US Hawaii Broker License Exam Set Two

Upon the death of a tenant, the tenancy is not automatically terminated, nor is the tenant’s personal property considered abandoned under Hawaii law. The property manager’s primary responsibility is to secure the rental unit to protect the deceased’s assets from theft or damage. The correct legal procedure involves treating the personal property as part of the deceased tenant’s estate. The property manager must make a diligent effort to identify and contact the tenant’s next of kin or the individual designated as the emergency contact. However, the manager cannot grant access to or release the property to anyone, including family members, until a personal representative or administrator for the estate has been legally appointed by the probate court. This court-appointed individual is the only person with the authority to take possession of the deceased’s belongings and settle their affairs. The landlord or property manager can file a claim against the estate for any unpaid rent or damages that exceed the security deposit. The security deposit itself must be accounted for according to HRS §521-44, with any deductions itemized and the remaining balance paid to the estate’s representative, not disposed of unilaterally. Acting without court authority, such as by selling the property or re-letting the unit prematurely, would expose the property manager and the owner to significant legal liability.

Under Hawaii Revised Statutes (HRS) Chapter 508D, a seller of residential real property has a continuing duty to ensure the accuracy of their disclosure statement up until the time of closing. When a new material fact arises after the initial disclosure statement has been delivered and accepted, the seller is legally obligated to amend the disclosure. A material fact is any condition or defect that would be expected to measurably affect the value of the property to a reasonable person. The significant roof leak and subsequent water damage in this scenario clearly constitute a new material fact. The seller’s agent has a fiduciary and ethical duty to advise their client to comply with the law. The proper procedure is for the seller to promptly prepare and deliver a written amended disclosure statement to the buyer. The delivery of this amended statement automatically provides the buyer with a new right of rescission, typically for a period specified in the purchase contract, allowing the buyer to terminate the agreement based on the new information. Proceeding without this formal written amendment, even if repairs are promised or credits are offered, violates the statute because it denies the buyer their legal right to reconsider the purchase in light of the new defect. Verbal communication is insufficient; the amendment must be in writing.

The Notice of Default and Intention to Foreclose served in a non-judicial foreclosure proceeding in Hawaii must contain specific, statutorily mandated information to be valid. A critical component of this notice, as outlined in Hawaii Revised Statutes (HRS) Chapter 667, is the clear and conspicuous disclosure of the mortgagor’s right to convert the non-judicial foreclosure into a judicial foreclosure. This provision is a significant protection for homeowners. The notice must inform the homeowner that they can file a new civil action in the circuit court of the circuit where the property is located. By filing this complaint and a motion to stop the non-judicial foreclosure before the deadline specified in the notice (which must be at least thirty days after the notice is served), the homeowner can effectively halt the non-judicial process. The power of sale foreclosure is then stayed pending the outcome of the judicial proceeding. This conversion right allows the homeowner to bring the matter before a judge, which can provide more opportunities to raise defenses, challenge the debt, or negotiate a resolution under court supervision, as opposed to the faster, lender-driven non-judicial process. Failure by the foreclosing mortgagee to include this specific information regarding the right to convert renders the notice defective and can be grounds to invalidate the foreclosure sale.

