HRS § 514B-105 - Association; limitations on powers

(a) The declaration and bylaws may not impose limitations on the power of the association to deal with the developer which are more restrictive than the limitations imposed on the power of the association to deal with other persons. (b) Unless otherwise permitted by the declaration, bylaws, or this chapter, an association may adopt rules and regulations that affect the use of or behavior in units that may be used for residential purposes only to: (1) Prevent any use of a unit which violates the declaration or bylaws; (2) Regulate any behavior in or occupancy of a unit which violates the declaration or bylaws or unreasonably interferes with the use and enjoyment of other units or the common elements by other unit owners; or (3) Restrict the leasing of residential units to the extent those rules are reasonably designed to meet underwriting requirements of institutional lenders who regularly lend money secured by first mortgages on units in condominiums or regularly purchase those mortgages. Otherwise, the association may not regulate any use of or behavior in units by means of the rules and regulations. (c) No association shall deduct and apply portions of common expense payments received from a unit owner to unpaid late fees, legal fees, fines, and interest (other than amounts remitted by a unit in payment of late fees, legal fees, fines, and interest) unless the board adopts and distributes to all owners a policy stating that: (1) Failure to pay late fees, legal fees, fines, and interest may result in the deduction of such late fees, legal fees, fines, and interest from future common expense payments, so long as a delinquency continues to exist; and (2) Late fees may be imposed against any future common expense payment that is less than the full amount owed due to the deduction of unpaid late fees, legal fees, fines, and interest from the payment. (d) No unit owner who requests legal or other information from the association, the board, the managing agent, or their employees or agents, shall be charged for the reasonable cost of providing the information unless the association notifies the unit owner that it intends to charge the unit owner for the reasonable cost. The association shall notify the unit owner in writing at least ten days prior to incurring the reasonable cost of providing the information, except that no prior notice shall be required to assess the reasonable cost of providing information on delinquent assessments or in connection with proceedings to enforce the law or the association's governing documents. After being notified of the reasonable cost of providing the information, the unit owner may withdraw the request, in writing. A unit owner who withdraws a request for information shall not be charged for the reasonable cost of providing the information. (e) Subject to any approval requirements and spending limits contained in the declaration or bylaws, the association may authorize the board to borrow money for the repair, replacement, maintenance, operation, or administration of the common elements and personal property of the project, or the making of any additions, alterations, and improvements thereto; provided that written notice of the purpose and use of the funds is first sent to all unit owners and owners representing fifty per cent of the common interest vote or give written consent to the borrowing. In connection with the borrowing, the board may grant to the lender the right to assess and collect monthly or special assessments from the unit owners and to enforce the payment of the assessments or other sums by statutory lien and foreclosure proceedings. The cost of the borrowing, including, without limitation, all principal, interest, commitment fees, and other expenses payable with respect to the borrowing or the enforcement of the obligations under the borrowing, shall be a common expense of the project. For purposes of this section, the financing of insurance premiums by the association within the policy period shall not be deemed a loan and no lease shall be deemed a loan if it provides that at the end of the lease the association may purchase the leased equipment for its fair market value. [L 2004, c 164, pt of §2; am L 2006, c 273, §15] Case Notes Condominium declaration provision that in development controversies (proceedings against respondent), petitioner must, inter alia, hire an attorney with a certain quality rating, obtain an opinion letter indicating that petitioner has a substantial likelihood of success on the merits, and impose a special litigation assessment to fund arbitration or litigation, violated subsection (a) because it imposed limitations on petitioner association of apartment owners in arbitration or litigation with respondent more restrictive than those imposed on other persons. 130 H. 152, 307 P.3d 132 (2013). Given the types of proceedings categorized as "operational proceedings" by the condominium declaration in question, it could not be said that provisions in the declaration requiring approval by at least seventy-five per cent of unit owners before commencing any major litigation or arbitration and governing the funding of proceedings applied "uniquely" to proceedings between petitioner and respondent; moreover, as an action against respondent may be an action for damages wherein the total amount in controversy is not more than $10,000, it may also be possible for petitioner to initiate litigation against respondent that is an "operational proceeding", and therefore not subject to the provisions in question. 130 H. 152, 307 P.3d 132 (2013). Condominium declaration provisions requiring approval by at least seventy-five per cent of unit owners before commencing any major litigation or arbitration and governing the funding of proceedings did not apply only to proceedings against respondent; rather the provisions applied to any proceeding other than an "operational proceeding" as defined by the declaration. Thus, the provisions did not violate subsection (a) because the provisions limited petitioner's power to institute major proceedings against any party and did not favor respondent. 129 H. 117 (App.), 295 P.3d 987 (2013).