The bill was proposed to deal with a rare scenario where a developer kept control of a condo board for more than a decade.

Hawaii Gov. Josh Green issued the first veto of his administration on Friday, rejecting a bill that was supposed to clarify an unusual scenario in which condominium owners sued the developer of their project for construction flaws more than a decade after construction was finished.

Green said in his veto message to state lawmakers that the measure “is objectionable because it appears to have the unintended consequence of increasing the costs of housing.”

But supporters of Senate Bill 921 said the measure was needed to clarify state law in a rare scenario.

Hawaii Gov. Josh Green speaks to the Civil Beat Editorial Board, March 2, 2023, at the governor's office. (Nathan Eagle/Civil Beat/2023)
Hawaii Gov. Josh Green issued his first veto on Friday, nixing a technical measure that dealt with disputes between condominium owners and developers of their projects. Green said the bill could add to the cost of housing in Hawaii. (Nathan Eagle/Civil Beat/2023)

Two separate Hawaii laws address when condo associations can sue developers for defects in design or construction. State condominium law generally gives the associations two years to sue from the date they discover — or should have discovered — a problem with a development.

However, developers sometimes keep control of condominium associations for more than two years. In those cases the state condominium law pauses or “tolls” the two-year limit on filing lawsuits until the condo owners gain control of the association. The owners then have the option of suing the developer for any defects.

But a separate law that deals with the limits of liability in construction projects has different language. That law sets an outside limit of 10 years for owners to file lawsuits against developers over defects, design flaws, or other construction problems.

SB 921 was supposed to deal with an unusual scenario in which a developer keeps control of the condo board for more than 10 years. According to Honolulu lawyer Terry Revere, that happened at an unidentified project on the Big Island that had “serious construction defects.”

It took the condo owners 11 years to finally get control of the condo association board, and the owners then filed a lawsuit over the construction defects. But Revere said in written testimony that a Big Island judge rejected the lawsuit because the 10-year limit in the construction liability law had passed.

That judge’s decision was later reversed on appeal, allowing the condo owners’ lawsuit to proceed, Revere wrote. But he argued SB 921 was needed to clarify that the statute of limitations in such cases is paused until the condo owners can finally get control of the association boards.

That would give associations additional time to sue for any design or construction defects.

The bill was supported by the Hawaii Council of Association of Apartment Owners, but was opposed by the Building Industry Association of Hawaii.

Sarah Love, president of the BIA, said in written testimony the proposed law “would result in additional costs for development, including affordable housing that is in short supply within the state of Hawaii.”

“If passed, the bill would expose developers to increased liability, resulting in increased insurance premiums and additional costs that would ultimately be passed on to the consumer,” Love wrote. “The high cost of housing is already a major issue in Hawaii, and the passage of this bill would only exacerbate the problem.”

The bill was unanimously approved in the state Senate, and passed the state House on a 47-1 vote, with only Rep. Sam Kong voting no.

Green said in his veto message the bill “has merit,” but ultimately agreed with the BIA.

According to his veto message, “the bill creates the potential for increased liability which results in the need for additional insurance coverage, which costs are ultimately borne and paid for by the buyers.”

“Our administration is focused on alleviating our critical housing shortage in Hawai‘i and we are reluctant to enact any new law that could add costs to housing or delays in construction,” Green wrote in the veto message.

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