The logical deduction to determine the correct answer is as follows. The primary legal and fiduciary responsibility of a principal broker in Hawaii, as mandated by Hawaii Administrative Rules (HAR) Title 16, Chapter 99, is the safeguarding of client funds and the preservation of essential transaction records. This duty is paramount and non-delegable. In an emergency, the integrity of trust accounts and the records that document them, along with all pending transaction files, must be the broker’s highest operational priority. The loss of these records could result in a complete failure to meet fiduciary obligations, leading to severe legal and financial repercussions for clients and the brokerage. Other actions, while important, are secondary. For instance, communicating with clients is contingent upon having accurate records to communicate about. Securing listed properties is typically the owner’s responsibility, although the brokerage may assist. Ensuring staff safety is a critical human concern but does not supersede the broker’s unique legal duty to protect client assets and transactional integrity. Therefore, the most critical action is to secure the records and data that form the legal and financial foundation of the brokerage’s obligations to its clients. A principal broker’s duties are extensive, but under Hawaii law, the responsibility for all client funds and records is a cornerstone of their license. Hawaii Administrative Rules, specifically Chapter 16-99, outlines strict requirements for record-keeping and the handling of trust funds. These rules are not suspended during an emergency. In fact, an impending disaster makes adherence to these duties even more critical. The principal broker is ultimately accountable for every client dollar and every contract. The primary action must be to protect the data and documents that prove compliance and allow for business continuity after the event. This includes ensuring that digital records are backed up in a secure, off-site location (such as a cloud server) and that irreplaceable physical documents are protected from potential damage from wind, water, or fire. While coordinating with agents and communicating with clients are vital functions of a well-run brokerage’s emergency plan, they are operationally dependent on the core records. Without the purchase contracts, escrow details, and trust account ledgers, a broker cannot properly advise clients or manage transactions. Securing these assets is the foundational step upon which all other recovery efforts are built.

In determining whether an item of personal property has become a fixture, and thus part of the real property, courts in Hawaii apply a series of legal tests. These tests are often remembered by the acronym MARIA: Method of attachment, Adaptability of the item, Relationship of the parties, Intention of the person placing the item, and Agreement between the parties. While a written agreement is the most definitive factor, its absence requires analysis of the other four. The intention of the annexor at the time of installation is considered the most crucial test. In the context of a commercial lease, a special category known as trade fixtures exists. Trade fixtures are items installed by a tenant on a leased property for the purpose of conducting their trade or business. Despite their potential attachment to the property, the law presumes that the intention of the commercial tenant was to use them for their business and then remove them upon lease termination. Therefore, trade fixtures remain the personal property of the tenant. The tenant has the right to remove these items before the lease expires. However, the tenant is also responsible for repairing any damage to the real property caused by the removal of the fixtures. In the given scenario, both the specialized oven and the industrial equipment were installed by the tenant for the express purpose of operating a business. Even though the oven is substantially attached, its use is integral to the tenant’s trade. Consequently, it qualifies as a trade fixture, which the tenant can legally remove, subject to the duty to repair any resulting damage.

In Hawaii real estate practice, when a single brokerage represents both the seller and the buyer in the same transaction, a dual agency is created. This presents a potential conflict of interest. Hawaii Revised Statutes Chapter 467 provides a specific mechanism to manage this situation called designated agency. When a principal broker or broker in charge appoints designated agents, the brokerage firm and the appointing broker become dual agents. Their primary role is supervisory, ensuring the integrity of the process and maintaining overall confidentiality for the transaction. However, the individual licensees appointed as designated agents do not become dual agents themselves. Instead, the designated agent for the seller functions as a single agent, owing full fiduciary duties, including loyalty, confidentiality, and advocacy, exclusively to the seller. Likewise, the designated agent for the buyer also functions as a single agent, owing the same complete set of fiduciary duties exclusively to the buyer. This structure is intended to provide both clients with a higher level of representation than they would receive under a traditional dual agency where one person represents both parties. The designated agents must maintain confidentiality and cannot share their respective client’s private information with each other, even though they are affiliated with the same brokerage.

No calculation is required for this question. Under the Hawaii Residential Landlord-Tenant Code, specifically Hawaii Revised Statutes Chapter 521, the rules governing a landlord’s entry into a dwelling unit are clearly defined to balance the landlord’s needs with the tenant’s right to quiet enjoyment. For non-emergency situations, such as showing the property to prospective purchasers, the landlord must provide the tenant with at least two days’ notice of intent to enter. The entry must also be scheduled for a reasonable time. If a landlord fails to provide this statutorily required notice, any subsequent refusal of entry by the tenant is not considered unreasonable. The landlord’s ability to seek legal remedies, such as an injunction or damages, is predicated on their own compliance with the law. In a situation where the landlord has provided defective notice, they have no immediate legal standing to compel access or penalize the tenant for the refusal. The proper course of action for the landlord is to correct their procedural error by issuing a new, compliant notice. Only after providing proper two-day notice and being met with an unreasonable refusal could the landlord then pursue remedies like terminating the rental agreement or seeking a court order for access, along with potential damages equivalent to one month’s rent and attorney’s fees.

