HB 252: RELATING TO MANAGING AGENTS.

A BILL FOR AN ACT

RELATING TO MANAGING AGENTS.

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

     SECTION 1.  The legislature finds that residential high-rise properties are held to the same standard as commercial buildings with regard to structural conditions like repairs, maintenance, and reserve requirements.  However, the level of experience and expertise that volunteer association of apartment owners board members possess is not comparable to that of business organizations whose facilities are managed by professional property management companies.  The legislature also finds that existing statutory requirements for managing agents are inadequate to protect association board members and unit owners from incompetence, negligence, and lack of property management experience.  Furthermore, existing law requires only that managing agents be licensed real estate brokers.  The lack of requirements for commercial property management experience may cause association board members to suffer losses due to fraud, misrepresentation, or deceit of the managing agent or its employees.

     Accordingly, the purpose of this Act is to require managing agents for residential condominium properties over seventy-five feet in height to have commercial property management experience.

     SECTION 2.  Section 514B-132, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every managing agent shall:

     (1)  Be a:

          (A)  Licensed real estate broker in compliance with chapter 467 and the rules of the commission.  With respect to any requirement for a corporate managing agent in any declaration or bylaws recorded before July 1, 2006, any managing agent organized as a limited liability company shall be deemed to be organized as a corporation for the purposes of this paragraph, unless the declaration or bylaws are expressly amended after July 1, 2006 to require that the managing agent be organized as a corporation and not as a limited liability company; or

          (B)  Corporation authorized to do business under article 8 of chapter 412;

     (2)  Register with the commission [prior to] before conducting managing agent activity through approval of a completed registration application, payment of fees, and submission of any other additional information set forth by the commission.  The registration shall be for a biennial period with termination on December 31 of an even-numbered year.  The commission shall prescribe a deadline date [prior to] before the termination date for the submission of a completed reregistration application, payment of fees, and any other additional information set forth by the commission.  Any managing agent who has not met the submission requirements by the deadline date shall be considered a new applicant for registration and subject to initial registration requirements.  The information required to be submitted with any application shall include the name, business address, phone number, and names of associations managed;

     (3)  Obtain and keep current a fidelity bond in an amount equal to $500 multiplied by the aggregate number of units of the association managed by the managing agent; provided that the amount of the fidelity bond shall not be less than $20,000 nor greater than $500,000.  Upon request by the commission, the managing agent shall provide evidence of a current fidelity bond or a certification statement from an insurance company authorized by the insurance division of the department of commerce and consumer affairs certifying that the fidelity bond is in effect and meets the requirements of this section and the rules adopted by the commission.  The managing agent shall permit only employees covered by the fidelity bond to handle or have custody or control of any association funds, except any principals of the managing agent that cannot be covered by the fidelity bond.  The fidelity bond shall protect the managing agent against the loss of any association's moneys, securities, or other properties caused by the fraudulent or dishonest acts of employees of the managing agent.  Failure to obtain or maintain a fidelity bond in compliance with this chapter and the rules adopted pursuant thereto, including failure to provide evidence of the fidelity bond coverage in a timely manner to the commission, shall result in nonregistration or the automatic termination of the registration, unless an approved exemption or a bond alternative is presently maintained.  A managing agent who is unable to obtain a fidelity bond may seek an exemption from the fidelity bond requirement from the commission;

     (4)  Act promptly and diligently to recover from the fidelity bond, if the fraud or dishonesty of the managing agent's employees causes a loss to an association, and apply the fidelity bond proceeds, if any, to reduce the association's loss.  If more than one association suffers a loss, the managing agent shall divide the proceeds among the associations in proportion to each association's loss.  An association may request a court order requiring the managing agent to act promptly and diligently to recover from the fidelity bond.  If an association cannot recover its loss from the fidelity bond proceeds of the managing agent, the association may recover by court order from the real estate recovery fund established under section 467-16, provided that:

