HB 1824: Condominium Associations; Reserve Study; Waiver; Small Associations

A BILL FOR AN ACT

RELATING TO CONDOMINIUMS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Hawaii's condominium and homeowners' association reserve requirements are intended to promote financial transparency, long‑term planning, and the protection of unit owners from unexpected special assessments.

     The legislature further finds that while third-party reserve study reviews can be an effective tool for larger and more complex associations, the cost of obtaining such reviews may impose a disproportionate financial burden on very small associations with simple infrastructure, limited shared components, and active owner oversight.  For these associations, the expense of a mandatory third-party reserve study review may exceed other essential annual operating costs and reduce funds available for actual maintenance and repair of common elements.

     The legislature notes that existing law already recognizes the distinction between large and small associations by permitting associations comprised of fewer than twenty units to waive certain audit and financial verification requirements by a vote of unit owners.  The legislature finds that a similar, narrowly tailored approach is appropriate with respect to the triennial third-party reserve study review requirement.

     The purpose of this Act is to provide limited flexibility for small associations, while preserving transparency and owner protections, by allowing associations with fewer than twenty units and a building or buildings of no more than two stories, to waive the requirement for a third-party reserve study review upon a majority vote of unit owners; provided that certain requirements are met, but prohibiting associations from waiving this requirement for consecutive periods.

     SECTION 2.  Section 514B-148, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The budget required under section 514B-144(a) shall include a summary with at least the following details:

     (1)  The estimated revenues and operating expenses of the association;

     (2)  Disclosure as to whether the budget has been prepared on a cash or accrual basis;

     (3)  The estimated costs of fire safety equipment or installations that meet the requirements of a building fire and life safety evaluation required by the applicable county for any building located in a county with a population greater than five hundred thousand; provided that the reserve study may forecast a loan or special assessment to fund building fire and life safety components or installation;

     (4)  The balance of the total replacement reserves fund of the association as of the date of the budget;

     (5)  The estimated replacement reserves assessments that the association will require to maintain the property based on a reserve study performed by or on behalf of the association; provided that [the]:

          (A)  The reserve study, if not prepared by an independent reserve study preparer, shall be reviewed by an independent reserve study preparer no less than every three years; provided further that [a] an association comprising fewer than twenty units and a building or buildings of no more than two stories may, by the affirmative vote of a majority of the unit owners present or represented at a duly noticed association meeting, elect to waive the requirement for a review by an independent reserve study preparer; provided that:

              (i)  The association continues to prepare and disclose annual reserve information to unit owners in accordance with this chapter;

             (ii)  The vote to waive the review by an independent reserve study preparer is recorded in the association's records and made available to unit owners upon request;

            (iii)  The vote to waive the reserve study review applies to a single three-year period; and

             (iv)  The association shall not waive the reserve study review requirement for two consecutive three-year periods.

              Nothing in this subparagraph shall be construed to prohibit an association from obtaining a review by an independent reserve study preparer at any time; and

          (B)  A managing agent with industry reserve study designations shall not be considered as having a conflict of interest for purposes of this paragraph;

     (6)  A general explanation of how the estimated replacement reserves assessments are computed and detailing:

          (A)  The identity, qualifications, and potential conflicts of interest of the person or entity performing the reserve study, update, or any review thereof;

          (B)  Disclosure of any component of association property omitted from the reserve study and the basis for the omission;

          (C)  Planned increases in the estimated replacement reserve assessments over the thirty-year plan; and

          (D)  Whether the actual estimated replacement reserves assessments for the prior year as defined in the study were less than the assessments provided for in the reserve study, and, if so, by how much, and explaining the impact of the lesser assessments on future estimated replacement reserves assessments;

     (7)  The amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments; and

     (8)  Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments was calculated using a per cent funded or cash flow plan.  The method or plan shall not circumvent the estimated replacement reserves assessments amount determined by the reserve study pursuant to paragraph (5).

The budget summary shall contain all required information without referring the reader to other portions of the budget."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval.

Report Title:

Condominium Associations; Reserve Study; Waiver; Small Associations

Description:

Allows small condominium associations with a building or buildings of no more than two stories to waive the requirement for the reserve study to be reviewed by an independent reserve study preparer if a majority of unit owners at a meeting approve the waiver and certain other requirements are met, but prohibits associations from waiving this requirement for consecutive three-year periods.  (CD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO CONDOMINIUMS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Hawaii's condominium and homeowners' association reserve requirements are intended to promote financial transparency, long‑term planning, and the protection of unit owners from unexpected special assessments.