The developer, Leilani, is creating a 30-lot subdivision. Under Hawaii Revised Statutes (HRS) Chapter 484, the Uniform Land Sales Practices Act, any developer offering 25 or more lots, parcels, units, or interests in a subdivision for sale or lease must comply with specific state-level registration and disclosure requirements. This law is administered by the Department of Commerce and Consumer Affairs (DCCA) and is designed to protect consumers by ensuring they receive full and fair disclosure about the property they are purchasing. The primary tool for this disclosure is the public report, also known as a subdivision public offering statement. Before any prospective purchaser signs a binding contract to purchase a lot, the developer must provide them with a copy of the DCCA-approved final public report. This report contains crucial information about the subdivision, including details on title, encumbrances, infrastructure availability, zoning, and the developer’s financial stability. Failure to provide this report gives the purchaser the right to rescind the contract. This state-level consumer protection requirement is separate and distinct from the county-level subdivision approval process, which deals with zoning, plat maps, and infrastructure standards. Therefore, even after receiving preliminary county approval, Leilani’s most critical legal obligation before executing sales contracts is to complete the state registration process and furnish the public report to buyers.

\[ \text{Initial Property Value} = \$2,100,000 \] \[ \text{Cost of Improvement (Glass Atrium)} = \$300,000 \] \[ \text{Market-Derived Value Added (Contribution)} = \$70,000 \] \[ \text{Final Appraised Value} = \$2,100,000 + \$70,000 = \$2,170,000 \] \[ \text{Diminution in Value (Loss)} = \text{Cost} – \text{Contribution} = \$300,000 – \$70,000 = \$230,000 \] The valuation of this property hinges on the appraisal principle of contribution, which states that the value of any component of a property is determined by how much it adds to the market value of the whole, not by its individual cost. In this scenario, the owner invested a significant sum in an improvement. However, the principle of conformity must also be considered. This principle holds that maximum value is realized when a property is in harmony with its surroundings and architectural style. The construction of an ultra-modern glass atrium on a historic Kama’aina residence in a neighborhood known for its traditional character represents a stark lack of conformity. This clash creates what is known as functional obsolescence, where the utility or desirability of the property is diminished because of its design. A prospective buyer in this market is likely seeking a property that aligns with the neighborhood’s aesthetic. Therefore, while the atrium is new and costly, its contribution to the overall market value is significantly less than its cost because it does not conform to market expectations for that specific area. An appraiser would analyze comparable sales to determine how much the market is actually willing to pay for such a feature, which in this case is far below the construction expense. The difference between the cost and the value added represents a loss to the owner due to this non-conforming improvement.

