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House Bill 2272

by | Sep 15, 2022 | Real Estate News

What is House Bill 2272?

House Bill 2272 – Amending a Condominium Declaration – HB2272 HD 1 SD1 CD1 has a few items that passed in the 2022 legislation on June 17th, 2021. One piece of that bill will be discussed in this blog.

My intention is not to present a legal interpretation of the law, but to educate. Here is a summary of the Bill. If you would like to view the entire HB 2272 bill, the link has been provided.

Summary of House Bill 2272

  • Clarifies that sixty-seven per cent of unit owners may amend a condominium declaration at any time by vote or written consent, unless the declaration specifies a higher percentage.
  • Requires developers to include annual reserve contributions based on a reserve study.
  • Clarifies time and date requirements for petitions to amend bylaws and call for special meetings; electronic, machine, and mail voting; time frame for approval of minutes; and board meeting participation.
  • Expands when electronic, machine, and mail voting is authorized. Requires a condominium association’s reserve study to be reviewed by an independent reserve study preparer and reviewed or updated at least every three years.
  • Specifies that cash flow plans be based on thirty-year projections.

The section I will discuss is, “Requires a condominium association’s reserve study to be reviewed by an independent reserve study preparer and reviewed or updated at least every three years.”

Why am I focusing on this section? The answer is because this law impacts a condo complex right here in Waikoloa Village where I live and work as a realtor. This bill has affected my neighbors, friends, past clients and some “almost” new buyers.

The Special Assessment Letter for Elima Lani

It all began when some condo owners started grumbling on a local neighborhood social media page about a letter they received back in May of 2021 in regards to a “special assessment fee.” This special $1000 assessment fee was due on top of their $400 HOA dues in order to cover several hundred thousand dollars of expenses that were past due. How could this possibly be true? Was this a scam? Unfortunately it was not, and the financial saga continues to this day. They were confused, outraged and wanted answers.

The rumor going around town was that the funds were mismanaged by the management company, Associa, but I’ll let you make that decision on your own.

Revealing Financial Statements

When the new management company, Hawaiiana, took over from Associa at the beginning of 2022, that’s when some creative accounting methods appeared on financial balance sheets. Instead of having a surplus of funds, the Association was carrying a significant amount of debt. There were still outstanding bills that hadn’t been paid. These bills were water bills, landscaping bills, painting bills and legal fees for approximately $330,000. Everyone was doing the math in their heads. There were 216 units (times the $1000 special assessment) and in everyone’s calculations, they were still coming up short. Some people didn’t even want to ask the obvious question, where were the rest of the funds going to come from and how did this even happen?

Reserves Depleted

And adding to Elima Lani’s continuous financial problems, they discovered their reserves were depleted. This is why writing about House Bill 2272 is so important. House Bill 2272 requires condominium complexes to have their reserve studies reviewed or updated by an independent third party, every three years, so that this exact scenario won’t happen to condo complexes in the future. The law goes into effect January 1, 2023.

Reserve Study

The scary part is Elima Lani had a recent reserve study done and found in some reports that over $600,000 was needed to have a fully funded reserve balance. Do you think this will jeopardize the future sales in one of the affordable condo complexes in Waikoloa? Condo values? I would say yes.

Current Update

Another letter was sent out recently to the Elima Lani owners dated September 1, 2022 stating that according to this new law, the Association will need to have cash for projected Reserve Replacements for the year, at the beginning of the year, based on the Reserve Study. Approximately $267,475 is the minimum amount needed for these projected projects and the funds need to be collected before the 2023 budget is formally adopted. Thus, the HOA fees will be raised 15%-20% in 2023 along with another $1500 special assessment to each unit in order to meet the States Reserve project funding minimum requirement.

As a REALTOR® working in Waikoloa, it’s highly recommended to always take a look at the Condo M-1 documents that are provided with each transaction and hire professionals in the field of accounting or legal services, especially if there is information that you do not understand. Could this have been prevented? Perhaps, but with HB 2272 becoming law January 1, 2023 it will establish a financial norm for condo associations to follow moving forward.

I worry for the financial solvency of this complex because Elima Lani is located in my community and hope that the property values of this complex aren’t jeopardized by the accounting errors of the management company. I still have many more questions in regards to this subject and will continue to follow the progress. If you are interested or have questions about Waikoloa, Waimea region on the Big Island of Hawai’i, let’s talk. I believe using a realtor specializing in a specific area is vital, instead of using an online algorithm to determine your ideal real estate home.

Phyllis Klicker, RS-77134


Phyllis Klicker, RS-77134
Realtor Salesperson
EMAIL: [email protected]
DIRECT: (808) 217-6816