STAND. COM. REP. NO. 2392

Honolulu, Hawaii

RE: S.B. No. 2765

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. 2765 entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUMS,"

begs leave to report as follows:

The purpose and intent of this measure is to clarify that condominium associations that have obtained title to a unit through foreclosure may retain rental income received prior to the appointment of a commissioner in a subsequent foreclosure; provided that the association may be required by a court to remit rental income received after the appointment of a commissioner.

Your Committee received testimony in support of this measure from the Hawaii Legislative Action Committee of the Community Associations Institute; Honolulu Tower; Associa; Law Offices of Mark K. McKellar, LLLC; AOAO Lakeview Sands; and twelve individuals.

Your Committee received testimony in opposition to this measure from the Mortgage Bankers Association of Hawaii and two individuals.

Your Committee received comments on this measure from one individual.

Your Committee finds that existing law requires a condominium association that acquires title to a property through foreclosure to disgorge any excess rental income to a superior lienholder after a subsequent foreclosure. Lengthy delays in foreclosure proceedings can lead to years of forgone assessment revenues and large disgorgements to superior lienholders, resulting in significant financial burden for condominium associations. This measure would enable fairer outcomes by allowing condominium associations that acquire title through foreclosure to retain rental income earned before a subsequent foreclosure.

Your Committee has amended this measure by:

(1) Inserting language that clarifies that rental income received by the association from the unit may be used for the benefit of the unit owner;

(2) Inserting language that clarifies that a court may require that rental income received after the appointment of a commissioner in a subsequent foreclosure of a lien against the unit shall be remitted to and held by the commissioner until an order of distribution is entered by the court;

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

(4) Inserting an effective date of July 1, 2050, to encourage further discussion; and

(5) Making technical, nonsubstantive amendments 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. 2765, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2765, 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