          (A)  The loss is caused by the fraud, misrepresentation, or deceit of the managing agent or its employees;

          (B)  The managing agent is a licensed real estate broker; and

          (C)  The association fulfills the requirements of sections 467-16 and 467-18 and any applicable rules of the commission;

     (5)  Pay a nonrefundable application fee and, upon approval, an initial registration fee, and subsequently pay a reregistration fee, as prescribed by rules adopted by the director of commerce and consumer affairs pursuant to chapter 91.  A compliance resolution fee shall also be paid pursuant to section 26‑9(o) and the rules adopted pursuant thereto; [and]

     (6)  Report immediately in writing to the commission any changes to the information contained on the registration application or any other documents provided for registration.  Failure to do so may result in termination of registration and subject the managing agent to initial registration requirements[.]; and

     (7)  For residential condominium properties that exceed seventy-five feet in height, have experience in commercial property management."

     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:

Condominiums; Managing Agents; Requirements; Commercial Property Management Experience

Description:

Requires managing agents for residential condominium properties over seventy-five feet in height to have commercial property management experience.  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 managing agents.

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

     SECTION 1.  The legislature finds that residential high-rise properties are held to the same standard as commercial buildings with regard to structural conditions like repairs, maintenance, and reserve requirements.  However, the level of experience and expertise that volunteer association of apartment owners (AOAO) board members possess is not comparable to that of business organizations whose facilities are managed by professional property management companies.  The legislature also finds that existing statutory requirements for managing agents are inadequate to protect AOAO board members and unit owners from incompetence, negligence, and lack of property management experience.  Concerning qualifications, existing law requires only that managing agents be licensed real estate brokers.  The lack of requirements for commercial property management experience may cause AOAO board members to suffer losses due to fraud, misrepresentation, or deceit of the managing agent or its employees. 

     Accordingly, the purpose of this Act is to require managing agents for residential condominium properties over seventy-five feet in height to have commercial property management experience.

     SECTION 2.  Section 514B-132, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every managing agent shall:

     (1)  Be a:

          (A)  Licensed real estate broker in compliance with chapter 467 and the rules of the commission.  With respect to any requirement for a corporate managing agent in any declaration or bylaws recorded before July 1, 2006, any managing agent organized as a limited liability company shall be deemed to be organized as a corporation for the purposes of this paragraph, unless the declaration or bylaws are expressly amended after July 1, 2006 to require that the managing agent be organized as a corporation and not as a limited liability company; or

          (B)  Corporation authorized to do business under article 8 of chapter 412;

     (2)  Register with the commission [prior to] before conducting managing agent activity through approval of a completed registration application, payment of fees, and submission of any other additional information set forth by the commission.  The registration shall be for a biennial period with termination on December 31 of an even-numbered year.  The commission shall prescribe a deadline date [prior to] before the termination date for the submission of a completed reregistration application, payment of fees, and any other additional information set forth by the commission.  Any managing agent who has not met the submission requirements by the deadline date shall be considered a new applicant for registration and subject to initial registration requirements.  The information required to be submitted with any application shall include the name, business address, phone number, and names of associations managed;

     (3)  Obtain and keep current a fidelity bond in an amount equal to $500 multiplied by the aggregate number of units of the association managed by the managing agent; provided that the amount of the fidelity bond shall not be less than $20,000 nor greater than $500,000.  Upon request by the commission, the managing agent shall provide evidence of a current fidelity bond or a certification statement from an insurance company authorized by the insurance division of the department of commerce and consumer affairs certifying that the fidelity bond is in effect and meets the requirements of this section and the rules adopted by the commission.  The managing agent shall permit only employees covered by the fidelity bond to handle or have custody or control of any association funds, except any principals of the managing agent that cannot be covered by the fidelity bond.  The fidelity bond shall protect the managing agent against the loss of any association's moneys, securities, or other properties caused by the fraudulent or dishonest acts of employees of the managing agent.  Failure to obtain or maintain a fidelity bond in compliance with this chapter and the rules adopted pursuant thereto, including failure to provide evidence of the fidelity bond coverage in a timely manner to the commission, shall result in nonregistration or the automatic termination of the registration, unless an approved exemption or a bond alternative is presently maintained.  A managing agent who is unable to obtain a fidelity bond may seek an exemption from the fidelity bond requirement from the commission;

