Condo owners in a Big Island community are unexpectedly digging deeper into their wallets after being blindsided by a surprise budget hit. By Friday, owners of Elima Lani Condominiums at Waikoloa Village must pay a $1,000 “special assessment” on top of their regular $400 monthly fees to cover unpaid expenses.

Some condo owners are steamed about it, according to interviews and their social media posts. Others just feel bewildered.

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According to a May 20 letter to homeowners from Hawaiiana Management Co., a one-time cash infusion is needed because several hundred thousand dollars in bills are past due.

The delinquent bills requiring “immediate attention” include $150,000 owed to Hawaii Water, $30,000 in legal fees, $29,000 in landscaping costs, and an unfinished painting project that needs $120,000 worth of remaining work.

“While the Board is still working to understand how this could have happened without being notified, there is also a sense of urgency to get current on all bills, and put the remaining amount in reserves and continue to fund the reserve account,” according to the letter.

Homeowners at the Elima Lani condo complex are being hit with a $1,000 unexpected bill. Courtesy: Michael Konowicz

Michael Kennedy, senior management executive, signed the letter, saying he was writing on behalf of the board of directors.

Kennedy declined to be interviewed and said none of the directors wished to provide comment.

A condo owner who lives in Elima Lani asked Kennedy on the morning of June 17 for a detailed explanation. The woman, who asked not to be named, received a response about an hour later which she shared with Civil Beat.

“It doesn’t appear that funds were mismanaged, it looks like there were very large unexpected bills that the association had to pay in 2021 and they didn’t have enough money in the budget to stay current on all of the other bills,” Kennedy wrote.

In a Waikoloa Facebook group, several condo owners asked if the special assessment is a scam or legitimate.

Michael Konowicz closed on an Elima Lani condo in May. He’s among those caught off-guard by the special assessment and is combing through financial documents trying to find answers.

A lender’s disclosure dated March 28, prepared by Hawaiiana and signed by Kennedy, indicates no special assessments are pending.

Konowicz wonders why Hawaiiana would say that in late March and then impose a $1,000 assessment less than two months later.

“I don’t know what happened in those five weeks,” said Konowicz. “I need to have a chat with my real estate agent and find out if I’m the victim of a fraudulent transaction.”

The same disclosure document says the condo association is not involved in any litigation, arbitration or mediation, begging the question: why would thousands of dollars be owed in legal fees?

A review of Elima Lani’s financial documents from the last several months points to some trouble.

A different management company handled Elima Lani’s 216 condo units prior to Jan. 1 when Hawaiiana took over. The previous management company, Associa Hawaii, prepared an end-of-the-year financial statement dated Dec. 31 that shows the condo association carrying a net operating loss of $87,801.

The funds budgeted for exterior painting in December are listed at $3,250. The actual amount spent is listed as $85,579.

The April financial statement shows the amount budgeted for water at $12,000 but the actual amount spent was $109,357, leaving a $97,357 variance.

Financial statements show wide variances in some some amounts budgeted for work around the condo complex compared to what was actually spent. Courtesy: Michael Konowicz

Adding to the condo association’s woes is a depleted reserve account. An analysis prepared by McCaffery Reserve Consulting, released in December, shows the projected balance in the account at $420,926. A fully funded reserve balance would have $1,029,831 so Elima Lani’s reserves were $608,000 less than what they should have been, the reserve study found.

The board held a six-minute special meeting on May 4 by Zoom to discuss the financial trouble and voted to pass the special assessment to cover the outstanding debts, according to draft minutes.

Even if the $216,000 raised by the special assessment pays off some of the delinquent bills, Konowicz is concerned about where the condo community is headed.

“How big of a mess are we in? How did we get there and how will we get out?”

The reserve study shows that many things will need to be replaced very soon and there’s very little in the saving account to cover those costs, he noted.

The situation also raises concerns over whether monthly maintenance fees will need to be hiked to meet future bills, and how much debt the association can take on and remain solvent, he says.

For now, Konowicz said he’s trying to get answers from Hawaiiana Management but isn’t having much luck.

Condo owners in Hawaii have limited options for challenging decisions their boards make. They belong to self-governing associations that share finances over things like physical maintenance of the property. If disputes arise, mediation is required under the state’s condo law. If such talks fail to resolve problems, condo owners can hire an attorney at their own expense.

The state’s Regulated Industries Complaints Office has limited jurisdiction over condo associations. The agency takes complaints if condo owners are refused access to association documents, like audits and meeting minutes, that the law requires be provided to owners. The office can also investigate complaints about the handling and dispersal of association funds.

A former board president of Elima Lani’s condo association who still lives in the complex said she’s not surprised by the $1,000 special assessment.

“We had a lot of work and repairs done last year,” said Derry Morris.

A lot of people who purchase condos never attend association meetings or read financial documents, Morris said. And many don’t pay attention until an assessment comes along, she said.

“Then all of sudden they’re up in arms,” Morris said. “I think it’s ignorance.”

View the special assessment letter:

 

 

 

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