HAR Chapters 119.1 through 119.8 – Condominiums (effective 3/26/26)

CHAPTER 119.8

CONDOMINIUMS - ASSOCIATION REGISTRATION

§16-119.8-1 Registration of an association §16-119.8-2 Failure to provide evidence of fidelity bond §16-119.8-3 Fidelity bond; deductible §16-119.8-4 Fidelity bond exemption for an association §16-119.8-5 Fidelity bond exemption §16-119.8-6 Registration application §16-119.8-7 Availability of association's records, documents, and information §16-119.8-8 Deposit of association funds

§16-119.8-1 Registration of an association. (a) Notwithstanding that an associati6n has minimal or no expenses for maintenance of the common elements, and except as provided in subsection (c), each project or association having more than five units shall register with the commission and obtain a fidelity bond as required by section 514B-103, HRS, and chapters 16-119.1 through 16-119.8. (b) An association shall register with the commission in the name as it appears on the recorded declaration of the condominium property regime. Any name change shall be evidenced by an amendment to the

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declaration made pursuant to section 514B-32(a) (11), HRS, and where the association has incorporated, a document evidencing that the entity is properly registered with the business registration division of the department. (c) If so provided in a project's declaration and bylaws, this section shall not apply to: (1) Condominiums in which all units are restricted to nonresidential uses; or (2) Condominiums that contain no more than five units and are not subject to any continuing development right. (d) The board, developer or developer's affiliate, or managing agent on behalf of the association shall be responsible for registering and reregistering the association pursuant to section 514B-103, HRS, including maintaining the required fidelity bond, provided that the board or developer or developer's affiliate may delegate in writing the completion of the registration and reregistration to a managing agent. [Eff MAR 2 6 2026 ] (Auth: HRS §§514B-61, 514B-101) (Imp: HRS §§514B-103, 514B-143)

§16-119.8-2 Fai1ure to provide evidence of fide1ity bond. Failure to provide evidence to the commission of continuous fidelity bond coverage throughout an entire biennial registration period prior to the expiration of the fidelity bond shall result in the automatic termination of the association registration. [Eff MAR 2 6 2026 (Auth: HRS §514B-61) (Imp: HRS §§514B-103, 514B-143)

§16-119.8-3 Fide1ity bond; deductib1e. (a) The fidelity bond shall: (1) Be issued by a company currently authorized by the State insurance division to issue insurance in this State;

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(2) Name the department as the certificate holder; (3) Provide coverage for association activity only; (4) Name only the association as the insured and exclude any other person, trade name, or business entity as the named insured, except as permitted in subsection (e); (5) Specify that it is a fidelity, employee dishonesty, or commercial crime bond and whether it is a blanket or name schedule type. If a name schedule type, list all persons handling or having control of funds received by the association, and provide notice to the commission of any changes to the name schedule on an amended name schedule within ten calendar days of the change; (6) Not contain a criminal conviction endorsement or rider which requires as a condition precedent to recover the prosecution or conviction of the employee; (7) State that it covers all officers, directors, employees, and managing agents of the association who handle, control, or have custody of association funds, and protect the association against fraudulent or dishonest acts by persons, including any managing agent, handling association funds; (8) Specify an expiration date or that it is continuous; (9) Specify whether the bond contains a deductible provision or a nondeductible provision; and (10) Provide other information as requested by the commission. (b) Unless otherwise approved by the commission, the insurance company's proof of insurance shall certify that the required fidelity bond: (1) Is in effect and meets the requirements of sections 514B-103 and 514B-143(a) (3), HRS,

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chapters 16-119.1 through 16-119.8, and commission requirements; and (2) Includes other information as requested by the commission. (c) The insurance certification shall be made on a form approved by the commission and submitted to the commission upon request. (d) The board shall provide to each unit owner notice of the amount of the deductible, if any, and any changes in the fidelity bond coverage. (e) An association may provide the required fidelity bond loss coverage by being named as an insured on another entity's insurance policy, provided that the policy includes a loss coverage provision for each covered registered association on a per occurrence basis that is not limited by an aggregate amount. [Eff MAR 2 6 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-103 (a) (1), 514B-143)

§16-119.8-4 Fide1ity bond exemption for an association. An association's fidelity bond exemption expires at the end of a registration period. Any reapplication for a fidelity bond exemption shall be made at least thirty days prior to the commission's deadline date for submission of a completed reregistration application. An application for an association's fidelity bond exemption shall be made on a commission approved form. [Eff MAR 2 6 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-101 (b), 514B-143)

§16-119.8-5 Fide1ity bond exemption. (a) An association that is unable to obtain a fidelity bond pursuant to section 514B-103(a) (1), HRS, may apply to the commission for approval of a fidelity bond exemption in accordance with that section and this section.