The correct course of action involves a multi-step process rooted in Hawaii’s specific land laws. First, the Government Survey System must be immediately dismissed as it is not and has never been used in the state of Hawaii. Second, the existing 19th-century metes and bounds description, while historically relevant, is unsuitable for creating and conveying numerous small lots due to its reliance on potentially non-existent or shifted natural monuments. Therefore, a new, precise survey of the entire parent parcel is required. Third, based on this new survey, a subdivision plat map must be created. This map will delineate all the new lots, blocks, access roads, and easements. Fourth, this plat map is then submitted for approval and subsequently filed with the Land Court, as the property is already registered in that system. The new individual parcels will then be legally described by referencing their specific lot and block numbers as shown on the newly filed Land Court Map, which will be tied to the original Land Court Application number. This creates clear, unambiguous, and state-guaranteed titles for each new lot. In Hawaii, legal descriptions of property are a critical component of a real estate transaction, and the state has a unique history and system. The primary method for describing irregularly shaped parcels has historically been the metes and bounds system, which uses distances, bearings, and monuments to outline a property’s perimeter. However, for creating new subdivisions, this method is cumbersome. The preferred and standard method is the lot and block system, also known as the recorded plat system. Under this system, a developer has a licensed surveyor prepare a detailed map of a new subdivision. This plat map is then recorded in the public record. From that point on, the individual parcels within the subdivision are described by their lot and block number, the subdivision name, and a reference to the recorded map. It is crucial to note that the Rectangular or Government Survey System, which is common in many mainland states and uses townships, ranges, and sections, is not used in Hawaii. Furthermore, Hawaii operates a dual system of land recordation: the Regular System (Bureau of Conveyances) and the Land Court (Torrens) system. Since the property in the scenario is in Land Court, any subdivision must adhere to the strict surveying and filing requirements of the Land Court to ensure the state’s guarantee of title extends to the newly created lots.

The core of this scenario revolves around the broker’s fiduciary duty of disclosure regarding material facts. A material fact in Hawaii is any information that would be expected to measurably affect the value of the property or a reasonable person’s decision to buy it. In this case, there are two distinct environmental risks: the Lava Zone 3 designation and the high rate of coastal erosion. The seller has fulfilled their basic obligation by disclosing the lava zone on the Seller’s Real Property Disclosure Statement (SRPDS). However, the broker, Kaimana, has independent knowledge of another material fact—the coastal erosion study. The broker’s duty to their client is not limited to simply verifying the seller’s disclosures. It is an affirmative duty to disclose all known material facts, especially those that could adversely affect the property. The coastal erosion data is highly material because it directly impacts the physical integrity of the land, its future usability, and its long-term value, which are the buyer’s stated primary concerns. While a Lava Zone 3 designation carries risk, the erosion presents a more progressive and certain threat to the property’s boundaries. Therefore, the broker’s primary responsibility is to proactively inform the buyer of this separate risk, ensuring the buyer can make a fully informed decision. Advising the client to seek expert consultation is a key part of exercising due care. Relying solely on the SRPDS or waiting for official updates to disclosure forms would constitute a failure of the broker’s fiduciary responsibility to protect their client’s interests.

The legal outcome is determined by applying the timeline specified in Hawaii Revised Statutes (HRS) Chapter 508D. The buyer, Leilani, received the amended Seller’s Real Property Disclosure Statement on June 7th. According to HRS §508D-13, upon receipt of an amended disclosure statement that contains information adversely affecting the value of the property, the buyer is granted a new right of rescission. This right must be exercised within fifteen (15) calendar days following the buyer’s receipt of the amended statement. Therefore, the calculation is June 7th plus 15 calendar days, which establishes the new rescission deadline as the end of the day on June 22nd. Under Hawaii law, the Seller’s Real Property Disclosure Statement is a critical document governed by HRS Chapter 508D. A seller has a continuing obligation to ensure the statement remains accurate up until the time of closing. If the seller becomes aware of any information that would make the current disclosure statement materially inaccurate, the seller is legally required to provide the buyer with an amended disclosure statement. The discovery of a major plumbing leak and subsequent subfloor damage is a clear material fact that adversely affects the property’s value. The seller’s good faith in repairing the issue does not negate the buyer’s statutory rights. Upon receiving the amended statement, the law provides the buyer with a renewed, unilateral right to terminate the purchase contract. This right is not contingent on negotiation or the seller’s consent. The buyer is granted a fresh fifteen-day period to review the new information and decide whether to proceed with the purchase or rescind the contract without penalty. This statutory protection ensures that a buyer can make a fully informed decision based on the most current and accurate information available before being obligated to complete the transaction.

