Category Archives: Housing

Aging condominiums: Background reading

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With the interest shown in the last couple of posts on condominium issues, I grabbed a few published articles that contain useful information or perspectives. What’s clear is that the issues created by aging condominiums are by no means unique to Hawaii. They are being experienced in all areas where condominiums have been built.

Talking points. Periodic inspections of structural integrity, initially every 10 year for new buildings, and every five years to older buildings, to identify problems before they get worse. Buildings can last, but the systems they depend on, from plumbing to fire alarms to elevators, will not. Units in older condominiums can be good buys, but only if the project is well managed, with ongoing maintenance and a robust reserve fund. And the reverse, low maintenance fees may be enticing, but they could mask deferred maintenance that will be very costly in the long run.

“Aging Condominiums: Repair or Terminate?” FieldLaw.com (Canada), December 22, 2022.

“Maintaining Aging Buildings, Older Structures Have Special Concerns,” New England Condominium, March 2022.”

“Condo owners in aging building face $14M in repairs. If they can’t pay their part, they risk losing homes,” CBC.ca, January 24, 2022.

“Condos in crisis? The dangers of ageing condos and underfunded reserve funds,” Canadian Lawyer Magazine, September 21, 2021.

Bleay points to a case he has worked on where a strata (condominium) board has tried to pass a special levy to repair the roof, which is 40 years old. “But they have a mixture of resident and non-resident owners and a few new owners who are probably stretching themselves financially,” he says. There has been a vote three times, and it failed to reach the three-quarters majority needed to get the work done each time. “While the long-term interests in keeping the building maintained properly are the same, the short-term interests of the various owners can be very different.”

“I Know All About Condo Living. After Surfside, Change Is Coming.” NY Times, July 29, 2021.

Members of these boards are volunteers; some serve for only one or two years. They often find themselves between a rock and a hard place. If the board sets aside reserve funds for building repairs, they are often criticized and, in some cases, defamed and replaced by new board members opposed to raising maintenance fees or passing special assessments. The general attitude has often been, “Why pay today for what you can put off until tomorrow?”

The answer is that putting it off puts residents at risk and is typically much more expensive, demanding huge special assessments that make owners balk. Yet these owners are the people making decisions about matters of safety in condominiums. It is akin to 200 airline passengers electing five to seven of them to fly the plane, people who then ignore the advice of the pilots they have displaced. That’s pure insanity.

“The Aging Condo Conundrum: Are Terminations the Answer?” JDSupra.com, July 27, 2021

“Aging condos fraught with challenges for owners, governing groups,” Miami.edu, July 14, 2021.

“‘Condo wars’: Surfside association fighting in Florida was extreme, but it’s a familiar battle for HOAs,” USA Today, July 10, 2021.

“Advice for Hawaii Condo Owners and Boards,” Hawaii Business, September 4, 2020.

“Why Condos Need to Plan Ahead for Major Repair Projects,” Hawaii Business, September 2, 2020.

“A Condominium Can Last Hundreds of Years, But Not Its Components, A 40-year-old Honolulu condominium can show its age in many ways: brittle, leaking pipes; cracks in its concrete walls and decks; rusted rebar; and corroded railings and window frames,” Hawaii Business, August 31, 2020.

Dana Bergeman is the CEO of Bergeman Group, a local construction management company. He says many of Hawai‘i’s condominiums were built in the 1960s and ’70s and are reaching the point where they will need major infrastructure, cosmetic and architectural improvements to keep their value and remain liveable….

Hawaii Business Magazine spoke with plumbers, exterior renovators, homeowner association managers, real estate experts and reserve planning specialists to learn more about these capital improvement projects. They say that keeping an aging condo functional and safe can cost millions of dollars, take months or even years to complete and requires that condo boards plan well in advance.

“Older condos plagued by high maintenance costs,” MarketWatch.com, June 12, 2014.

What’s the life span of a high rise condo in Hawaii?

