It’s worth noting that the Intermediate Court of Appeals decision in the Sakal v Hawaiian Monarch case agrees in part with a decisiona 2017 ruling by Federal Judge Leslie Kobayashi in an unrelated case (please excuse my informal annotations on that linked do document).

Kobayashi’s decision reached the conclusion that prior to 2012, condominiums could not make use of an older provision of the state’s foreclosure law unless the condo associations had existing legal agreements with all owners specifically authorizing the remedy of “power of sale”.

See my Civil Beat column concerning Kobayashi’s decision from April 2017, “Ian Lind: Why Condo Associations Are Sweating After A Judge’s Ruling.”

The ICA decision, which the Hawaii Supreme Court has now backed, applies that same logic to broader range of nonjudicial foreclosure actions, even those conducted under the state law that was amended in 2012, giving the decision much broader potential potential impact.

There are already a number of other individual cases moving through both state and federal courts that will continue to sharpen the legal issues as they go forward.

Maui Attorney Lance Collins added some additional considerations in an email today.

He wrote:

One quirk of the non-judicial foreclosure situation is that while damages against an association may be limited to either 2 o 6 years (depending on the claim), title can be reclaimed/challenged up to 20 years (the prescriptive period for adverse possession — which is
someone who obtained “title” from an invalid nonjudicial foreclosure)
with some exceptions. I’m sure this will be the next subject of
litigation in these cases. But it will be the association paying damages to those who bought the units from non-judicial foreclosures as opposed to those who were long dispossessed of their units.

In that case, condo associations could be facing claims from both directions, from buyers of the units and their original (pre-foreclosure) owners.

There are more legal points from the ICA decision that could limit some of those claims, but I’ll put those aside for another day.

In addition, there’s been a lot of talk about the potential liability facing the law firms that specialized in nonjudicial foreclosures, and specifically pitched their services to condo associations as being able to provide a faster and cheaper way to foreclose on financially delinquent owners. Those firms now face the potential of lawsuits brought by their former clients. A lot of lawyers in town are watching these cases carefully because of their broad consequences.

By the way, Happy New Year!