Bill Text: HI HB2021 | 2014 | Regular Session | Introduced
Bill Title: Time Share; Developer; Purchasers; Bond; Letter of Credit
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2014-02-10 - The committee(s) on CPC recommend(s) that the measure be deferred. [HB2021 Detail]
Download: Hawaii-2014-HB2021-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2021 |
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TWENTY-SEVENTH LEGISLATURE, 2014 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to time share.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that existing time share law requires buyers' funds to be placed in escrow and disbursed from escrow to help the developer pay the costs of construction and development of time share projects. A buyer's funds may also be disbursed prior to the closing and deeding of the property to the buyer.
The legislature further finds that it is common to include a subordination clause in contracts for the sale of time share interests in a project that has yet to be constructed. In the subordination clause, the buyers subordinate their rights in the project to the lien of the construction lender. As a result, if the developer defaults under the construction loan, the lender may foreclose and acquire title to the project free of any claims of the buyers. This would be true regardless of whether the buyers' funds were used to pay the costs of construction and development.
The legislature additionally finds that some other states have adopted laws permitting a timeshare developer to use buyers' deposits upon posting a bond, thus assuring that the buyers' deposits will be refunded if construction of the project is not completed or the buyers otherwise becomes entitled to a refund. Timeshare developers prefer this approach, and this approach also benefits buyers by providing buyers a remedy in the event that the developer fails to complete construction or defaults under its construction loan.
The purpose of this Act is to allow disbursement of purchasers' funds to a developer; provided that the developer first posts a bond, letter of credit, or other financial assurance.
SECTION 2. Chapter 514E, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§514E- Release of purchaser's funds pursuant to bond, letter of credit, or other financial assurance. (a) Notwithstanding the requirements of sections 514E-16 and 514E‑17, the developer of a time share plan shall be entitled to the release of a purchaser's funds from escrow after the expiration of the purchaser's seven-day cancellation period under section 514E-8, if the following conditions have been met:
(1) The developer has deposited with the director and the escrow agent either: a surety bond, escrow bond, or irrevocable letter of credit; or any other financial assurance acceptable to the director. Any such surety bond or escrow bond shall be issued by a bonding company that is not affiliated with the developer; and
(2) After the purchaser's funds are released to the developer, the amount of the bond, letter of credit, or other financial assurance will equal or exceed the amount that would otherwise be held in escrow.
(b) If the accommodations of the time share plan are located outside of the State, a bond, letter of credit, or other financial assurance that has been deposited with or accepted by the jurisdiction in which the accommodations are located shall satisfy the requirements of subsection (a).
If the time share plan includes accommodations in more than one jurisdiction and if all of the accommodations are located outside of the State, a bond, letter of credit, or other financial assurance that has been deposited with or accepted by any such jurisdiction in the United States, or any foreign jurisdiction acceptable to the director, shall satisfy the requirements of subsection (a).
(c) When the developer is required by section 514E-16 to deposit with the escrow agent the purchaser's funds, negotiable instruments, and purchase money contracts, the developer shall also deposit with the escrow agent a copy of each purchaser's purchase agreement."
SECTION 3. New statutory material is underscored.
SECTION 4. This Act shall take effect upon its approval.
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INTRODUCED BY: |
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Report Title:
Time Share; Developer; Purchasers; Bond; Letter of Credit
Description:
Allows disbursement of purchasers' funds to a developer; provided that the developer first posts a bond, letter of credit, or other financial assurance.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