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Here’s a new point worth considering as many of Oahu’s condominium buildings reach 40 years or older: What happens when a condo becomes economically untenable in the face of falling property values caused by mounting maintenance fees that can’t keep up with the cost of needed repairs and maintenance? We need a discussion of procedures appropriate for condominium that reach the end of their useful life.

John from Toronto raised the issue in a comment, which I’m elevating into its own post.

There is a very quickly evolving condo industry and related regulations where I am a condo manager, here in Toronto, Canada.

One looming issue is: most large , tower style condos built in the 60’s to 80’s are beginning to decay rapidly. There is no easy way to terminate a Condominium Corporation here, and this will become a huge issue in the future as repair costs make owning a condo untenable. Rising insurance premiums, inflation rate, and costs of labor and materials has all created a perfect storm for higher condo fees. There needs to be improved procedures and processes made for owners who want to dissolve the corporation so a new development can be built in its place.

During the Honolulu City Council’s debate over mandatory retrofitting old buildings with fire sprinklers a few years ago, the Honolulu Fire Department identified about 360 buildings built before 1975, when a law requiring sprinklers in new high rise buildings was passed. Projects that were on the books but had not yet started construction were grandfathered in, and were not required to add sprinklers.

Hawaii condominiums on leasehold land already face an end-of-life point at the expiration of their leases, when the land reverts back to the landowner. The lease of the Kahala Beach Apartments expires in July 2027, and landowner Kamehameha Schools has shown no interest in extending the lease for another term. Apartment values in the Admiral Thomnas, a high rise condominium near Thomas Square, with a lease that expires in less than 30 years, have been falling since the remaining term fell below the 30year mark.

But in fee simple buildings, it’s a different story. Do condo declarations typically contain provisions streamlining the eventual need to sell not just a single unit, but an entire condominium project? Perhaps someone else can answer that question.

The website Quora laid out one scenario for the fate of older buildings.

What often happens is that people first stop paying their condo fees. Then they move out and stop paying their mortgages. The building deteriorates and the condo association doesn’t have enough income to keep going. The association would go bankrupt and the lenders would foreclose on the individual units. At some point, possibly, a developer would enter the picture, buy the foreclosed units cheaply, and put something else up, if the area is economically viable. If not, it just sits there. (Detroit’s been going through some of that.) The city might actually buy up foreclosures and bulldoze them, simply to get rid of the urban blight and to absorb some of the surplus housing units.

That’s pretty harsh. Is it possible here? Again, I don’t know.

This brings up another issue. Hawaii’s condominium law requires boards to have a plan to fund repair and replacement costs over a couple of decades into the future. These “reserve” studies list each major project, when it needs to take place, and the estimated cost, and then requires to board to have a plan to cover those costs, either with savings built up in advance, or via cash flow. So, if this law were effective, the horror stories of soaring monthly fees and special assessments to meet unexpected to cover costs should be a thing of the past.

But it looks like there are consultants who are willing to produce “make it come out right” reserve studies, extending the estimated service life of existing systems, turning a blind eye to known issues, or underestimating replacement or repair costs, all with the goal of keeping current maintenance fees lower than they would be otherwise. Sometimes the board itself will tinker with the line items, adding a few years here, cutting cost estimates there, with the same goal of keeping current costs low.

I sat on a condo board some years back that commissioned a reserve study from a reputable company. When the draft was received, the board majority was unhappy with the bottom line. The majority’s answer was not to develop a financial plan, but to go shopping for another consultant willing to produce a study that minimized the estimated future expenses. Our property manager at the time took the unusual step of telling the board he was keepign a copy of the original reserve study to defend himself if any litigation was triggered by the board’s questionable shopping around for an amenable consultant.

This just to say that an investigation of the “reserve study” industry and its members might turn up interesting findings.

Hawaii has fallen behind the times in protecting tenants’ rights

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Hawaii’s Landlord-Tenant Code was part of the legislative package put forward by Gov. John Burns in 1970, and it was passed into law by the Legislature in during the 1972 session. It was seen as a major step forward in protecting tenants’ rights.

The Honolulu Advertiser reviewed the law following its passage in a story published May 31, 1972: “After a couple hundred years, a new deal has been established between landlords and tenants in the Islands.”

It was, at the time, a progressive move.

But a decision by the 9th Circuit Court of Appeals issued on Tuesday involving an Oakland law is a pretty stark reminder that Hawaii’s Landlord-Tenant Code has failed to keep up with the times or to address the needs created by the related problems of high housing costs and equally high rates of homelessness.

The 9th Circuit decision came in a lawsuit against the City of Oakland by a couple that was required to pay more than $6,500 to their tenants who were evicted because the owners wanted to move back into their own home. The payment was below the standard set by city ordinance because the tenants had been renting less than two years, which reduced the amount of the payment.

The East Bay edition of The Mercury-News reported:

The lawsuit took aim at Oakland’s Uniform Relocation Ordinance that requires landlords to pay tenants thousands of dollars if they are evicted for no fault of their own, such as making way for the owner or a family member to move in or when an apartment is converted into a condo. Tenants’ rights advocates say the ordinance helps displaced renters afford first and last month’s rent and a security deposit in a new place — and helps prevent them from becoming homeless in the Bay Area’s expensive rental market.

San Francisco, Berkeley and Palo Alto have similar ordinances, but landlords have complained the laws put an unfair burden on homeowners.

Oakland’s ordinance eases the hardship of eviction, particularly for tenants who lose their rent control status and are thrust into a significantly more expensive market, according to Oakland City Attorney Barbara Parker.

Is a law requiring landlords to pay tenants’ “relocation assistance” considered radical?

Do a bit of online searching (“Uniform Residential Tenant Relocation Ordinance”) and you’ll find that the idea of required relocation assistance when tenants are tossed out through no fault of their own seems quite common and well established, although it’s hard to say whether the Oakland law is more onerous for landlords than is the case in other jurisdictions.

Ballinger v. City of Oakland, Decided by the 9th Circuit Court of Appeals 2-1-2022 by Ian Lind on Scribd

The squatters next door

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Squatter (noun): One who occupies a building or land without title or permission.
wiktionary.org

There’s a curious back story regarding the residence on Kumukahi Place in Hawaii Kai that alleged crime boss Michael J. Miske, Jr., purchased at a foreclosure auction two years ago, and is now in the process of selling.

On June 6, 2013, James Harold Hall and his family moved into the home, which had been vacant since the death of its owner the previous year, and was in the process of being foreclosed on by the lender. The Hall family became squatters, battling in court to avoid or delay eviction as long as possible. They were finally removed from the property by court order in early 2018.

This wasn’t their first squat.

The story of the Hall family squats is revealed in court filings generated over the course of a long and contentious divorce and related litigation between Hall and his former wife, Tara Marie Hall, as well as records of foreclosure and ejectment lawsuits by the lenders and owners of the properties where they lived without permission.

Prior to moving to Hawaii, Hall owned a construction company in Wisconsin which renovated and flipped houses. 

Hall Development and Construction was caught up in the collapse of the national housing market, and filed for Chapter 7 bankruptcy in October 2008. At the time of the bankruptcy, the company was facing 25 civil lawsuits and listed debts of $17,500,925.39. The family also lost their personal residence through foreclosure. 

The first and last “legitimate” rental 

James and Tara Hall, and their four daughters, moved to Honolulu in January 2009, court records show. Neither  was employed. They initially rented a home at 553 Kumukahi Place in Hawaii Kai.

During the two years the Halls lived at Kumukahi Place, James Hall became friends with their next door neighbor, Cary Thornton, a Honolulu contractor who originally hailed from Utah. 

Thornton, who was attempting to arrange a short sale of his home, gave Hall a power of attorney so that he could help in finding a buyer.

But Hall’s own financial problems soon forced the family to move before a sale could be done. The house on Kumukahi Place turned out to be “the last place the parties legitimately rented,” according to a later statement by Tara Hall filed in the couple’s divorce case.

“In 2011, our cache of money was depleted, consequently we could no longer afford rent at 553 Kumukahi Place,” Tara Hall wrote later in a statement filed in court.

“When money ran out, [James Hall] began this cycle of moving the family into abandoned homes—essentially creating a situation where the family were squatters,” Tara alleged.

Tara said that after leaving Kumukahi Place, her husband moved the family into another empty home he had located on Ehu Wai Place, also in Hawaii Kai. 

Empty house #1: Ehu Wai Place

It was a five-bedroom, three-bath home, with pool and a separate guest quarters, located on the marina in The Anchorage neighborhood of Hawaii Kai, considered one of the prime areas due to its waterfront location.

“[F]rom May 2011 to January 2012, our entire family were squatters in the home until we were finally legally evicted from the residence,” according to one of Tara Hall’s court filings.

Before the family moved themselves into the home, the owners of the Ehu Wai property had been hit with a foreclosure lawsuit by their mortgage holder, Chevy Chase Bank FSB. The lawsuit, which was filed  in July 2009, dragged on in court for over a year, but in August 2010, the  bank obtained a default judgement against the owners and was granted an interlocutory decree of foreclosure, court records show.

The home was sold at a foreclosure auction held on November 3, 2010, outside of First Circuit Court in Honolulu. Capitol One NA, which had acquired Chevy Chase Bank the year before, was the winning bidder. No other bidders appeared later to challenge the bank, and the commissioner’s sale was confirmed in court on January 6, 2011. The final order approving the sale, along with attorneys fees and costs, and a deficiency judgement, had been issued by Judge Bert Ayabe on April 7, 2011. 

The Halls moved in the following month. 

On January 17, 2012, about eight months after they occupied the home, three plain clothes police officers came to the door to serve a writ of possession signed by Judge Ayabe. The writ authorized the officers to “remove any and all persons occupying the above premises pursuant to this writ of possession, effective forthwith, including their personal belongings and property,” court records show.

Hall, who had taken paralegal classes at Kapiolani Community College, filed a pro se  lawsuit against the bank on the same day in an attempt to block the eviction, alleging it would violate tenants’ rights provided under federal law. The lawsuit asked the court to award  upwards of $95,000, including damages, costs, and fees.

Although the lawsuit went forward, Hall’s request for an emergency injunction to block eviction was denied, and the family was ejected from the property on February 1, according to documents filed later in court. Despite failing to halt the eviction, the family had managed to live in the home for about more than half a year, apparently without paying rent.

During a subsequent hearing on Hall’s lawsuit before Judge Rhonda Nishimura on June 21, 2012, months after the family was evicted, Hall claimed to have signed a rental contract before the family had moved into the house. Hall said he had agreed to do repairs and maintenance to make the house habitable, apparently in lieu of what he claimed was an agreed on rent of $1,925 per month. 

However, Hall did not produce a copy of a lease or any other documentation, and the lawyer representing the bank denied the existence of any landlord-tenant relationship with Hall. His lawsuit was dismissed “with prejudice,” meaning that it could not be refiled.

Hall appealed the decision to the Intermediate Court of Appeals. His appeal was dismissed the following year.

Empty House #2: Polihale Place

Meanwhile, after the family was evicted from the Ehu Wai house, Hall then “found another empty home in Portlock…where we squatted from January 2012 through June 2013,” according to Tara Hall’s account.

This time it was a 4-bedroom, 4-bath home on Polihale Place in the Koko Kai Triangle, which had last sold  in 2007 for $1.5 million.

The property owner filed a complaint in court on May 28, 2013 to throw the Hall family out of the home. This time around, Hall didn’t show up in court and lost the case by default. It took a while, but the family was evicted again.

Empty House #3:  Back at Kumukahi Place

In January 2012, about the same time the Hall family was being evicted from the house at Ehu Wai Place, Bank of America filed a foreclosure lawsuit against Hall’s friend and former neighbor on Kumukahi Place, Cary Thornton. 

Seven months later, ill and facing imminent foreclosure, Thornton took his own life. After Thornton’s funeral, his son and daughter sold the home’s furnishings, Thornton’s car and truck, and other personal effects.

In February 2013, after learning that the bank’s foreclosure of Thornton’s home was quickly moving toward a forced foreclosure auction, Hall attempted to intervene in the ongoing case, claiming to be Thornton’s “personal representative.” As evidence, he pointed to the power of attorney from Thornton a couple of years earlier as evidence he was an “interested party” with the right to be included in the proceedings. 

The judge in the foreclosure case sidestepped the question, and referred the matter to the probate court to sort out Hall’s claim to have a recognizable interest in Thornton’s estate. 

By this time, Tara Hall had enough. She moved out and filed for divorce on May 15, 2013.

Then, on June 6, 2013, after the foreclosure case was put on hold pending a ruling in probate court, Hall and three daughters moved into Thornton’s now vacant house.  Hall claimed they moved in to protect the empty house, and said Thornton had wanted to leave it to him in his will.

In the probate court, Hall submitted a declaration saying that after Thornton’s death, the coroner had given Thornton’s daughter, Tara Shook, a sealed package which was then opened in Hall’s presence. 

Hall said its contents “included Cary’s will and a note from Cary referencing his inclusion of me in his Will regarding his Hawaii Kai home.”

That note was evidence that he had an interest in Thornton’s estate, Hall argued. However, his declaration failed to convince the judge, and his request to be among those with an interest in Thornton’s house, and his estate as a whole, was denied.

And, in turn, his attempt to legally intervene to stop the bank’s foreclosure was also denied once his claim to have a legally recognized interest in the case had been rejected.

After Hall’s cases were dismissed in court, both decisions were appealed to the Intermediate Court of Appeals. This time around, Hall didn’t argue the case pro se, without the benefit of an attorney. Instead, he was represented in both appeals by Honolulu attorney Gary Victor Dubin and Fred Arensmeyer of the Dubin Law Office.

The Intermediate Court first dismissed Hall’s claim to have an interest in Thornton’s estate. In its ruling, the court found Hall had no “familial relationship” to Thornton, had failed to produce sufficient evidence of any interest, and what the court referred to as his “unauthorized occupation” of the home, along with his claims to have spent a substantial sum maintaining the property, did not provide the basis for validating his claim to an interest in the estate.

The court also dismissed Hall’s attempt to intervene in the foreclosure and challenge the appointment of a special administrator to conduct the foreclosure auction. The court rejected his attorneys’ generalized claims about the “pernicious and dishonest practice” of banks in pursuing foreclosures, and found their accusation that the special administrator had mismanaged Thornton’s estate “unsupported” by evidence. 

The Thornton home was sold at a commissioner’s auction on March 18, 2018. The winning bid of $1.4 million was submitted by  Kaulana Freitas. After the bid was confirmed, Freitas disclosed he was representing Michael J. Miske, Jr., who then took Freitas’ place in the sale. The sale was final, and a commissioner’s deed issued, on December 31, 2019.

In July 2020, Miske, Freitas, and nine other co-defendants were indicted on federal charges of being members or associates of a racketeering organization controlled and directed by Miske.

Attorney Gary Dubin was disbarred by order of the Hawaii Supreme Court effective November 9, 2020, after the court found he had engaged in conduct involving dishonesty, fraud, deceit or misrepresentation in several cases. His representation of Hall was not among the cases considered by the court. Dubin was then disbarred from practicing in Hawaii’s Federal District Court by order dated September 30, 2021  following reciprocal discipline proceedings. He has repeatedly denied any wrongdoing, blames a cabal of lenders and foreclosure lawyers, and is currently pursuing multiple appeals of both disbarment actions in the 9th Circuit Court of Appeals.

And there’s more to this story.

Stay tuned.