The core of this scenario rests on the legal principle of lex situs, which dictates that the law of the jurisdiction where real property is located governs matters related to that property. The couple is moving from California, a community property state, to Hawaii, which is an equitable distribution state. Therefore, Hawaii law will govern the ownership, division, and inheritance of the real property they purchase in Honolulu, regardless of the fact that the funds used for the purchase originated from the sale of a community property asset. In Hawaii, there is no concept of community property. Instead, property acquired during a marriage is subject to equitable distribution upon divorce. This means a court will divide the property in a manner it deems fair and just, which is not necessarily a 50/50 split. The court considers numerous factors, such as the respective merits of the parties, the abilities of the parties, the condition in which they will be left by the divorce, and all other circumstances of the case. For married couples acquiring property, Hawaii law provides for a special form of co-ownership called Tenancy by the Entirety. This form of title is exclusive to married couples and reciprocal beneficiaries. It treats the couple as a single legal entity for the purpose of property ownership. A key feature is the automatic right of survivorship, meaning upon the death of one spouse, the surviving spouse automatically becomes the sole owner of the property, bypassing probate. This also provides significant protection against the individual creditors of one spouse. A broker must explain these Hawaii-specific options and, crucially, must advise the clients to consult with a qualified Hawaii attorney. This legal consultation is essential for them to understand how to title their new property and how their overall estate plan is affected by moving from a community property to an equitable distribution jurisdiction.

The valuation of this property is determined by analyzing its potential, not its current state. The core issue is the discrepancy between the existing use (a single-family home) and the use permitted by the new high-density zoning. The principle of highest and best use is the fundamental concept applied to resolve this. This principle dictates that the value of a property is based on the use that is legally permissible, physically possible, financially feasible, and results in the highest value. In this scenario, the new zoning makes a high-rise condominium legally permissible. The large lot size makes it physically possible. The prime Kaka’ako location makes it financially feasible. This development use would generate a significantly higher value than its current use as a single-family home, making it the maximally productive use. Therefore, an appraiser would conclude the property’s value is primarily as a development site. The existing home is an underimprovement for the land, and its value as a structure is likely negligible or even negative if demolition costs are considered. Other principles are secondary; for instance, substitution would be used to find comparable land sales for development, not comparable single-family homes, but only after the highest and best use has been determined.

Leilani acquires sole ownership of the property in severalty, and the property is not subject to the claims of Keanu’s individual creditors. In Hawaii, tenancy by the entirety is a special form of joint ownership available only to married couples or registered reciprocal beneficiaries. It is founded on the legal theory that the married couple is a single, indivisible legal entity. A primary and crucial feature of this ownership form is the right of survivorship, meaning that upon the death of one spouse, their interest is automatically extinguished, and the surviving spouse becomes the sole owner of the entire property by operation of law. This transfer occurs immediately and outside of the probate process. Another critical characteristic is the protection it affords against the separate debts of an individual spouse. Because the property is owned by the marital entity and not by the individuals, a creditor of only one spouse cannot attach a lien or force the sale of the property to satisfy that spouse’s individual debt. When Keanu passed away, his interest in the property ceased to exist, and full title vested in Leilani. Consequently, Keanu’s individual creditors have no claim against the property, as it now belongs entirely to Leilani, free and clear of Keanu’s separate financial obligations.

The action taken constitutes illegal discrimination based on marital status. Under Hawaii Revised Statutes (HRS) Chapter 515, it is unlawful to refuse to engage in a real estate transaction with a person because of their marital status. This protected class includes individuals who are single, married, separated, divorced, or in a cohabiting relationship. The property manager’s decision to deny the application from the unmarried couple was explicitly based on their status as unmarried cohabitants, which is a direct violation of this provision. While the federal Fair Housing Act does not include marital status as a protected class, Hawaii state law provides broader protections. In cases where state and federal laws differ, the stricter law generally applies. Therefore, compliance with federal law alone is insufficient. The argument that a decision is based on deeply held religious beliefs does not typically create a legal exemption from complying with public accommodation and fair housing laws in the context of commercial activities like renting property. Exemptions that may exist, such as the federal “Mrs. Murphy” exemption for owner-occupied smaller dwellings, are narrowly defined and do not absolve a landlord or their agent, a licensed broker, from adhering to Hawaii’s specific anti-discrimination statutes concerning marital status. The act of discrimination is the refusal to rent based on a protected characteristic, making the manager’s action a clear violation.

