Hawaii's New Condominium Law: Facilitating the Fair and Efficient Functioning of Condominium Associations

• Jurisdiction: Hawaii,United States
• Citation: Vol. 17 No. 06
• Publication year: 2013

Hawaii's New Condominium Law: Facilitating the Fair and Efficient Functioning of Condominium Associations

By Gordon M. Arakaki

In 1961, Hawaii became the first state to pass a law enabling the creation of condominiums.¹ Over fifty years later, approximately 30% of Hawaii's housing units are held in condominium ownership - the highest percentage of condominium housing units in the United States of America.² Along with the rise in condominium ownership, condominium disputes have increased exponentially as well.

Many condominium disputes arise because people - owners, boards, managing agents, attorneys, and others - do not properly understand how they should live and operate under the restrictive covenants that create and define condominium property regimes.

That is why Hawaii's new condominium law - Chapter 514B, Hawaii Revised Statutes ("HRS") - made it clear that a condominium's governing documents³ (e.g., the declaration, bylaws, and condominium map) must be liberally construed to facilitate the operation of the condominium property regime.

This article will explain how Hawaii's new condominium law requires that restrictive covenants contained in condominium governing documents must be liberally construed to facilitate the fair and efficient functioning of the condominium community.

Understanding The Importance Of Condominium Property Regimes

Before discussing the recent changes to the condominium law, it is important to understand what caused the growth in condominium projects and other common interest ownership developments in the first place.

Condominiums are important for land use, housing, and growth policy reasons. The rapid growth of condominiums, cooperatives, and planned communities (i.e., common interest ownership communities) since the 1960's has been spurred by government policies - driven by popular sentiment - requiring that new development "pay its own way." As more and more people in existing developments objected to their tax dollars being used to pay for the infrastructure necessary for new developments, government responded to such objections by shifting much of the infrastructure costs to the new developments.⁴

Condominiums and other common interest ownership communities - with their regimes of privately enforceable covenants governing use of property and establishing financial obligations (e.g., maintenance fees) to pay for formerly public facilities and services such as roads, trash collection, and recreational areas -are a fundamental necessity in having new development "pay its own way." Indeed, virtually all new development in Hawaii for the past 40 years consists of common interest ownership communities.

Condominium Governing Documents Must Be Liberally Construed To Facilitate The Fair And Efficient Functioning Of Condominium Associations

Pursuant to Act 164, Session Laws of Hawaii ("SLH") (2004), Hawaii's new condominium law became effective on July 1, 2006. HRS §514B-10 makes it clear that a condominium's governing documents must be liberally construed to facilitate the operation of the condominium property regime. Subsection (b) of HRS §514B-10⁵ reads as follows:

(b) Any deed, declaration, bylaw, or condominium map shall be liberally construed to facilitate the operation of the condominium property regime.

In adopting HRS §514B-10(b), the Legislature overturned the Hawaii Supreme Court's holding regarding restrictive covenants in Hiner v. Hoffman as it applied to condominium communities. Before passage of this legislation, Hiner v. Hoffman⁶ had often been cited for the proposition that Hawaii has a strict construction rule for interpreting ambiguous restrictive covenants in favor of the free use of land. Some still mistakenly cite the case for that proposition.⁷

Legislature's Public Policy Reasons For Overturning Hiner v. Hoffman

The Hawaii Real Estate Commission, in its "Final Report to the Legislature, Recodification of Chapter 514A, Hawaii Revised Statutes (Condominium Property Regimes), in response to Act 213, Section 4 (SLH 2000)", dated December 31, 2003 ("Final Report"),⁸ explained in great detail the public policy reasons for overturning Hiner. It is important to note that the Legislature explicitly directed that the Hawaii Real Estate Commission's Final Report should be used as an aid in understanding and interpreting Hawaii's new condominium law.⁹

The public policy reasons for overturning the Hawaii Supreme Court's holding regarding restrictive covenants in Hiner v. Hoffman are clearly set forth in the Hawaii Real Estate Commission's official comments regarding HRS §514B-10(b).¹⁰ The comments are set forth in full as follows:

Subsection (b) is intended to negate any implication that the Hawaii Supreme Court holdings regarding restrictive covenants/ equitable servitudes in Hiner v. Hoffman, 90 Haw. 188, 977 P.2d 878 (1999), and Fong v. Hashimoto, 92 Haw. 568, 994 P.2d 500 (2000), apply to condominium communities. Given the importance of condominiums to the quality of life of Hawaii's people, laws must support the fair and efficient functioning of our condominium communities (and other common interest ownership communities).
In Hiner, defendants-appellants ("Hoffmans") constructed a three story house on a lot which was (along with 118 other lots) subject to a restrictive covenant prohibiting any dwelling "which exceeds two stories in height." The Hoffmans had actual knowledge of the restrictive covenant. After warning the Hoffmans of their violation of the restrictive covenant, neighboring homeowners and the community association sued to have the Hoffmans remove the third story of their house.
At the trial court level, the Hoffmans argued that their house consisted of "two stories and a basement." The trial court rejected the Hoffmans' argument and ordered them to remove the third (top) story of their house.
On appeal, the Hoffmans changed their argument and claimed that the term "two stories in height" was ambiguous. In a 3-2 decision, the Hawaii Supreme Court ruled that the term "two stories in height" was ambiguous since it did not provide any dimensions for the term "story" and was therefore unenforceable in light of the restrictive covenant's undisputed purpose (to protect views by restricting the height of homes within the neighborhood). The majority on the Court stated that it was following a "long-standing policy favoring the unrestricted use of property" when construing "instruments containing restrictions and prohibitions as to the use of property." Finally, the majority noted that "such 'free and unrestricted use of property' is favored only to the extent of applicable State land use and County zoning regulations."
In so doing, the majority appeared to ignore the massive growth of servitude regimes over the past forty years and the corresponding importance of ensuring the fair and efficient

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