Repeal of Old Condominium Law, Chapter 514A

Repeal of Old Condominium Law, Chapter 514A

Six things you need to know about the repeal of the old Condominium Law, Chapter 514A

Major changes in Hawai‘i condominium law are upon us.  In 2017, the Hawai‘i State Legislature passed SB 292 to repeal Chapter 514A, Hawai‘i Revised Statutes (“514A”). SB 292 was subsequently signed into law as Act 181.  The legislature elected to repeal 514A to eliminate confusion between two existing condominium laws.

Most of 514A was originally superseded by the 2006 recodification under Chapter 514B, Hawai‘i Revised Statutes (“514B”). The development sections of 514A still applied, however. Act 181 now brings the developer sections under 514B, effective on January 1, 2019. The impending repeal of 514A may create confusion as to the transition of certain documents and sale of units for developers.

Note the following:

  • Act 181 provides a safe harbor provision for projects still under 514A. The safe harbor allows the most recent final report, supplementary, and disclosure abstracts that are active under 514A to be treated as non-expiring under 514B. Active reports for the 514A project will be automatically transferred to 514B. Developers will be permitted to continue sales using a previously issued 514A developer’s public report past January 1, 2019 and into the future, so long as the report is accurate and not misleading.
  • In the event that there are any pertinent and/or material changes to a condominium, a developer must file an amended public report under 514B. This new public report would then supersede all prior reports. 
  • Contingent and preliminary reports will not be treated as non-expiring under 514B. Therefore, developers with 514A projects that have contingent or preliminary reports must file as a new project under 514B to sell units after January 1, 2019. Any condominium that was not issued an effective date will be required to file as a new project under 514B to sell units once the repeal takes effect.
  • Developers with projects registered under 514A that contain unsold inventory and who fail to have an active report pursuant to HRS § 514A-4 and 41 by January 1, 2019, will be required the withdraw any previously filed registration and refile as a completely new project.
  • Condominium property regimes created prior to July 1, 2006, that were not issued a final report or supplementary public report under 514A and did not file a notice of intent to sell will be required to revise their governing documents and file a public report under 514B.

Given the multitude of changes that will occur on January 1, 2019, it is important for developers with 514A projects to be prepared. Below provides guidance on the next steps developers should take and addresses certain scenarios that may arise during this transition.

Next Steps:

  • Check to see if the public report for your 514A is active and accurate.
  • Check to see if there are any remaining units to be sold for your 514A project.
  • Developers who still retain inventory should file for an extension and supplementary reports to ensure that their projects are active and non-expired as of January 1, 2019.
  • Be sure to plan ahead. Due to the large numbers of developers filing reports in response to Act 181, the Real Estate Commission recommends that developers file the necessary documentation by August 2018 to account for the delay in the review process.
  • Developers planning to transition pursuant to Act 244 Session Laws of Hawai‘i (“SLH”) 2007 should submit their application by August 2018 to account for the delay as well.
  • Developers are encouraged to become familiar with 514B.

Should you have any questions regarding the information in this newsletter, please contact us at (808) 521-9500.  If you wish to visit our Home Page, Facebook, or Linkedin, please feel free to click on the corresponding icons below. Be sure to keep an eye out for our next E Newsletter containing frequently asked questions for the upcoming repeal of 514A.  

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