Act 181 May Impact Developers Under Chapter 514A, HRS
On July 11, 2017, Governor Ige signed Act 181 into law, effective January 1, 2019, which will repeal Hawaii Revised Statutes (“HRS”) 514A. While Act 181 is a positive step towards uniformity in Hawaii’s condominium, the repeal of HRS 514A may affect developers and owners who received their unit(s) as a gift or inheritance from the developer.
In Hawaii, two state laws currently govern condominium projects in their registration and governance. HRS Chapter 514A governs the registration of condominium projects created prior to July 1, 2006. Chapter 514B governs the registration of condominium projects created after July 1, 2006, and governance for all condominium projects regardless of when they were created.
HRS Chapter 514A requires developers (or someone in the shoes of the developer) to have an active Developer’s Public Report filed with the Real Estate Commission to legally sell units. Act 181 raises questions about the ability of certain owners and developers to sell their units after the repeal of 514A on January 1, 2019.
Act 181 converts reports created under Chapter 514A to Chapter 514B. However, developers (or someone in the shoes of the developer) must meet certain requirements for the transition to automatically apply.
Developers of registered Chapter 514A projects with units remaining to be sold have two options available. They may keep the Chapter 514A developer’s public report active and accurate on January 1, 2019, to make certain that the project meets the requirements for an automatic transfer to Chapter 514B, or they can apply for a transition to a Chapter 514B report pursuant to Act 244, SLF 2007.
If a developer of a registered Chapter 514A project has only a preliminary or contingent public report, they may either apply for a developer’s final public report or transition to a Chapter 514B report pursuant to Act 244. Preliminary and contingent reports will not be automatically transferred to Chapter 514B.
Developers with projects registered under Chapter 514A containing unsold inventory who fail to have an active report subject to HRS § 514A-4 and § 514A-41, on January 1, 2019, will be forced to withdraw any previously filed registration granted an effective date and refile as a completely new project to sell units outside of the exemptions listed under HRS § 514B-51(b).
The Hawaii Real Estate Commission is recommending that developers who retain inventory file extensions and supplementary reports to ensure their projects are active and non-expired on January 1, 2019.