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(b) All the units in the association or project shall be: ( 1) Owned by a single individual or a single entity that is registered to do business in this State and in good standing with the State; (2) Restricted by the declaration or bylaws to non-residential use; or (3) Twenty or fewer units. An association or project described in this subsection shall further satisfy all the following: (A) Certify to the commission that it has letters from three separate insurance carriers that issue such bonds, each dated no more than a hundred and eighty days before the exemption application date, confirming that the association is unable to obtain a fidelity bond; (B) Pass a resolution by its board certifying its inability to obtain a fidelity bond, intention to request an exemption from such requirement, and requiring that two persons sign all checks that exceed $2,500 drawn on association accounts; (C) Is managed by a managing agent or a real estate broker who, except for a project described in paragraph (1), holds an active real estate license and is in good standing under the laws of the State; (D) Prohibit any one individual or entity from having sole control over association funds and records without the supervision of at least one other association owner, director, or officer, except for a project described in paragraph (1); (E) Keep separate operating and reserve accounts and books with two signatures required for any withdrawals from the reserve account; and

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(F) Certify to the commission that the board promptly, diligently, and regularly reviews all association fund account statements. (c) An association or project containing six or more, but fewer than fourteen units which has either reserves of $10,000 or less and an annual budget of $15,000 or less or an annual budget of $25,000 or less shall meet at least two of the following conditions: ( 1) The requirements of subparagraph (b) ( 2) ( C) ; ( 2) The requirements of subparagraph (b) ( 2) ( E) ; (3) Has an operating account that requires two signatures for checks more than $500; (4) Conducts an annual audit of association funds and accounts; (5) Uses automatic bill payment with a financial institution for utility charges and regularly recurring expenses of the association; (6) Conducts board review of the account statement from the project's managing agent or financial institution; or (7) Is restricted by its declaration or bylaws to non-residential use for all units in the project. (d) An association or project containing more than thirteen, but twenty or fewer units which has reserves of $20,000 or less and an annual budget of $30,000 or less or has an annual budget of $50,000 or less shall meet at least three of the following conditions: ( 1) The requirements of subparagraph (b) ( 2) ( C) ; ( 2) The requirements of subparagraph (b) ( 2) ( E) ; (3) Has an operating account that requires two signatures for checks more than $1,000; (4) Conducts an annual audit of association funds and accounts; (5) Uses automatic bill payment with a financial institution for utility charges and regularly recurring expenses of the association;

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(6) Conducts board review of the account statement from the project's managing agent or financial institution; or (7) Is restricted by its declaration or bylaws to non-residential use for all units in the project. (e) Any application for an exemption from the requirement to obtain a fidelity bond shall be submitted to the commission on a form prescribed by the commission, together with a nonrefundable application fee in an amount set forth in section 16- 53-16.8. Any association that is granted an exemption shall immediately report to the commission in writing any changes that affect the project's eligibility for such exemption under this section. (f) At registration or reregistration, the commission may approve a request for a fidelity bond exemption upon payment of a nonrefundable fee and the association's certification that it has complied with the commission's requirements for the specific exemption requested. [Eff MAR 2 6 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-101, 514B-103, 514B-143)

§16-119.8-6 Registration application. (a) A completed association registration ·and reregistration application includes, in addition to the requirements set forth in chapter 514B, HRS, chapters 16-119.1 through 16-119.8, and of the commission, an application signed by an authorized officer of the association, accompanied by payment of the correct fee amount and any applicable penalties, documentation of current evidence of a fidelity bond, and any other documents and information required by the commission. (b) Upon a unit owner's request, the association board shall make available the file copy of the registration and reregistration application, if any, filed with the commission. The unit owner shall pay all reasonable fees for duplication, postage, and other administrative costs incurred by the board

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relating to handling the request in accordance with section 514B-154(j), HRS. (c) The commission may terminate a project or association registration when any changes to the association's registration information remain unreported to the commission for thirty days or more. Any termination shall subject the association to section 514B-103(b), HRS, including the loss of standing to maintain any action or proceeding in the courts of this State for the collection of any past due assessments for common expenses. [Eff MAR 26 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-101, 514B-103, 514B-154 (j §16-119.8-7 Availability of association's records, documents, and information. (a) Biennially, each project or association with more than five units shall attach a copy of the following to its association registration and reregistration application: (1) A one to two-page written summary of where, when, and how the records, information, and d6cuments required by sections 514B-106(c), 514B-122, 514B-144 (a), 514B-150 (b), 514B- 152, 514B-153, 514B-154, and 514B-154.5, HRS, shall be made available to unit owners and of any costs subject to sections 514B- 105(d)and 514B-154(j), HRS, of making the records, information, and documents available; and (2) The date the written summary required by paragraph (1) was last distributed to unit owners. (b) The summary required by subsection (a) shall include the information required by subsection (a) and the following: (1) The name and address of a person or entity to whom a unit owner may direct a request for the records, information, and documents. A unit owner may use any type of writing to

