:

(i) The association continues to prepare and disclose annual reserve information to unit owners in accordance with this chapter; and

(ii) The vote to waive the review by an independent reserve study preparer is recorded in the association's records and made available to unit owners upon request.

Nothing in this subparagraph shall be construed to prohibit an association from obtaining a review by an independent reserve study preparer at any time; and

(B) A managing agent with industry reserve study designations shall not be considered as having a conflict of interest for purposes of this paragraph;

(6) A general explanation of how the estimated replacement reserves assessments are computed and detailing:

(A) The identity, qualifications, and potential conflicts of interest of the person or entity performing the reserve study, update, or any review thereof;

(B) Disclosure of any component of association property omitted from the reserve study and the basis for the omission;

(D) Whether the actual estimated replacement reserves assessments for the prior year as defined in the study were less than the assessments provided for in the reserve study, and, if so, by how much, and explaining the impact of the lesser assessments on future estimated replacement reserves assessments;

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

(8) Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments was calculated using a per cent funded or cash flow plan. The method or plan shall not circumvent the estimated replacement reserves assessments amount determined by the reserve study pursuant to paragraph (5).

The budget summary shall contain all required information without referring the reader to other portions of the budget."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1824
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII