The ‘brutal reality’ of owning a
condo in Hawaii
Honolulu Civil Beat
By Anita Hofschneider
16 May 2016
(This is the 'brutal reality' of
owning a condo everywhere.—CondoMadness)
When Melinda Salcedo bought her two-bedroom, two-bathroom condo unit at
Pearl Ridge Gardens and Tower near Pearl Harbor on the south shore of
Oahu a year and a half ago, it was a dream come true.
Finding a place to purchase hadn’t been easy. The cheapest houses for
sale cost half a million dollars, far beyond her budget as a single mom
and nursing assistant at Queens Hospital.
Even when she found an affordable condo, she had to use some of her
retirement savings to cover the $24,000 down payment. But it was worth
it. With a monthly mortgage of about $1,250 and maintenance fees set at
$539 per month, she could finally raise her two kids in a place of her
Last November, just over a year after she purchased the unit, Salcedo
was shocked to receive a letter from her homeowners’ association: Pay
$43,000 upfront, or agree to a 48 percent increase in monthly
maintenance fees to help cover $12 million in plumbing repairs.
is trying to sell her two-bedroom, two-bathroom condo
unit at Pearl Ridge Gardens & Tower because her maintenance fees
Anita Hofschneider/Civil Beat
“I said, ‘Oh my God, we don’t have elevators!’” she recalls thinking.
“We are not in Kahala, Ala Moana, or in Waikiki.”
Her story is hardly unique.
The cost of housing in Hawaii is at an all-time high. With median home
prices hovering around $725,000, purchasing a condo may be the only
option for people who want to own a residence.
But while condo buyers may be able to afford a fixed mortgage, they may
not realize that maintenance fees can spike unexpectedly and make their
homes suddenly unaffordable.
“If you’re upset with your condo you either
lump it and move out, or
you hire an attorney, because there’s no one else looking out for you.
That’s the brutal reality.”
— Terrance Revere, attorney
As Honolulu condos age, many boards of directors faced with the need
for expensive repairs are asking unit owners to pay large assessments
or higher monthly fees.
State law says condo associations aren’t supposed to exceed their
annual operating budget by more than 20 percent in a year. But there’s
an exception if the condo board notifies unit owners of an emergency
increase or gets permission from more than half of them.
Condo associations are also supposed to conduct studies of potential
repairs and keep a certain amount of money in reserves to cover large
Salcedo has no idea whether or not her board properly followed state
regulations. But even if there were violations, the state Department of
Commerce and Consumer Affairs doesn’t have any power to enforce those
provisions of the law.
Instead, the Regulated Industries Complaints Office focuses its
condo-related regulatory efforts on ensuring boards abide by legal
requirements to provide homeowners with certain financial documents,
and the Real Estate Branch emphasizes public outreach and education.
“Our emphasis is on education and that’s what the law gives us the
authority to do,” said Benedyne Stone, a condo specialist at DCCA. “The
way the law stands now we don’t have authority to do much else. We
don’t have enforcement authority. We don’t have authority to advocate
Because condos are self-regulated, it’s up to owners to file a lawsuit
or pay for state-subsidized voluntary mediation services if they feel
that a board has broken the law.
But lawsuits are expensive and mediation doesn’t always work. The state
implemented a law last year for a new evaluative mediation process
specifically for condo disputes involving former judges and attorneys.
So far, the state has been billed for six cases: four cases that were
resolved, and two that resulted in no agreement.
owners at Pearl Ridge Gardens and Towers are paying $12 million for
plumbing repairs. Cory Lum/Civil Beat
The lack of teeth in the state’s condo law doesn’t make sense to Lila
Mower, a spokeswoman for an informal group of local residents who are
concerned about the lack of oversight for condo associations.
“It’s like saying there’s a speed limit of 55 and there’s no one
policing that,” said Mower, whose group includes more than 150
residents who own units in more than four dozen condos. “If someone’s
going at 90 miles an hour, what do you do?”
The group lobbied unsuccessfully at the Legislature this year to
strengthen regulations by requiring residential property managers to
get licensed and establishing a condo ombudsman who would investigate
disputes between condo owners and boards. Similar positions exist in
some other states, including Florida and Virginia.
But legislators declined to even pass a resolution studying whether an
ombudsman is necessary, opting instead to request a study of existing
Rep. Matt LoPresti thinks the lack of stronger regulations is
astounding given the influence condo boards have over residents’ lives.
There are about 160,000 registered residential condo units in the state.
“These boards, you add them all up, and they have enormous power across
the state,” said LoPresti. “They can take over your home, they can
force you to spend tens of thousands of dollars, with little or no say
“When you look at it that way it’s really amazing that there’s no
accountability,” he said.
What’s happening to Salcedo sounds familiar to Lon Pierce, a resident
of Kahala Towers. Its board recently gave Pierce the option of paying
$39,000 up front or agreeing to pay more than $200 more per month to
cover a loan for building repairs.
