HB2615

SECTION 1. The legislature finds that homeowners are facing significant financial losses due to the recording of instruments that are void and unenforceable, either because noncompliance with applicable laws expressly renders any violative agreement void and unenforceable, or because the conduct constitutes intentionally exploitative or predatory behavior amounting to fraud or criminal conduct.

In the case of fraudulent instruments, including forged deeds, scammers target properties where title is held by an owner who may appear vulnerable due to age or financial condition and who may appear to be neglecting the property. Some of these properties may be vacant or occupied by squatters. Some scammers have violent criminal backgrounds and have been known to appear at the property unannounced and confront anyone present, whether an owner or a tenant, falsely claiming ownership of the property by virtue of a fraudulent deed and demanding that the property be vacated. Scammers perpetrating this fraud may seek to profit from their scheme by transferring title to the property through a second fraudulent deed to a third-party purchaser in exchange for money, or by using the property as collateral to obtain a loan. In either event, the real owner may be faced with the need to contend with someone claiming to be a bona fide purchaser or bona fide encumbrancer.

In addition to harmed homeowners, everyone involved with these properties may be negatively impacted, including persons in the chain of title, consumers and the public at large, realtors, lenders, title companies, property insurers, appraisers, surveyors, architects, contractors, and conceivably many others. To obtain relief, the homeowner would typically need to retain an attorney to file a court action to remedy the title issues. Under typical circumstances, based on the time and expense involved, even if the homeowner is successful in restoring title, the homeowner will never be made whole financially.

The legislature further finds that instruments submitted for filing in Hawaii's recording systems are not screened for indicators of fraud and that the recordation of a fraudulent instrument poses a real threat to any person holding title to or having an interest in real property. Deeds executed with the intent to deceive or defraud pose a considerable threat of harm due to the general reliance upon the recording system.

The risk of harm caused by a fraudulent deed may be reduced if the attorney general, county attorney, or prosecuting attorney of any county, or the executive director of the office of consumer protection, pursuant to statutory investigative authority, files in Hawaii's recording system a notice of pendency of investigation in connection with an investigation of a reported or suspected violation of law concerning real property or affecting the title to, or the right of possession of, real property. The filing of a notice of pendency of investigation may help preserve the rights of any person claiming title to, or the right to possession of, real property. In the event an action concerning the real property is later commenced, the legal relief sought in that action may still be obtainable and not rendered moot by subsequent conduct involving the property that might affect title or possession of the property. A notice of pendency of investigation would preserve the power of the judiciary to effect justice with respect to real property during the critical period of investigation of the underlying conduct and issues of contract formation and enforceability.

The purpose of this Act is to authorize:

(1) The recording of a notice of pendency of investigation in the bureau of conveyances and land court to alert potential purchasers or encumbrancers to investigations of reported or suspected violations concerning real property or affecting title to, or right of possession of, real property; and

(2) The registrar to accept for recordation a notice of pendency of investigation to promote transparency in the public record, reduce the risk of harm to victims, deter bad actors from exploiting the system, and preserve the ability of courts to enter declaratory relief as to title and to expunge documents determined by the court to be void and unenforceable.

SECTION 2. Chapter 634, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows:

"§634- Notice of pendency of investigation. (a) A governmental agency authorized by law to conduct investigations, including the attorney general, county attorney, or prosecuting attorney of any county, or executive director of the office of consumer protection, in connection with any investigation of a reported or suspected violation of law concerning real property or affecting the title or the right of possession of real property, may record in the recording system described in chapters 501 and 502 a notice of pendency of investigation.

(b) A notice of pendency of investigation may be recorded if the agency the investigation relates to alleged conduct that, if proven, could result in a civil or criminal proceeding affecting title to or an interest in the real property described in the notice, and the investigating agency has made a written determination that recordation is necessary to provide notice to potential purchasers or encumbrancers.

(1) The name of the investigating agency;

(2) A statement that there is a pending investigation that may result in an action affecting title to or an interest in the described real property;

(3) A legal description of the real property affected;

(4) The date the investigation was formally initiated; and

(5) A statement in substantially the following form:

"This notice does not constitute a finding of wrongdoing, does not create a lien, and does not determine any right, title, or interest in the property."

(d) From the time of recording, a notice of pendency of investigation shall impart constructive notice to subsequent purchasers and encumbrancers of the existence of the investigation. A person who becomes a purchaser or encumbrancer of the property affected shall be deemed to have constructive notice of the pendency of the investigation; provided that in the case of registered land, section 501-151, sections 501-241 to 501-248, and part II of chapter 501 shall govern; provided further that the notice shall not create a lien or encumbrance, establish probable cause or liability, or restrict transfer of title.

(e) A notice of pendency of investigation shall expire upon the earliest of:

(1) The recordation of a notice of pendency of action in connection with the commencement of an action affecting the property;

(2) The recordation of a release by the investigating agency; or

(3) The expiration of ninety days from the date of recordation, unless extended by court order upon a showing of cause, which extension shall not exceed an additional ninety days, or one hundred eighty days from the initial date of recordation.

For the purposes of this subsection, "cause" includes but is not limited to delays in the government agency's investigation that are attributable to persons of interest who are not readily available to answer questions, provide statements, testify, or provide documents in response to a request or subpoena; who are reluctant to cooperate; who evade service; or who orchestrate delays.