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make the request, including an association approved form; (2) The number of days no later than thirty days as specified by section 514B-154.4(c), HRS, after receipt of a request within which the board, managing agent, if any, or the association's representative shall make the requested records, information, and documents available for examination or copying; (3) The specific location and time where the requested records, information, and documents shall be made available for examination or copying. Where not specifically provided by chapter 514B, HRS, the designated location shall be convenient for both the unit owner and the association. The requested records, information, and documents may also be made available electronically as provided by chapter 489E, HRS; (4) The cost, subject to section 514B-105(d), HRS, if any, including the costs prescribed by sections 514B-153, 514B-154, and 514B- 154.5, HRS, or costs allowed by law; and (5) Any other records, information, and documents as the commission may request to be provided on the association's registration application. (c) Unless making the records, information, and documents of subsections (a) and (b) available to unit owners is prohibited or limited by a state or federal law, a board or managing agent shall: (1) Make every good faith effort to provide the requested records, information, and documents; (2) Redact any information the disclosure of which would clearly be an unwarranted invasion of privacy or violates any other state or federal law or regulation; (3) Where not an unwarranted invasion of privacy or prohibited by any state or federal law or

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rule, make the remaining records, information, and documents available to the unit owner in accordance with sections 514B- 106 (c), 514B-122, 514B-144 (a), 514B-150 (b), 514B-152, 514B-153, 514B-154, and 514B- 154.5, HRS, and chapters 16-119.1 through 16-119.8; and (4) Cite the specific authority for any non- disclosure; for example, the specific state or federal law or regulation or provision of the declaration or bylaws for any refusal to disclose. (d) The commission may prescribe a form for submitting the information required by subsections (a) and (b). (e) A management contract made pursuant to section 514B-134(b), HRS, shall include provisions describing: (1) A managing agent's duties and responsibilities relating to making available records, information, and documents as provided in sections 514B- 106 (c), 514B-122, 514B-144 (a), 514B-150 (b), 514B-152, 514B-153, 514B-154, and 514B- 154.5, HRS, and chapters 16-119.1 through 16-119.8. Where there is no managing agent contracted and authorized to make available the records, information, and documents in accordance with sections 514B-106(c), 514B- 122, 514B-144 (a), 514B-150 (b), 514B-152, 514B-153, 514B-154, and 514B-154.5, HRS, and chapters 16-119.1 through 16-119.8, the board shall designate a person or entity to undertake such duties and responsibilities; and (2) Any other provision required by section 514B-134, HRS, or the commission. (f) A managing agent, board, board member, or association representative that fails to make records, information, and documents available for examination or copying as provided by sections 514B-106(c), 514B- 122, 514B-144 (a), 514B-150 (b), 514B-152, 514B-153,

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514B-154, and 514B-154.5, HRS, and chapters 16-119.1 through 16-119.8, is subject to the criminal and civil penalties of section 514B-69, HRS, and the commission's investigatory, cease and desist, and injunctive powers as provided in sections 514B-65, 514B-66, and 514B-68, HRS. [Eff MAR 26 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-103, 514B-106(c), 514B-122, 514B-134, 514B-144(a), 514B-148, 514B-150, 514B-152, 514B-153, 514B-154, 514B-154.5)

§16-119.8-8 Deposit of association funds. As used in section 514B-149, HRS, the term "located in the State" shall mean that the financial institution: (1) Is currently registered with the department's business registration and financial institution divisions, in good standing, and authorized to do business in this State; and (2) Has an office in this State that is managed and operated by employees who are physically located at the office site. [Eff MAR 26 2026 ] (Auth: HRS §§514B-61, 514B-101) (Imp: HRS §514B-149)

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The repeal of chapter 16-107 and adoption of chapters 16-119.1, 16-119.2, 16-119.3, 16-119.4, 16-119.5, 16-119.6, 16-119.7, and 16-119.8, Hawaii Administrative Rules, on the Summary Page dated June 27, 2025, was adopted on June 27, 2025, following a public hearing held on November 29, 2024, after public notice was given in the Star Advertiser, The Garden Island, West Hawaii Today, Hawaii Tribune Herald, and The Maui News newspapers on October 24, 2024.

The repeal of chapter 16-107 and adoption of chapters 16-119.1, 16-119.2, 16-119.3, 16-119.4, 16-119.5, 16-119.6, 16-119.7, and 16-119.8 shall take effect ten days after filing with the Office of the Lieutenant Governor.

APPROVED AS TO FORM

NAO~ Director of Commerce and Consumer Affairs

Date: 3 J'"' 2.0lb

J0SGREEN, M.D. Governor State of Hawaii

Date: 3/ lfo I 2.02..b

APPROVED AS TO FORM:

Shari J Wong Deputy Atto~y General MAR 16 2026 Filed