Changes to Assessment Law
This 2018 summer legislative session contained some significant changes in the law pertaining to the way associations collect. The law took effect on July 1, 2018.
Most significantly, HRS § 514B-105(c), which applies to condominium associations, has been changed so that the Board is no longer allowed to adopt a so-called “priority of payment” policy. In the past, Boards have adopted such policies so that payments received from a unit owner are first applied to late fees, legal fees, fines, interest, etc. The law now reads that 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 purposely remitted by an owner in payment of late fees, legal fees, fines and interest).
Therefore, associations need to stop applying payments according to any priority of payment policies. Associations need to apply payments to common expenses, unless the owner otherwise specifies in a letter or on the check that the payment is for fines, late fees, legal fees, etc.
Boards should, at the least, at their next meeting vote to rescind any priority of payment policy based on the change of the statute. Ideally, Boards should adopt new collection policies that omit the priority of payment policy.