     The legislature further finds that while third-party reserve study reviews can be an effective tool for larger and more complex associations, the cost of obtaining such reviews may impose a disproportionate financial burden on very small associations with simple infrastructure, limited shared components, and active owner oversight.  For these associations, the expense of a mandatory third-party reserve study review may exceed other essential annual operating costs and reduce funds available for actual maintenance and repair of common elements.

     The legislature notes that existing law already recognizes the distinction between large and small associations by permitting associations comprised of fewer than twenty units to waive certain audit and financial verification requirements by a vote of unit owners.  The legislature finds that a similar, narrowly tailored approach is appropriate with respect to the triennial third-party reserve study review requirement.

     The purpose of this Act is to provide limited flexibility for small associations, while preserving transparency and owner protections, by allowing associations with fewer than twenty units and a building or buildings of no more than two stories, to waive the requirement for a third-party reserve study review upon a majority vote of unit owners; provided that certain requirements are met, but prohibiting associations from waiving this requirement for consecutive periods.

     SECTION 2.  Section 514B-148, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The budget required under section 514B-144(a) shall include a summary with at least the following details:

     (1)  The estimated revenues and operating expenses of the association;

     (2)  Disclosure as to whether the budget has been prepared on a cash or accrual basis;

     (3)  The estimated costs of fire safety equipment or installations that meet the requirements of a building fire and life safety evaluation required by the applicable county for any building located in a county with a population greater than five hundred thousand; provided that the reserve study may forecast a loan or special assessment to fund building fire and life safety components or installation;

     (4)  The balance of the total replacement reserves fund of the association as of the date of the budget;

     (5)  The estimated replacement reserves assessments that the association will require to maintain the property based on a reserve study performed by or on behalf of the association; provided that [the]:

          (A)  The reserve study, if not prepared by an independent reserve study preparer, shall be reviewed by an independent reserve study preparer no less than every three years; provided further that [a] an association comprising fewer than twenty units and a building or buildings of no more than two stories may, by the affirmative vote of a majority of the unit owners present or represented at a duly noticed association meeting, elect to waive the requirement for a review by an independent reserve study preparer; provided that:

               (i)  The association continues to prepare and disclose annual reserve information to unit owners in accordance with this chapter;

              (ii)  The vote to waive the review by an independent reserve study preparer is recorded in the association's records and made available to unit owners upon request;

             (iii)  The vote to waive the reserve study review applies to a single three-year period; and

              (iv)  The association shall not waive the reserve study review requirement for two consecutive three-year periods.

               Nothing in this subparagraph shall be construed to prohibit an association from obtaining a review by an independent reserve study preparer at any time; and

          (B)  A managing agent with industry reserve study designations shall not be considered as having a conflict of interest for purposes of this paragraph;

     (6)  A general explanation of how the estimated replacement reserves assessments are computed and detailing:

          (A)  The identity, qualifications, and potential conflicts of interest of the person or entity performing the reserve study, update, or any review thereof;

          (B)  Disclosure of any component of association property omitted from the reserve study and the basis for the omission;

          (C)  Planned increases in the estimated replacement reserve assessments over the thirty-year plan; and

          (D)  Whether the actual estimated replacement reserves assessments for the prior year as defined in the study were less than the assessments provided for in the reserve study, and, if so, by how much, and explaining the impact of the lesser assessments on future estimated replacement reserves assessments;

     (7)  The amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments; and

     (8)  Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments was calculated using a per cent funded or cash flow plan.  The method or plan shall not circumvent the estimated replacement reserves assessments amount determined by the reserve study pursuant to paragraph (5).

The budget summary shall contain all required information without referring the reader to other portions of the budget."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

Condominium Associations; Reserve Study; Waiver; Small Associations

Description:

Allows small condominium associations with a building or buildings of no more than two stories to waive the requirement for the reserve study to be reviewed by an independent reserve study preparer if a majority of unit owners at a meeting approve the waiver and certain other requirements are met, but prohibits associations from waiving this requirement for consecutive three-year periods.  Effective 7/1/3000.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO CONDOMINIUMS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Hawaii's condominium and homeowners' association reserve requirements are intended to promote financial transparency, long-term planning, and the protection of unit owners from unexpected special assessments.

     The legislature further finds that while third-party reserve study reviews can be an effective tool for larger and more complex associations, the cost of obtaining such reviews may impose a disproportionate financial burden on very small associations with simple infrastructure, limited shared components, and active owner oversight.  For these associations, the expense of a mandatory third-party reserve study review may exceed other essential annual operating costs and reduce funds available for actual maintenance and repair of common elements.