The governing statute for this situation is Hawaii Revised Statutes (HRS) Chapter 521, the Residential Landlord-Tenant Code, specifically section 521-56 which covers the abandonment of a tenant’s personal possessions. When a tenant abandons personalty, the landlord or their agent must follow a strict procedure. First, the landlord must store the property. Second, the landlord must mail a written notice to the tenant at their last known or forwarding address. This notice must describe the property and state the landlord’s intention to sell or dispose of it if it is not claimed within fifteen days after the notice is postmarked. If the tenant does not claim the property within the fifteen-day period, the landlord may sell it. After the sale, the landlord may deduct any unpaid rent, damages, and the costs of storing and selling the property. Any excess proceeds from the sale must be held by the landlord for the benefit of the tenant for a period of thirty days. The landlord must make a reasonable effort to notify the tenant of the sale and the amount of the proceeds. If the tenant does not claim the excess proceeds within this thirty-day period, the proceeds then belong to the landlord. Therefore, after selling the items and calculating the net profit, the broker’s primary legal duty is to hold those funds for the tenant for thirty days.

The initial ownership is a joint tenancy among Keanu, Leilani, and Akoni, each holding a one-third undivided interest. This form of ownership requires the four unities of time, title, interest, and possession, and includes the right of survivorship. First, Leilani’s action of conveying her interest to her cousin, Malia, via a quitclaim deed severs the joint tenancy with respect to that one-third share. This is because the unities of time and title are broken for Malia’s interest. Consequently, Malia becomes a tenant in common with Keanu and Akoni. However, the joint tenancy between Keanu and Akoni remains intact for their combined two-thirds interest. Second, Keanu’s action of taking out a mortgage on his interest must be analyzed under Hawaii law. Hawaii is a lien theory state, meaning a mortgage creates a lien on the property but does not convey title to the lender. Therefore, mortgaging an interest in a joint tenancy does not sever the four unities, and the joint tenancy between Keanu and Akoni persists. Finally, upon Keanu’s death, the right of survivorship, which is the defining characteristic of his joint tenancy with Akoni, takes effect. Keanu’s one-third interest automatically passes to Akoni by operation of law. This transfer happens outside of probate. Crucially, because Keanu’s property interest was extinguished at the moment of his death, the mortgage lien attached to that specific interest is also extinguished. The lender’s security interest does not survive and does not encumber the interest that Akoni receives. As a result, Akoni’s ownership interest becomes two-thirds (his original one-third plus Keanu’s one-third), and Malia holds her one-third interest. They hold title together as tenants in common, as there is no right of survivorship between them.

\[\$1,200,000 \times 6\% = \$72,000\] In Hawaii, as in most jurisdictions, the real estate commission is calculated based on the gross sales price stipulated in the purchase contract, unless the listing agreement explicitly specifies an alternative method, such as net proceeds. The gross sales price is the total amount the buyer agrees to pay for the property. Seller concessions, such as credits for repairs, closing costs, or other buyer expenses, are treated as adjustments or debits against the seller’s proceeds at closing. These credits do not retroactively alter the legally agreed-upon sales price of the real estate itself. Therefore, the brokerage has earned its commission based on the full, negotiated price that was accepted by the seller and memorialized in the purchase contract. For the commission to be calculated on a lower amount, the listing agreement would need to contain clear and unambiguous language to that effect. It is a critical responsibility for a principal broker to ensure their client understands these terms when signing the listing agreement to prevent disputes at the time of closing. The basis of the commission is a material term of the contract and is tied to the value exchanged for the property, not the seller’s final cash position after all expenses and credits are accounted for.