     (4)  Act promptly and diligently to recover from the fidelity bond, if the fraud or dishonesty of the managing agent's employees causes a loss to an association, and apply the fidelity bond proceeds, if any, to reduce the association's loss.  If more than one association suffers a loss, the managing agent shall divide the proceeds among the associations in proportion to each association's loss.  An association may request a court order requiring the managing agent to act promptly and diligently to recover from the fidelity bond.  If an association cannot recover its loss from the fidelity bond proceeds of the managing agent, the association may recover by court order from the real estate recovery fund established under section 467-16, provided that:

          (A)  The loss is caused by the fraud, misrepresentation, or deceit of the managing agent or its employees;

          (B)  The managing agent is a licensed real estate broker; and

          (C)  The association fulfills the requirements of sections 467-16 and 467-18 and any applicable rules of the commission;

     (5)  Pay a nonrefundable application fee and, upon approval, an initial registration fee, and subsequently pay a reregistration fee, as prescribed by rules adopted by the director of commerce and consumer affairs pursuant to chapter 91.  A compliance resolution fee shall also be paid pursuant to section 26‑9(o) and the rules adopted pursuant thereto; [and]

     (6)  Report immediately in writing to the commission any changes to the information contained on the registration application or any other documents provided for registration.  Failure to do so may result in termination of registration and subject the managing agent to initial registration requirements[.]; and

     (7)  For residential condominium properties that exceed seventy-five feet in height, have experience in commercial property management."

     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:

Condominiums; Managing Agents; Requirements; Commercial Property Management Experience

Description:

Requires managing agents for residential condominium properties over seventy-five feet in height to have commercial property management experience.

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.  761

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 252

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Housing, to which was referred H.B. No. 252 entitled:

"A BILL FOR AN ACT RELATING TO MANAGING AGENTS,"

begs leave to report as follows:

     The purpose of this measure is to require managing agents for residential condominium properties over seventy-five feet in height to have commercial property management experience.

     Your Committee received testimony in support of this measure from the Hawai‘i Association of REALTORS and three individuals.  Your Committee received testimony in opposition to this measure from the Hawaii Legislative Action Committee of the Community Associations Institute and eight individuals.  Your Committee received comments on this measure from the Real Estate Commission; Hawaii Council of Community Associations; and two individuals.

     Your Committee finds that residential high-rise condominium properties have complex operational, safety, and financial management needs similar to commercial buildings.  Additionally, these condominiums may also lease available space to other commercial businesses.  Volunteer condominium board members rely on managing agents to navigate these challenges effectively.  This measure seeks to ensure that high-rise condominium properties are managed efficiently and responsibly by requiring managing agents to have commercial property management experience.

     However, your Committee notes the various concerns raised in testimony, particularly about what qualifies as "experience" for managing agents and whether they should be required to obtain a professional license or an equivalent educational accreditation.  Additional concerns were raised about the differences between managing residential and commercial properties and whether experience in one area is sufficient for the other.  Your Committee appreciates these concerns but believes that this dialogue should be continued by your Committee on Consumer Protection & Commerce, where matters of condominium governance and management are more appropriately addressed.  Your Committee therefore respectfully requests your Committee on Consumer Protection & Commerce, should it deliberate on this measure, to address these concerns and determine the most preferred approach as this measure moves through the legislative process.

Your Committee has amended this measure by:

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

     (2)  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 Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 252, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 252, H.D. 1, and be referred to your Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committee on Housing,