Hawaii Condo Buyers Guide

In the State of Hawaii, generally Sellers are required to disclose specific information to prospective Buyers, which include a Seller's Disclosure of material facts and HOA documents. These documents may include, but are not limited (and in some cases may not apply) the Declaration, any Amendments, By-Laws, Meeting Minutes (Annual Owner's Meeting and Board of Directors), Financial Statements, Reserve Study, Insurance Summary, House Rules and Managing Agent's Report (Form rr105c).  Also, please be sure to read the Hawaii Condominium Owners Guide as produced by the Real Estate Commission - not guaranteed to be latest version, contact us to confirm - and Hawaii Revised Statutes Chapter 514B. With that said, let's detail some of the most important HOA documents and what to look for.

By-Laws & Articles of Incorporation

  • These documents detail how the Association will be governed - voting powers, requirements, etc.
  • By-Laws document establishes how often and how BOD is to meet.
  • Establishes roles/responsibilities of BOD members. Confirm if there are any Amendments and/or if By-Laws have been restated.
  • If amendments have been recorded, then review what the purpose for each Amendment was
  • Association Articles of Incorporation - NOT applicable to all condominium properties.
  • Articles of Incorporation establishes the legal 'entity' of the Association, one of the many reasons for incorporating is to protect BOD and Owners from potential liability.
  • If incorporated, review the Articles to see if there are established limitations on liability.
  • If property built in phases, review to see if latter phases merged to the same entity.

Minutes of Meetings - Annual Homeowner's and Board of Directors:

  • Generally minutes of last three meetings - review in depth as these speak as to pertinent current issues and resolutions.
  • Board of Director Minutes relay most important topics. Is there discussion of upcoming assessments? Timeframe and cost?
  • Do Minutes show disagreement within the AOAO?
  • Do any comments address whether HOA is financially sound?
  • If Minutes from most recent Meetings are not available, request a Draft of such.
  • Is there any on-going litigation and, if so, what is the issue and/or proposed outcomes? Details on this are important, including whether a special assessment is being considered.

Financial Statements & Budget (Current and Proposed, as applicable)

  • Financial Statement shows incoming and outgoing monies, detailed breakdown.
  • It is important to compare budget to actual expenses, are there any major costs beyond what is budgeted.
  • If there are significant changes in budget from year to year, it is important to note why.
  • If accounts receivable are on budget, important to note the source and whether collectible.
  • If audits are available (as per applicable HRS Chapter 514B), were any discrepancies found and, if so, commentary?
  • If expected raises on HOA dues, then identify the reason and whether the increases will be sufficient to address the issue.

House Rules

  • House Rules govern how owners, residents, and guests are to interact and behave within the property.
  • Note the date of most recent version and, if amended, what items have been changed.
  • Items to note include car washing, bikes/skateboards, quiet time, guests, parking, rentals.
  • IMPORTANT to note are restrictions on pets and rentability.
  • Note if there are design guidelines applicable and what the application process is (i.e. length, review committee, etc.)
    Note what the fines are for infractions to the Rules and who is responsible.
  • House Rules should be consistent with applicable County ordinances, zoning, and AOAO By-Laws.

Declaration and Amendments

  • For new properties, the Public Report is a good basis of information regarding the project.
  • These are important documents to review as it defines the property, including common elements, limited common elements, percentage of ownership, unit description and more.
  • Units are described in detail, ensure this is consistent with what is being presented - i.e. number of bedrooms, parking, 
  • When in dispute, Declaration and Amendment is taken as most accurate data unless otherwise recorded.
  • The percentage of ownership in common elements should be consistent with what is on the Title Report.
  • Ensure to review all Amendments as applicable as those could change the character/description of the property significantly.

Insurance Summary

  • Describes the type and coverage of insurance policy procured by the AOAO on behalf of the property.
  • Fully understand the level of coverage so then can properly procure additional coverage as needed, to include contents and liability.
  • In the event of over lap between two policies, identify which is deemed as primary policy.
  • Is coverage consistent with the type of insurance that should be presumed to be needed? As an example, beachfront property on VE flood zone without flood insurance.
  • If available to review, is there a history of claims made against the policy?

Managing Agent's Disclosure (Form rr105c)

  • To be used a general synopsis of the property as a whole, NOT of individual units. 
  • Information includes percentage of owner-occupied units (important to lenders), place where HOA documents are kept, contact information to AOAO President, and more.
  • Have the HOA monthly dues been increased recently?
  • Review the date when rr105c was prepared, to ensure that information is still valid.
  • Contact information to Managing Agent is on this form, contact directly with questions.

Reserve Study or Summary

  • A good synopsis of major expenditures as projected and whether sufficient monies are being put aside to address those expenses.
  • Take a look at remaining useful life of major items, such as roof, pool, parking lot. 
  • Look for the date in which Reserve Study was prepared - if terribly outdated (4+ years), then ask why.
  • Smaller properties often do not have the means to hire an expert to provide the Reserve Study.
  • Check whether Reserves are consistent with what is required by law.
  • Generally, if projects are 100% funded, then much less likely that special assessments will be required to address 'unforeseen' expenses.

Contact Us

For more information regarding condominium ownership in the State of Hawaii, contact our team of experts today. With experience in condos in Wailea, Kakaako, Princeville, Kona, Lanai and everywhere in between, we're well positioned to be of assistance.

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