Hawaii Condominium Liens: Six-Month Recovery and Foreclosure Limits

Chapter 514B applies to all condominiums created in Hawaii under section 514B-21(a), and amendments apply to every condominium regardless of when adopted, so a project organised long ago as a horizontal property regime is covered too. Section 514B-21(b) maps the old vocabulary onto the new: condominium property regime and horizontal property regime mean condominium, apartment means unit, apartment owner means unit owner, and association of apartment owners means association. A homeowners association that is not a condominium is governed instead by chapter 421J, whose lien section is 421J-10.5, and the two chapters differ in almost every detail described here.

Under section 514B-146(a) all sums assessed but unpaid for a unit's share of the common expenses become a lien on the unit with priority over all other liens except real property taxes and assessments lawfully imposed by government, and except sums unpaid on a mortgage recorded before the association recorded its notice of lien. Two clocks then run. A recorded lien expires six years from the date of recordation unless proceedings to enforce it are instituted before then, and any proceeding to enforce a lien for an assessment must be instituted within six years after the assessment became due. Both are tolled if the owner files under the United States Bankruptcy Code, until thirty days after the automatic stay under 11 U.S.C. 362 is lifted. The expiration of a recorded lien does not kill the automatic lien that arises under the subsection or under the declaration and bylaws.

The nonjudicial power is the most litigated part. Act 282 of the 2019 session amended 514B-146 so an association may foreclose by nonjudicial or power of sale foreclosure regardless of the presence or absence of power of sale language in its governing documents, and section 5 of that Act made the change apply retroactively to claims arising before July 9, 2019 in which no final non-appealable judgment had been entered. A federal district court decision reported at 453 F. Supp. 3d 1334 (2020) rejected due process, equal protection and separation of powers challenges to that Act. The carve-out survives: a lien arising solely from fines, penalties, legal fees or late fees must be foreclosed in court under part IA of chapter 667.

Subsections (j) through (l) are the six-month provision that people call a super-priority. It is not a priority over the mortgage; it is a special assessment the board may levy on the mortgagee or other purchaser who buys a delinquent unit at foreclosure, capped by subsection (k) at the unpaid regular monthly common assessments assessed during the six months immediately preceding completion of that foreclosure. Subsection (l) defines completion as the recording of the affidavit after public sale under section 667-33 in a nonjudicial case, and as the moment a purchaser is deemed to acquire title under subsection (b) in a judicial one. It also strips out everything that is not a regular monthly assessment: other special assessments, late charges, fines, penalties, interest, the lien itself, and collection or enforcement costs including attorneys' fees and court costs. The buyer may demand, at no charge, a notice stating the amount, how it was calculated, and the legal description of the unit before taking title.

An owner cannot simply withhold. Section 514B-146(e) says no unit owner shall withhold any common expense assessment claimed by the association. The route instead is to pay in full, then use small claims court, mediation, or arbitration under section 514B-162 as subsection (f) allows. For charges that are not common expenses, such as fines, late fees and lien filing fees, subsection (g) gives the owner thirty days from the date of the written statement to demand mediation in writing, and the association may not collect the disputed charges until it has taken part. That mediation must be completed within sixty days or the association may resume collection.

Beyond foreclosure, section 514B-146(h) lets an association that has given sixty days' written notice to the owner and to the unit's first mortgagee terminate an owner-occupied delinquent unit's access to the common elements and cut off every service the association normally supplies or pays for. Services need not be restored until the delinquency is paid in full. That remedy is conditional: under subsection (i) the board must first adopt a written policy and have it approved by a majority vote of the unit owners at an annual or special meeting, or by written consent of a majority of owners.

In a foreclosure the owner must pay a reasonable rent for the unit where the bylaws or the law so provide, and the plaintiff is entitled to a receiver, which may be the association's own managing agent. If the association takes title and rents the unit out, subsection (n) requires excess rental income to be paid to existing lien holders by priority rather than pro rata, after the association is reimbursed for the delinquent assessments, maintenance fee arrears, collection costs and the cost of renting, repairing and maintaining the unit.

Subsection (m) puts the cost of releasing a lien on whoever asks for the release. A lender or purchaser who buys at mortgage foreclosure is not liable under subsection (b) for common expenses that came due before it acquired title, and those go back into the pool as common expenses collectible from all owners.