Why was it necessary to pass the reserves law?
Hawaii's condominium law puts the control over the lives and property of
thousands of condominium owners in the hands of condominium boards, managers,
and owners themselves. Unfortunately, increasing evidence showed that not all
boards, managers, and owners were exercising that control responsibly. Prior to
the reserves law, a number of owners were complaining about large special
assessments by associations without sufficient reserves. Complaints of
assessments of $2,000 - $3,000 were not uncommon. Some owners paid close to
$10,000 each for such basic work as re-roofing, re-painting, and termite
repairs. Others paid $10,000 - $15,000 each for major plumbing and electrical
work. In some cases, total assessments by an association ranged into the
millions of dollars.
The reserves law is a response to these concerns as well as the issues outlined in the next section - fairness, financial hardship, mortgage and insurance requirements, accounting requirements, and the need to encourage condominiums to operate in a businesslike manner.