     The legislature notes that existing law already recognizes the distinction between large and small associations by permitting associations comprised of fewer than twenty units to waive certain audit and financial verification requirements by a vote of unit owners.  The legislature finds that a similar, narrowly tailored approach is appropriate with respect to the triennial third-party reserve study review requirement.

     The purpose of this Act is to provide limited flexibility for small associations, while preserving transparency and owner protections, by allowing associations with fewer than twenty units to waive the requirement for a third-party reserve study review upon a majority vote of unit owners; provided that certain requirements are met, but prohibiting associations from waiving this requirement for consecutive periods.

     SECTION 2.  Section 514B-148, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The budget required under section 514B-144(a) shall include a summary with at least the following details:

     (1)  The estimated revenues and operating expenses of the association;

     (2)  Disclosure as to whether the budget has been prepared on a cash or accrual basis;

     (3)  The estimated costs of fire safety equipment or installations that meet the requirements of a building fire and life safety evaluation required by the applicable county for any building located in a county with a population greater than five hundred thousand; provided that the reserve study may forecast a loan or special assessment to fund building fire and life safety components or installation;

     (4)  The balance of the total replacement reserves fund of the association as of the date of the budget;

     (5)  The estimated replacement reserves assessments that the association will require to maintain the property based on a reserve study performed by or on behalf of the association; provided that [the]:

          (A)  The reserve study, if not prepared by an independent reserve study preparer, shall be reviewed by an independent reserve study preparer no less than every three years; provided further that [a] an association comprising fewer than twenty units may, by the affirmative vote of a majority of the unit owners present or represented at a duly noticed association meeting, elect to waive the requirement for a review by an independent reserve study preparer; provided that:

              (i)  The association continues to prepare and disclose annual reserve information to unit owners in accordance with this chapter;

             (ii)  The vote to waive the review by an independent reserve study preparer is recorded in the association's records and made available to unit owners upon request;

            (iii)  The vote to waive the reserve study review applies to a single three-year period; and

             (iv)  The association shall not waive the reserve study review requirement for two consecutive three-year periods.

              Nothing in this subparagraph shall be construed to prohibit an association from obtaining a review by an independent reserve study preparer at any time; and

          (B)  A managing agent with industry reserve study designations shall not be considered as having a conflict of interest for purposes of this paragraph;

     (6)  A general explanation of how the estimated replacement reserves assessments are computed and detailing:

          (A)  The identity, qualifications, and potential conflicts of interest of the person or entity performing the reserve study, update, or any review thereof;

          (B)  Disclosure of any component of association property omitted from the reserve study and the basis for the omission;

          (C)  Planned increases in the estimated replacement reserve assessments over the thirty-year plan; and

          (D)  Whether the actual estimated replacement reserves assessments for the prior year as defined in the study were less than the assessments provided for in the reserve study, and, if so, by how much, and explaining the impact of the lesser assessments on future estimated replacement reserves assessments;

     (7)  The amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments; and

     (8)  Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments was calculated using a per cent funded or cash flow plan.  The method or plan shall not circumvent the estimated replacement reserves assessments amount determined by the reserve study pursuant to paragraph (5).

The budget summary shall contain all required information without referring the reader to other portions of the budget."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

Condominium Associations; Reserve Study; Waiver; Small Associations

Description:

Allows small condominium associations to waive the requirement for the reserve study to be reviewed by an independent reserve study preparer if a majority of unit owners at a meeting approve the waiver and certain other requirements are met, but prohibits associations from waiving this requirement for consecutive three-year periods.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to condominiums.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that Hawaii's condominium and homeowners' association reserve requirements are intended to promote financial transparency, long-term planning, and the protection of unit owners from unexpected special assessments.

     The legislature further finds that while third-party reserve study reviews can be an effective tool for larger and more complex associations, the cost of obtaining such reviews may impose a disproportionate financial burden on very small associations with simple infrastructure, limited shared components, and active owner oversight.  For these associations, the expense of a mandatory third-party reserve study review may exceed other essential annual operating costs and reduce funds available for actual maintenance and repair of common elements.

     The legislature notes that existing law already recognizes the distinction between large and small associations by permitting associations comprised of fewer than twenty units to waive certain audit and financial verification requirements by a vote of unit owners.  The legislature finds that a similar, narrowly tailored approach is appropriate with respect to the triennial third-party reserve study review requirement.

