3.2 Hawaii Condominium Law (HRS 514B)
Key Takeaways
- HRS Chapter 514B governs condominium creation, developer sales, association operations, and resale disclosures in Hawaii.
- Under HRS 514B-86 a buyer of a new condo from a developer may cancel until midnight of the 30th day after signing the contract, after receiving the developer's effective public report.
- The developer's public report is reviewed by the DCCA Real Estate Branch and must be delivered before any binding sales contract.
- Resale buyers must receive association documents (declaration, bylaws, house rules, budget, reserve study) and a disclosure of assessments, litigation, and reserves.
- Unpaid association assessments become a lien that the association can foreclose, and certain amounts have priority over a first mortgage under HRS 514B-146.
Why HRS 514B Dominates the Hawaii Exam
HRS Chapter 514B, the Condominium Property Act, governs how condominiums are created, sold by developers, operated by associations, and resold. Because a large share of Hawaii's housing - especially on Oahu and in resort areas - is condominium, expect a cluster of questions here. Contrast it with HRS 467 (the license law) and HRS 521 (the Residential Landlord-Tenant Code); examiners love to swap these chapter numbers as distractors.
New Condominium Sales: The Developer Public Report
Before a developer can take binding contracts, it must file an offering with the Department of Commerce and Consumer Affairs (DCCA) Real Estate Branch, which reviews it and issues an effective public report. The report is a disclosure document, not a state endorsement of quality.
| Public report contents | Purpose |
|---|---|
| Developer information | Identity, experience, financial backing |
| Project description | Units, common elements, amenities |
| Estimated operating budget | Projected monthly maintenance fees |
| Recorded declaration and bylaws | Legal framework of the project |
| House rules (if any) | Day-to-day living restrictions |
| Warranties and risk factors | Construction warranties, material risks |
The 30-Day Cancellation Right (HRS 514B-86)
This is the single most-tested condo fact. No sales contract is binding on the developer or purchaser until the developer delivers a true copy of the effective public report plus a Commission-prescribed notice of the cancellation right. The buyer may then cancel at any time up to midnight of the 30th day after signing the contract, for any reason, and receive a full refund of the deposit with no penalty.
Trap to avoid: Older study material says the 30 days run "from receipt of the public report." Under current HRS 514B-86 the cancellation window is measured to midnight of the 30th day after the purchaser signs the contract, after the public report is delivered. If you see both phrasings, choose the "30 days, signed contract, full refund, any reason" answer.
A buyer may instead waive the right in writing after acknowledging the report. Developer deposits during this period are held in escrow, protecting the buyer if the project never closes.
Association Governing Documents
Every condominium is governed by a layered set of documents. Knowing the hierarchy and what each controls is testable.
| Document | Controls | Hardest to amend? |
|---|---|---|
| Declaration | Creates the condo; defines unit boundaries, common elements, percentage interests, use restrictions | Yes - highest owner-vote threshold |
| Bylaws | Association governance: board elections, meetings, voting, assessments, officers | Moderate |
| House Rules | Day-to-day living: pets, parking, noise, pool/lanai use, rental limits | Easiest - often board-adopted |
The declaration is the master document and sits at the top of the hierarchy; a house rule that conflicts with the declaration is unenforceable. Limited common elements (assigned lanais, parking stalls, storage) belong to all owners but are reserved for one unit's exclusive use, distinct from general common elements (lobby, roof, elevators) used by all.
Assessments, Reserves, and Liens
Owners pay regular assessments (monthly maintenance fees) allocated by common-interest percentage, plus special assessments for major repairs or capital projects. HRS 514B requires associations to conduct a reserve study and fund reserves for major components (roofs, elevators, repiping), then disclose reserve status.
Collection escalates predictably:
| Step | Association action |
|---|---|
| Past due | Late fees and interest accrue |
| Lien | Unpaid assessments become a lien on the unit |
| Foreclosure | Association may foreclose (judicial or nonjudicial) to collect |
| Priority | Under HRS 514B-146, a limited portion (commonly up to six months of regular assessments) has priority even over a recorded first mortgage |
That priority lien is a favorite exam point: a foreclosing lender may have to pay the association a capped slice of delinquent fees ahead of its own mortgage.
Resale Disclosure Package
A resale (owner-to-owner) buyer does not get a developer public report. Instead the seller and association provide a disclosure package so the buyer can evaluate the association's health:
- Recorded declaration, bylaws, and house rules
- Current operating budget and financial statements
- Reserve study / reserve fund balance
- Current monthly assessment and any pending special assessments
- Pending litigation and insurance coverage
- Outstanding violations on the unit
Worked scenario: A resale buyer learns after closing that the association had voted a $25,000-per-unit special assessment for repiping, undisclosed at offer time. The buyer's remedy lies in the resale-disclosure rules - rescission or damages for the omission - not in the developer 30-day cancellation right, which applies only to new developer sales.
Common Elements, Maintenance, and Fee vs. Leasehold Condos
Dividing repair duty is testable. As a default, the association maintains general common elements; owners maintain unit interiors; limited common elements (an assigned lanai or parking stall) are usually association-maintained but the declaration controls and can shift the burden.
| Element | Typical maintenance duty |
|---|---|
| General common elements (roof, lobby, elevators) | Association |
| Limited common elements (lanai, assigned stall) | Usually association; check the declaration |
| Unit interior (paint, fixtures, cabinets) | Owner |
| Windows and doors | Per declaration - varies by project |
Many Hawaii condos are themselves leasehold, layering 514B over the leasehold concepts from Section 3.3: the buyer owns a leasehold unit and pays both maintenance fees AND a share of the master ground lease rent. The exam may combine these - a buyer of a leasehold condo faces association assessments, lease rent, and a reverting term all at once.
Dispute Resolution and Enforcement
HRS 514B channels owner-association disputes toward less costly forums before court. The DCCA Office of Administrative Hearings / Real Estate Branch and mandatory mediation programs handle many disputes; some governing documents also require arbitration. Litigation is the last resort. A practical exam point: a board may fine owners and enforce house rules, but it must follow the bylaws' notice-and-hearing procedure - self-help that skips due process is unenforceable.
A buyer signs a contract to purchase a unit directly from the developer of a new Honolulu condominium and receives the effective public report at signing. Under HRS 514B-86, what is the buyer's cancellation right?
Which Hawaii statute governs condominium creation, developer sales, and association operations?
An association forecloses on a unit for unpaid maintenance fees, and there is also a recorded first mortgage. Under HRS 514B-146, what is true about the association's lien?