Hawaii Administrative Rules › Title 16 - DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS › Chapter 107 - RULES RELATING TO HORIZONTAL PROPERTY REGIMES, CHAPTER 514A, HAWAII REVISED STATUTES › Subchapter 6 - REQUIREMENTS FOR REPLACEMENT RESERVES › Section 16-107-62 - Definitions

Current through June, 2024
Unless the context clearly indicates otherwise, the
				  definitions in chapter
				  514A, HRS, apply to this subchapter
				  and the following definitions apply to chapter
				  514A and this subchapter:
"Asset" means any part of the association property.
"Association property" means those parts of a condominium
				  project which an association is obligated to maintain, repair, or replace,
				  including but not limited to:
(1) All of the common elements of the project, as determined
				  from the project's declaration and the bylaws of the association and any master
				  deeds, restrictive covenants, apartment deeds, apartment leases, or other
				  documents affecting the project;
(2) Any real property which is not part of the common
				  elements but which the association either owns or leases for a term of more
				  than one year, such as a manager's apartment acquired by the association after
				  the project was developed;
(3) Any personal or movable property owned or leased by the
				  association; and
(4) Any fixtures owned or leased by the association.
"Association property" does not include any part of the
				  project which is "exempt association property" or which fewer than all owners
				  are obligated to maintain, such as apartments or certain limited common
				  elements.
Example:
A condominium association's documents state that a deck is a
				  limited common element assigned to less than all of the owners. The documents
				  also state that the owners of the apartments to which the deck is appurtenant
				  must pay for the cost of maintaining and repairing the deck. Therefore the
				  association need not set aside funds for replacement reserves for the
				  deck.
"Budget year" means the association's fiscal year for
				  accounting and budgetary purposes.
"Contingency reserves" means all reserve funds, other than
				  replacement reserves, in an association's reserves accounts, including but not
				  limited to reserves for:
(1) Unexpected contingencies or emergencies which, in the
				  reasonable judgment of the board, may occur;
(2) The payment of insurance deductibles or other expenses
				  relating to insurance;
(3) Legal expenses and lease renegotiation or fee purchase
				  expenses;
(4) Exempt association property or additions and improvements
				  to the association property, such as new construction; or
(5) Late payment or non-payment of an assessment by any
				  owner.
"Emergency" means the same as "emergency situation," defined
				  in section
				  514A-83.6(j),
				  HRS.
"Estimated age" means the estimated useful life of an asset
				  minus its estimated remaining life.
"Estimated remaining life" means any period:
(1) which is shorter than the estimated useful life of an
				  asset; and
(2) for which the asset will continue to serve its intended
				  function without requiring capital expenditures or major maintenance.
"Estimated replacement reserves" means funds which an
				  association's reserve study indicates must be assessed and collected during a
				  budget year to establish a full replacement reserve for the association by the
				  end of that budget year.
"Estimated useful life" means the period of time a new
				  asset, or an existing asset which has been newly restored or refurbished, will
				  serve its intended function without requiring capital expenditures or major
				  maintenance.
"Exempt association property" means any asset which:
(1) At the end of its estimated useful life will require
				  capital expenditures or major maintenance of less than $1,000 or less than 0.1
				  per cent of the association's annual operating budget, whichever is greater;
				  or
(2) Has an estimated remaining life of more than twenty
				  years.
Any asset which because of the passage of time ceases to be
				  exempt shall become association property and be subject to the transitional
				  rules stated in section
				  16-107-71.
"Existing association" means an association which has held
				  its first association meeting before January 1, 1993.
"Full replacement reserve" means reserve funds for an asset
				  equal to: The projected capital expenditure or major maintenance required for
				  the asset at the end of its estimated useful life; multiplied by a fraction
				  which has as its numerator and denominator the asset's estimated age and
				  estimated useful life, respectively.
The total of the full replacement reserves for each asset
				  shall be a full replacement reserve for the association.
Example:
A roof with an estimated useful life of ten years will cost
				  $100,000 to replace. At the end of its seventh year of life, a full replacement
				  reserve will be $100,000 x 7/10 = $70,000. In the tenth year of its life, a
				  full replacement reserve will be $100,000 x [10/10=] 1 = $100,000.
"Funds" or "reserve funds" means cash or cash equivalents
				  but excluding any funds which the association has borrowed. No borrowed funds
				  shall be included when calculating whether an association has collected its
				  statutory replacement reserves.
"Managing agent" means, for purposes of the good faith
				  exemption provided by section
				  514A-83.6(d),
				  HRS, any person who prepares a replacement reserve study and who:
(1) Is a managing agent as defined by chapter
				  514A, HRS, and commission rules and
				  policies relating to managing agents;
(2) Meets all legal requirements for managing agents;
				  and
(3) Is the managing agent for the association for which the
				  reserve study is prepared.
Any employee of a managing agent who prepares the
				  replacement reserve study shall be deemed a managing agent for purposes of this
				  definition.
"Minimum replacement reserve" means fifty per cent of a full
				  replacement reserve.
"New association" means an association which holds its first
				  association meeting on or after January 1, 1993.
"Statutory replacement reserves" means fifty per cent of an
				  association's estimated replacement reserves.
"Substantially deplete" means any expense for an emergency
				  which reduces the association's replacement reserves and contingency reserves
				  by more than seventy-five per cent.