Pierce is unhappy with the increase and hopes to eventually sell his
place, but said he has to wait for another four years until he pays off
a specially equipped vehicle he recently bought for his disabled
Richard Emery, a longtime lobbyist who works at the Dallas-based global
property management firm Associa, says the large assessments and
maintenance fee increases that many condo associations levy are
Like more than half of Hawaii residences of all kinds, Pearl Ridge
Gardens and Tower and Kahala Towers were built more than three decades
Emery estimates that 10 to 15 percent of Hawaii condos have imposed
large assessments or raised maintenance fees by more than 25 percent to
cover major repairs over the last few years.
Towers is another condo where owners were faced with a large assessment
for repairs. Cory Lum/Civil Beat
“It’s a fairly common problem in Hawaii right now with these older
buildings that were built in the ’70s,” he said, noting in the last
three years he’s seen increases in repairs for wastewater, water and
electrical systems. “I don’t know of anyone who planned for this. They
all thought the useful life was much longer than it was. They didn’t
realize this was coming.”
Boards can be reluctant to increase maintenance fees because of
pressure from unit owners, and may put off doing repair work, Emergy
“It’s pay me now or pay me later. Nobody wants to pay more now.”
Some boards are also reluctant to spend money on reserve studies of the
need for future capital improvements. But the failure to do so can come
back to haunt them when big repairs costs materialize, said Jane
Sugimura of the Hawaii Council of Community Associations.
“I had no idea that this fee would be going up like this. If I had
known of that, I would have never moved here.”
—Nellie Miller, condo
Keven Whalen, who leads the Hawaii chapter of the Community
Associations Institute, said some buildings, like 1350 Ala Moana, have
needed to replace their cast iron waste lines 40 years earlier than
they would have needed to do so on the mainland because of Honolulu’s
Some of the most expensive repairs that condo boards are grappling with
include fixing concrete spalling, updating elevator systems and
renovating plumbing, drinking water and wastewater systems.
Unfortunately for some condo owners, the need for repairs in aging
buildings is coinciding with high construction costs. Honolulu
currently has the hottest construction market in the nation, with
competition for labor and construction material fueled by new condos
being built in Kakaako and the city’s multi-billion-dollar rail line.
The situation underscores the need for boards to do thorough reserve
studies and ensure that owners are paying the right amount for the
appropriate repair work.
But while many condo owners argue more regulation would help, Emery,
Sugimura and the Community Associations Institute believe it’s not
necessary. Instead, they say it would be better to increase education
and outreach efforts targeting condo board members and owners.
“I have great empathy for the owners but I’m not sure what the solution
is,” Emery said. “There’s nothing you can legislate to fix this
The debate is muddled by a general lack of data about the scope of the
Stone said her office often receives several calls a day from people
who are upset about increases in maintenance fees or other actions
their condo associations have taken.
“People often call here and expect us to be an advocate or take a
complaint, for example, but that’s not the case,” she said. “People are
not happy to hear that.”
The Department of Commerce and Consumer Affairs doesn’t keep data on
how often people complain about large assessments or fee increases.
That can make it tough for policymakers to figure out whether there’s a
need for reform. Sen. Suzanne Chun Oakland co-authored a bill with Sen.
Brickwood Galuteria to establish an condominium ombudsman office. She
said she heard conflicting opinions about whether there’s a need for an
ombudsman to address condo residents’ complaints.
“Because of the self-governance model, there’s not really anywhere to
report, so that’s a catch-22,” she said.
At 1350 Ala
Moana, residents had to pay millions to cover plumbing upgrades.
Cory Lum/Civil Beat
Attorney Terrance Revere thinks there’s no need to wait for more data
before the Legislature takes action. He said condos would be more
likely to avoid surprise assessments if boards were required to rely on
unbiased third parties to conduct reserve studies, instead of the
boards themselves or property management companies.
“What happened to (Salcedo) is exactly what Hawaii’s reserves law was
designed to prevent. The whole point of the reserves law is that
everybody should pay as they go and that there shouldn’t be these types
of surprises,” he said. “You shouldn’t have these unexpected
assessments that just kill people.”
Revere also believes an ombudsman who can advocate on behalf of owners
would be a much better use of public money than the existing
education-focused work of the DCCA.
“They ought to have an ombudsman dealing with these things; instead
they’re stuck with basically me and a handful of attorneys who will
actually go after condo boards,” he said.
“If you’re upset with your condo you either lump it and move out, or
you hire an attorney, because there’s no one else looking out for you,”
he said. “That’s the brutal reality.”
The Legislature considered many bills related to condos this year, but
none made it very far. Most didn’t even receive a hearing.
