Why is a reserve law necessary?
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 exercise 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.