     The purpose of this Act is to provide limited flexibility for small associations, while preserving transparency and owner protections, by allowing associations with fewer than twenty units to waive the requirement for a third-party reserve study review upon a majority vote of unit owners; provided that annual reserve disclosures are maintained and the waiver decision is clearly documented and available to unit owners.

     SECTION 2.  Section 514B-148, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The budget required under section 514B-144(a) shall include a summary with at least the following details:

     (1)  The estimated revenues and operating expenses of the association;

     (2)  Disclosure as to whether the budget has been prepared on a cash or accrual basis;

     (3)  The estimated costs of fire safety equipment or installations that meet the requirements of a building fire and life safety evaluation required by the applicable county for any building located in a county with a population greater than five hundred thousand; provided that the reserve study may forecast a loan or special assessment to fund building fire and life safety components or installation;

     (4)  The balance of the total replacement reserves fund of the association as of the date of the budget;

     (5)  The estimated replacement reserves assessments that the association will require to maintain the property based on a reserve study performed by or on behalf of the association; provided that [the]:

          (A)  The reserve study, if not prepared by an independent reserve study preparer, shall be reviewed by an independent reserve study preparer no less than every three years; provided further that [a] an association comprising fewer than twenty units may, by the affirmative vote of a majority of the unit owners present or represented at a duly noticed association meeting, elect to waive the requirement for a review by an independent reserve study preparer every three years; provided that:

              (i)  The association continues to prepare and disclose annual reserve information to unit owners in accordance with this chapter; and

             (ii)  The vote to waive the review by an independent reserve study preparer is recorded in the association's records and made available to unit owners upon request.

              Nothing in this subparagraph shall be construed to prohibit an association from obtaining a review by an independent reserve study preparer at any time; and

          (B)  A managing agent with industry reserve study designations shall not be considered as having a conflict of interest for purposes of this paragraph;

     (6)  A general explanation of how the estimated replacement reserves assessments are computed and detailing:

          (A)  The identity, qualifications, and potential conflicts of interest of the person or entity performing the reserve study, update, or any review thereof;

          (B)  Disclosure of any component of association property omitted from the reserve study and the basis for the omission;

          (C)  Planned increases in the estimated replacement reserve assessments over the thirty-year plan; and

          (D)  Whether the actual estimated replacement reserves assessments for the prior year as defined in the study were less than the assessments provided for in the reserve study, and, if so, by how much, and explaining the impact of the lesser assessments on future estimated replacement reserves assessments;

     (7)  The amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments; and

     (8)  Information as to whether the amount the association must collect for the fiscal year to fund the estimated replacement reserves assessments was calculated using a per cent funded or cash flow plan.  The method or plan shall not circumvent the estimated replacement reserves assessments amount determined by the reserve study pursuant to paragraph (5).

The budget summary shall contain all required information without referring the reader to other portions of the budget."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval.

Report Title:

Condominium Associations; Reserve Study; Waiver; Small Associations

Description:

Allows small condominium associations to waive the requirement for the reserve study to be reviewed by an independent reserve study preparer every three years if a majority of unit owners at a meeting approve the waiver and complies with other requirements.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO.  897-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 1824

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

     Your Committee on Consumer Protection & Commerce, to which was referred H.B. No. 1824 entitled:

"A BILL FOR AN ACT RELATING TO CONDOMINIUMS,"

begs leave to report as follows:

     The purpose of this measure is to allow associations with fewer than twenty units to waive the requirement for a third-party reserve study review upon a majority vote of unit owners; provided that annual reserve disclosures are maintained and the waiver decision is clearly documented and available to unit owners.

     Your Committee received testimony in support of this measure from two individuals.  Your Committee received testimony in opposition to this measure from the Community Associations Institute Hawaii Legislative Action Committee and Associa.  Your Committee received comments on this measure from the Real Estate Commission.

     Your Committee finds that condominium reserve requirements are intended to promote financial transparency, long‑term planning, and protection against unexpected special assessments.  While third‑party reserve study reviews can benefit larger and more complex associations, the cost of mandatory reviews may impose a disproportionate burden on very small associations with limited shared infrastructure, diverting resources from maintenance and repair.  This measure is intended to provide narrowly tailored flexibility for associations with fewer than twenty units by authorizing these associations to waive the triennial third-party review under certain conditions.

     Your Committee has amended this measure by:

     (1)  Specifying that each vote to waive the requirement for a third-party reserve study review applies for a single three-year period;

     (2)  Specifying that a condominium association cannot waive the reserve study review requirement for consecutive three-year periods;

     (3)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (4)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1824, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1824, H.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection & Commerce,