House Majority Leader Scott Saiki was behind the measure that sought to
establish an ombudsman, explaining that he introduced the bill at the
request of his constituents.
“There are more and more high-rises being built with resident
associations and we increasingly hear about disputes that occur within
associations and within condominiums,” he said.
The bill died because of concerns about the cost of establishing a new
office, Saiki said.
He said a resolution proposing a study of an ombudsman office morphed
into a study of mediation because lawmakers wanted to make sure
existing processes were fully vetted before considering a new venue for
Saiki introduced a bill to establish a condo ombudsman.
Cory Lum/Civil Beat 5 May 2016
Saiki thinks the Legislature may have to be more aggressive in helping
to resolve condo disputes because mediation is not always effective.
“This issue is not going to go away and at some point we’ll have to
make adjustments,” he said.
Emery thinks the push toward more regulation would result in unintended
consequences, such as discouraging people from volunteering as board
Additional requirements for reserve studies would be expensive for
boards, and licenses for residential property managers are unnecessary
given existing company-sponsored training, he said.
There’s no need for an ombudsman given existing mediation services,
Emergy said. Besides, an ombudsman would not have the authority to
interfere with the contractual relationship between owners and
associations, he added.
Rather than passing new laws, there should be greater emphasis on
educating board members about the need to conduct reserve studies and
helping owners understand why fees are increasing, he said.
That’s why Emery appears on “ThinkTech Hawaii,” a local digital show
where he talks about these issues on a segment called “Condo Insider”.
sits at her piano in her one-bedroom unit at Pearl Ridge
Gardens & Tower. She is frustrated by rising maintenance fees that
make it difficult for her to afford food and
medicine. Anita Hofschneider/Civil Beat
In addition, the Community Associations Institute is starting a
certification course for condo board members at a cost of just $5 per
class, Emery said.
The group is also in the process of establishing a hotline that condo
owners can call if they have problems with their board.
Sugimura, who appears on “ThinkTech Hawaii” with Emery, agrees that
education is the answer rather than regulation.
“The whole concept of a condominium is self-governance, which means no
government regulation,” she said. She worries condo owners have been
quick to lay blame without understanding how the system works.
“It’s not like there are good guys and bad guys,” she said. “The people
who volunteer to serve on boards, none of them get paid and none of
them are experts. For those with problems, there are resources. That’s
what my organization is hoping to address.”
Rising maintenance fees, Sugimura said, may mean some owners need to
“A lot of buildings have older people who are on Social Security and a
fixed income,” Sugimura said. “What they have to realize is costs do
not stay the same. The way it’s set up, you pay maintenance fees based
on your unit. We can’t give you some kind of a discount because you’re
on fixed income. When it gets to the point when it’s too expensive you
have to sell your unit. It’s unfortunate but that’s what it is.”
Know Before You
That attitude is frustrating to Nellie Miller, 74, who lives on the
16th floor of Pearl Ridge Gardens and Tower.
She bought her condo nearly 20 years ago, and paid it off in 2001. When
she purchased the one-bedroom unit, her maintenance fees were under
$100 per month. Now they are more than $600.
In total, her monthly fees and utility costs are nearing $700 per
month, almost half of her monthly $1,400 Social Security income.
Already, it’s been harder to afford food and medicine.
“If they keep on raising the fees, they’re going to raise me out of
here,” she said. “I had no idea that this fee would be going up like
this. If I had known of that, I would have never moved here.”
Miller holds up her latest bill for more than $600 in monthly
maintenance fees. Anita Hofschneider/Civil Beat
The state Department of Commerce and Consumer Affairs offers
informational brochures for condo board members and owners, but nothing
to specifically help people who are interested in purchasing condos
understand the potential pitfalls.
In contrast, Maryland’s state attorney general published a guide for
consumers with information about the benefits and drawbacks of condo
“You should ask about any actual or proposed special assessments,” the
guide advises potential buyers. “In addition, you should request a copy
of the board meeting minutes for the past three months as these could
help you determine the financial health of the condominium association.”
Salcedo has been trying to sell her condo for the last three months.
She’s had to work four hours of overtime each week since the fees were
increased to pay them. She wants to move back to Kalihi to be near
Miller’s family members are much farther away in New Jersey. She has
thought about leaving Hawaii to be closer to them, but the amount of
work it would take to pack up her possessions overwhelms her.
Plus, having paid off her condo unit 15 years ago, she considers Pearl
Ridge Gardens and Tower to be her home, and she knows that with rents
as high as they are, she couldn’t afford to become a renter again.
Revere thinks the problem with saying, “if you can’t afford it, don’t
live there,” to people who can’t afford large assessments and higher
maintenance fees is that it doesn’t take into account how limited
Hawaii’s housing options are.
“It’s like, ‘Where would you like me to live on this island?'” Revere
said. “Because condos are pretty much it, as far as affordable housing.”
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