Bill Text: HI HB76 | 2019 | Regular Session | Amended
Bill Title: Relating To Nonjudicial Foreclosures.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2019-02-27 - The committee(s) on JUD recommend(s) that the measure be deferred. [HB76 Detail]
Download: Hawaii-2019-HB76-Amended.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
76 |
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THIRTIETH LEGISLATURE, 2019 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO NONJUDICIAL FORECLOSURES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. In 1999, the legislature passed Act 236, Session Laws of Hawaii 1999, authorizing condominium associations to conduct nonjudicial foreclosures. In 2012, through Act 182, Session Laws of Hawaii 2012, the legislature enacted a new part of the foreclosure law—part VI of chapter 667, Hawaii Revised Statutes—creating a nonjudicial foreclosure process specifically for condominium and planned community associations. During that time, in reliance on the legislature's actions, associations have conducted nonjudicial foreclosures as part of their efforts to collect delinquencies and sustain their financial operations. Associations have done so subject to the restrictions on nonjudicial foreclosures and other collection options imposed by the legislature.
These restrictions include:
(1) Prohibiting the use of nonjudicial foreclosure to collect fines, penalties, legal fees, or late fees;
(2) Requiring associations to give an owner sixty days to cure a default before proceeding with the nonjudicial foreclosure and to accept reasonable payment plans of up to twelve months; and
(3) Requiring associations to provide owners with contact information for approved housing counselors and approved budget and credit counselors.
The Intermediate Court of Appeals in Sakal v. Association of Apartment Owners of Hawaiian Monarch, 143 Haw. 219, 426 P.3d 443 (2018), held that the legislature intended that associations can only conduct nonjudicial foreclosures if they have specific authority to conduct nonjudicial foreclosures in their declaration or bylaws or in an agreement with the owner being foreclosed upon.
The legislative history indicates this was not the intent of the legislature in 2012, nor in legislatures that have made subsequent amendments. Therefore, this Act confirms the legislative intent that condominium and homeowner associations should be able to use nonjudicial foreclosure to collect delinquencies without having specific authority to conduct nonjudicial foreclosures in an agreement with a delinquent owner or in the association's declaration or bylaws.
SECTION 2. Section 421J-10.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) All sums assessed by the association, but
unpaid for the share of the assessments chargeable to any unit, shall constitute
a lien on the unit. The priority of the
association's lien shall, except as otherwise provided by law, be as provided
in the association documents or, if no priority is provided in the association
documents, by the recordation date of the liens; provided that any amendment to
the association documents that governs the priority of liens on the unit shall
not provide that an association lien shall have priority over a mortgage lien
that is recorded before the amendment is recorded. A lien recorded by an association for unpaid
assessments shall expire six years from the date of recordation unless proceedings to enforce the lien are instituted
prior to the expiration of the lien; provided that the expiration of a recorded
lien shall in no way affect the association's automatic lien that arises
pursuant to this subsection or the association documents. Any proceedings to enforce an association's
lien for any assessment shall be instituted within six years after the
assessment became due; provided that if the owner of a unit subject to a lien
of the association files a petition for relief under the United States
Bankruptcy Code (11 U.S.C. §101 et seq.),
the period of time for instituting proceedings to enforce the association's
lien shall be tolled until thirty days after the automatic stay of proceedings
under section 362 of the United States Bankruptcy Code (11 U.S.C. §362) is
lifted.
The lien of the association may
be foreclosed by action or by nonjudicial or power of sale foreclosure
procedures set forth in chapter 667, regardless of the
presence or absence of power of sale language in an association's governing
documents, by the managing agent or board, acting on behalf of the
association and in the name of the association; provided that no association
may exercise the nonjudicial or power of sale
remedies provided in chapter 667 to foreclose a lien against any unit
that arises solely from fines, penalties, legal fees, or late fees, and the
foreclosure of any such lien shall be filed in court pursuant to part IA of
chapter 667. In any association
foreclosure, the unit owner shall be required to pay a reasonable rental for
the unit, if so provided in the association documents or the law, and the
plaintiff in the foreclosure shall be entitled to the appointment of a receiver
to collect the rental owed by the unit owner or any tenant of the unit. If the association is the plaintiff, it may
request that its managing agent be appointed as receiver to collect the rental
from the tenant. The managing agent or
board, acting on behalf of the association and in the name of the association,
may bid on the unit at foreclosure sale and acquire and hold, lease, mortgage,
and convey the unit thereafter as the board deems reasonable. Action to recover a money judgment for unpaid
assessments shall be maintainable without foreclosing or waiving the lien
securing the unpaid assessments owed.
