SB2878

SECTION 1. The purpose of this Act is to improve transparency and fairness and prevent hidden or misleading charges, reduce disputes, and ensure consumers have the information necessary to make informed financial decisions by:

(1) Establishing standards for transfer fees assessed by a planned community association, condominium association, or managing agent when a residential unit is sold or ownership is transferred; and

(2) Requiring the disclosure of estimated withholdings and pass-through charges expected to be collected at closing, including but not limited to sewer fees and water fees.

SECTION 2. Chapter 421J, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§421J- Restriction on transfer fees; disclosure required. (a) The association or managing agent may only charge transfer fees to recover the reasonable and actual costs of administrative services directly related to the sale or transfer of ownership of a unit. All fees related to sale or transfer of ownership shall have a clear and direct connection to the services provided.

(b) Flat transfer fees shall only be permitted if they are a reasonable estimate of actual costs based on historical data.

(c) Transfer fees that exceed $350 shall be supported by documentation demonstrating the actual costs incurred to provide the services.

(d) No association or managing agent shall charge a transfer fee that results in a profit, or for unrelated costs, or costs for services not actually provided.

(e) Any unspent transfer fees charged by an association or managing agent shall be reimbursed to the owner no later than ten days after the completion of the transfer.

(f) Before the closing of any sale or transfer of ownership of a unit, the association or managing agent shall provide the seller, buyer, and the closing or escrow agent a written itemized disclosure of any estimated withholdings, prorations, or pass-through charges expected to be collected at closing, including but not limited to:

(1) Sewer fees;

(2) Water fees;

(3) Utility charges;

(4) Unpaid assessments; and

(5) Other amounts required to satisfy association-related obligations.

The disclosure shall identify each category of withholding, the estimated amount, and the basis for the estimate. No undisclosed withholding shall be collected at closing unless supported by documentation demonstrating the actual cost incurred or the legal obligation requiring the withholding."

SECTION 3. Chapter 514B, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§514B- Restriction on transfer fees; disclosure required. (a) The association or managing agent may only charge transfer fees to recover the reasonable and actual costs of administrative services directly related to the sale or transfer of ownership of a unit. All fees related to sale or transfer of ownership shall have a clear and direct connection to the services provided.