STAND. COM. REP. NO. 2390

Honolulu, Hawaii

RE: S.B. No. 2037

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 2037 entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUMS,"

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Prohibit condominium associations from charging unit owner attorneys' fees on fines unless deemed collectable;

(2) Limit attorneys' fees awarded and charged under section 514B-157, Hawaii Revised Statutes, to twenty-five percent of an underlying claim; and

(3) Allow a court to assess charges against a party requesting trial de novo if the requesting party fails to better its position by thirty percent or more.

Your Committee received testimony in support of this measure from four individuals.

Your Committee received testimony in opposition to this measure from the Hawaii Legislative Action Committee of the Community Associations Institute; Collection Law Section of the Hawaii State Bar Association; Honolulu Tower; Law Offices of Mark K. McKellar, LLLC; AOAO Lakeview Sands; and fifteen individuals.

Your Committee received comments on this measure from one individual.

Your Committee finds that condominium associations require an effective remedy to enforce collection of common expense assessments if necessary, including through civil actions. Your Committee further finds that attorneys' fees incurred by associations for enforcement actions can be applied to owners with limited transparency or explanation. This measure would create a balanced approach by clarifying apportionment and conditions under which an association can apply attorneys' fees to an owner. Your Committee further finds that the provisions of this measure with regard to trials de novo appear consistent with Hawaii Arbitration Rules concerning the determination of a prevailing party in a trial de novo challenging an arbitration award.

Your Committee has heard the concerns raised in testimony, including the questions regarding the cap on attorneys' fees and timeframes in relation to when a fine is deemed collectable, as proposed by this measure. Accordingly, your Committee has amended this measure by:

(1) Inserting language that clarifies that a fine is deemed collectable if the time to initiate an appeal pursuant to all applicable association governing documents has expired, a small claims court appeal has not been timely initiated, or a small claims court has not invalidated the fine within ninety days after timely initiation of a small claims court action;

(2) Deleting language that would have capped attorneys' fees charged or awarded after an association prevailed in an action at twenty-five percent of the amount of the underlying claim;

(3) Inserting an effective date of July 1, 2050, 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. 2037, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2037, 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