In
the case of a voluntary conveyance, the grantee of a unit shall be jointly and
severally liable with the grantor for all unpaid assessments against the latter
for the grantor's share of the common expenses up to the time of the grant or
conveyance, without prejudice to the grantee's right to recover from the
grantor the amounts paid by the grantee.
Any such grantor or grantee is entitled to a statement from the board,
either directly or through its managing agent or resident manager, setting
forth the amount of the unpaid assessments against the grantor. The grantee is not liable and the unit
conveyed is not subject to a lien for any unpaid assessments against the
grantor in excess of the amount set forth in the statement, except as to the
amount of subsequently dishonored checks mentioned in the statement as having
been received within the thirty-day period immediately preceding the date of
such statement."
SECTION 3. Section 514B-146, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) All
sums assessed by the association but unpaid for the share of the common
expenses chargeable to any unit shall constitute a lien on the unit with
priority over all other liens, except:
(1) Liens for real property taxes and assessments lawfully imposed by
governmental authority against the unit; and
(2) Except as provided in subsection (j), all sums unpaid on any mortgage of
record that was recorded prior to the recordation of a notice of a lien by the
association, and costs and expenses including attorneys' fees provided in such
mortgages;
provided that a
lien recorded by an association for unpaid assessments shall expire six
years from the date of recordation unless proceedings to enforce the lien are instituted prior to
the expiration of the lien; provided further that the expiration of a recorded
lien shall in no way affect the association's automatic lien that arises
pursuant to this subsection or the declaration or bylaws. Any proceedings to enforce an association's
lien for any assessment shall be instituted within six years after the
assessment became due; provided that if the owner of a unit subject to a lien
of the association files a petition for relief under the United States
Bankruptcy Code (11 U.S.C. §101 et
seq.), the period of time for instituting proceedings to enforce the
association's lien shall be tolled until thirty days after the automatic stay
of proceedings under section 362 of the United States Bankruptcy Code (11
U.S.C. §362) is lifted.
The lien of the association may be foreclosed by
action or by nonjudicial or power of sale foreclosure procedures set forth in
chapter 667, regardless of the presence or absence of power of sale
language in an association's governing documents, by the managing agent or board, acting on behalf
of the association and in the name of the association; provided that no association may exercise the
nonjudicial or power of sale remedies provided in chapter 667 to foreclose a
lien against any unit that arises solely from fines, penalties, legal fees, or
late fees, and the foreclosure of any such lien shall be filed in court
pursuant to part IA of chapter 667.
In any such foreclosure, the unit owner shall be required to pay a reasonable rental for the unit, if so provided in the bylaws or the law, and the plaintiff in the foreclosure shall be entitled to the appointment of a receiver to collect the rental owed by the unit owner or any tenant of the unit. If the association is the plaintiff, it may request that its managing agent be appointed as receiver to collect the rent from the tenant. The managing agent or board, acting on behalf of the association and in the name of the association, unless prohibited by the declaration, may bid on the unit at foreclosure sale, and acquire and hold, lease, mortgage, and convey the unit. Action to recover a money judgment for unpaid common expenses shall be maintainable without foreclosing or waiving the lien securing the unpaid common expenses owed."
SECTION 4. Section 667-1, Hawaii Revised Statutes, is amended by amending the definition of "power of sale" to read as follows:
""Power of sale" or
"power of sale foreclosure" means a nonjudicial foreclosure when [the]:
(1) The
mortgage contains, authorizes, permits, or provides for a power of sale, a
power of sale foreclosure, a power of sale remedy, or a nonjudicial
foreclosure[.]; or
(2) For the purposes of part VI, an association enforces its claim of an association lien, regardless of whether the association documents provide for a power of sale, a power of sale foreclosure, a power of sale remedy, or a nonjudicial foreclosure."
SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 6. This Act shall take effect on July 1, 2050; provided that the amendments made to section 514B-146(a), Hawaii Revised Statutes, by section 3 of this Act shall not be repealed when that section is reenacted on June 30, 2020, pursuant to section 6 of Act 195, Session Laws of Hawaii 2018.
Report Title:
Nonjudicial Foreclosure; Power of Sale; Condominium Associations; Planned Community Associations
Description:
Provides an explicit grant of power of sale to condominium associations and planned community associations for the purposes of enforcing association liens under the power of sale procedures in state foreclosure law. (HB76 HD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