(f) During any time when a notice of pendency of investigation remains of record, any owner, title holder, mortgagee, or other person holding a recorded or perfected security interest in the real property who believes the notice of pendency of investigation has been filed in bad faith may petition the appropriate court to contest the appropriateness of the notice of pendency of investigation.

(g) The petition made pursuant to subsection (f) shall state the grounds upon which relief is requested and shall be supported by the affidavit of the petitioner or the petitioner's attorney setting forth a concise statement of the facts upon which the petition is based. The court shall set the petition for oral hearing. The procedure for obtaining expungement of a notice of pendency of action shall apply in cases brought under this section.

(h) At the conclusion of the hearing, or any continued hearing on the petition, the court may expunge the notice of pendency of investigation or allow the notice of pendency of investigation to remain of record, either unconditionally or on conditions as the court deems fair. The court may order additional relief, such as facilitating the production of documents or the elicitation of testimony, as it may facilitate a prompt determination as to whether the investigation warrants the filing of an action and accompanying recording in accordance with 634-51. The overriding issue shall rest upon the court's satisfaction that the investigation may identify facts warranting the filing of an action concerning real property or affecting title or the right of possession of real property. The government agency does not need to prove misconduct, but merely grounds warranting the investigation, which may be a reasonable suspicion of misconduct in connection with title or the right to possession of real property, which may include:

(1) Suspected forgery;

(2) Use of false information, such as when a deed contains false statements or misrepresentations about the property, the parties involved, or other significant details;

(3) Undue influence or coercion, such as when an individual is pressured, coerced, or manipulated into signing away the individual's property;

(4) Lack of capacity, such as when a deed is signed by an individual who lacks the legal capacity to understand the nature and consequences of the transaction, as in a case of mental incapacity or being a minor;

(5) Identity theft;

(6) Absence of genuine consent, such as when a deed was signed under duress or where consent was not freely given;

(7) Improper execution or recording;

(8) Indicators of a scam or scheme;

(9) The lack of an agreement or meeting of the minds;

(10) Lack of a written purchase agreement;

(11) Lack of consideration or adequate consideration;

(12) Misrepresentation, fraud, or unfair or deceptive acts or practices;

(13) Noncompliance with any applicable consumer protection laws;

(14) Noncompliance with any laws that may render any agreement void or unenforceable; or

(15) Conduct indicative that a party engaged in exploitive or predatory behavior."

SECTION 3. Section 502-31, Hawaii Revised Statutes, is amended to read as follows:

"§502-31 Recording, method. (a) The registrar shall make or cause to be made an entire literal copy of all instruments, with their original signatures, required to be recorded in the registrar's office, and the registrar, the registrar's deputy, or clerk shall certify its correspondence with the original, after which the registrar, the registrar's deputy, or clerk shall certify upon the exterior, or indorse upon the recorded instrument with the original signature, the date of its registry and the document number.

(b) The registrar, for purposes of the general indexes of the bureau of conveyances, shall use the names of the parties as they first appear in the recorded instrument. All names of all natural persons signing in their individual capacity shall be typewritten, stamped, legibly printed by hand, or by a mechanical or electrical printing method beneath all signatures. The provisions of this subsection shall not apply to any deed or conveyance instrument executed [~~prior to~~] before July 1, 1989.

(c) The registrar or the registrar's deputy may refuse to accept for record any document of a size larger than eight and one-half inches by eleven inches, or which contains a schedule or inventory sheet in excess of such size.

(d) This section shall apply to all instruments presented for recording in the bureau of conveyances, unless otherwise provided by rules adopted by the department of land and natural resources, pursuant to chapter 91.

(e) All instruments to be recorded shall include the original signature and the top three and one-half inches of space of the first page shall be reserved for recording information for the assistant registrar on the left half of such space, and for the registrar of conveyances on the right half of such space. The following one inch of space shall be reserved for information showing to whom the document should be returned beginning one and one-half inch from the left margin and not exceeding three and one-half inches per line. In addition, the first page shall identify and include, if possible, all names of the grantors and all names and addresses of the grantees, the type of document, and the tax map key number. Indorsements, if any, may be made on a conforming fly sheet. No papers or materials, written or otherwise, shall be secured or attached to a page in any manner that may conceal any other written text. If an instrument consists of more than one page, each page shall be single-sided sheets of written text numbered consecutively, beginning with number one, and shall be stapled once in the upper left corner. No instrument shall have a cover or backer attached. The registrar of conveyances shall be permitted to remove any rivets affixed to any instrument. The registrar may refuse to accept all instruments, papers, or notices presented for recordation that will not reproduce legibly under photographic, electronic, or electrostatic methods. Notwithstanding any other law to the contrary, the registrar may accept an electronic instrument in lieu of an original instrument with original signatures subject to the requirements set forth in rules adopted by the department of land and natural resources consistent with this section and chapter 489E.

(f) The registrar shall accept for recordation a notice of pendency of investigation submitted pursuant to section 634- by the attorney general, any county attorney or prosecuting attorney, or the executive director of the office of consumer protection. The notice of pendency of investigation shall be submitted in recordable form pursuant to this chapter. For any notice affecting registered land, section 501-151, sections 501-241 to 501-248, and part II of chapter 501 shall govern."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:

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HOUSE OF REPRESENTATIVES	H.B. NO.	2615
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII