Hawaii HOAs (& Their Attorneys) Face Potentially Staggering Financial Damages For Using Non-Judicial Foreclosure Process Against Unit Owners To Collect Unpaid Maintenance Fees, Other Assessments

In Honolulu, Hawaii, Honolulu Civil Beat reports:

• It’s probably going to take years to unravel the legal and financial uncertainty now facing condominium associations and law firms that used nonjudicial foreclosures — private sales without supervision by courts — to collect unpaid maintenance fees or other assessments prior to 2012.
  
  That’s the best guess after the recent ruling by a federal judge in Honolulu that condominium associations were not legally eligible to use the streamlined, nonjudicial foreclosure process that allowed properties to be sold at auction with minimal notice to — or procedural protections for — the unit owners.
  
  In a 57-page ruling filed March 30, U.S. District Court Judge Leslie Kobayashi concluded condominium associations did not have the power under Hawaii law to pursue quick, nonjudicial foreclosures under Part I of the state’s foreclosure law, which gave special rights to lenders whose mortgage contracts include a “power of sale” clause.(1)
  
  Part I dated back more than a century to 1874, during the era of the Hawaiian Kingdom, and allowed mortgagees to foreclose without going to court, and subject only to the terms contained in their mortgages.
  
  During and after the 2008-2009 “Great Recession,” a small group of attorneys marketed themselves to condominium associations by offering to pursue nonjudicial foreclosures.
  
  Many cash-strapped condominium associations, facing budget woes caused by growing levels of unpaid maintenance fees by owners caught in the recession’s downdraft, jumped at the chance to use the quicker and less expensive foreclosure process. Those associations are now facing a growing possibility that these prior foreclosures will be found to have been unlawful.
  
  And that’s got to have lots of condo owners, managers and directors having trouble sleeping at night.
  
  [...]

For more, see Why Condo Associations Are Sweating After A Judge’s Ruling (Improper foreclosure procedures were sometimes used, a federal judge found, and the stakes could be staggeringly high).

See also, Wrongful Foreclosure Claims Rock The Condo World (A class-action lawsuit alleges at least 160 individuals had their property illegally foreclosed by 72 condominium associations).

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(1) Galima v. Association of Apartment Owners of Palm Court, 1:16-cv-00023 (D. Haw. March 30, 2017.