The analysis of long-term Return on Investment (ROI) for a Hawaii leasehold property requires a deeper analysis than a simple fee simple property. The core calculation can be represented as ROI = (Annual Net Operating Income) / (Total Cash Investment). Logical Analysis of Key Variable: 1. Identify a unique, recurring expense for a leasehold property: the ground lease rent. This is a significant component of the operating expenses used to calculate the Net Operating Income (NOI). 2. Review the lease agreement to find the lease rent renegotiation date. This is a contractually fixed date when the landowner can adjust the rent. 3. Project the impact of this renegotiation. The new rent is typically based on the land’s fair market value at the time of renegotiation, not its historical value. 4. In a market with appreciating land values like Hawaii, this reset can cause a substantial, often multi-fold, increase in the ground lease rent expense. 5. This drastic increase in a major operating expense will directly and severely decrease future NOI, thereby collapsing the projected ROI. It also creates significant uncertainty that negatively affects the property’s future market value and liquidity. 6. Therefore, the potential financial shock from a lease rent renegotiation is a more critical long-term risk factor to project than more stable, predictable costs. In Hawaii’s real estate market, the distinction between fee simple and leasehold ownership is paramount for investors. While fee simple ownership grants perpetual ownership of the land and improvements, leasehold ownership grants the right to use the property for a pre-determined term, subject to paying ground lease rent to the landowner. A critical component of any leasehold agreement is the provision for lease rent renegotiation. These renegotiations, often scheduled every 10 to 20 years, are designed to adjust the ground rent to reflect the current market value of the underlying land. For an investor projecting long-term returns, the timing and potential outcome of this renegotiation are of utmost importance. A substantial increase in the ground rent can drastically increase operating expenses, thereby reducing or even eliminating the net operating income and devastating the return on investment. This risk also impacts the property’s future salability and value, as potential buyers will be wary of an impending large rent increase. Consequently, a thorough analysis of the lease terms, especially the renegotiation clause, is more critical than analyzing more predictable operating expenses.

The conclusion is that the Broker-in-Charge (BIC) retains full supervisory responsibility for the affiliated licensee’s actions throughout the personal transaction. Under Hawaii Administrative Rules (HAR) §16-99-3.1, a principal broker and any designated broker-in-charge have a direct duty to supervise the real estate activities of all licensees affiliated with the brokerage. This duty is comprehensive and does not distinguish between transactions where the licensee is acting as an agent for a client and transactions where the licensee is a principal (e.g., buying or selling their own property). The rationale is that the individual is still a licensee of the brokerage, and their actions, whether for a client or for themselves, reflect upon the brokerage and are governed by Hawaii real estate license law (HRS Chapter 467). The BIC must ensure the licensee adheres to all legal and ethical requirements, including proper disclosure of their license status, accurate completion of contracts, and adherence to all statutory timelines and procedures. The BIC’s liability is not diminished simply because the licensee is the owner of the property. The public must be protected, and the integrity of the brokerage must be maintained, which requires consistent oversight regardless of the licensee’s role in a specific transaction. Therefore, the BIC is responsible for overseeing the entire process to ensure compliance.

The core of the issue lies in the authority of a Planned Community Association’s board of directors under Hawaii Revised Statutes Chapter 421J and the association’s governing documents. The board has a fiduciary duty to manage the association’s finances prudently. This includes levying regular assessments for budgeted operating expenses and maintaining adequate reserves. However, for significant, unbudgeted capital improvements that are not emergency repairs, the board’s power is typically limited. Such expenditures generally require a special assessment. The process for levying a special assessment is strictly governed by the association’s declaration and bylaws, and almost always necessitates a vote of the ownership. Attempting to fund a major new amenity by labeling the charge a “special fee” or reallocating operating funds without proper authorization is a procedural circumvention. This action is likely ultra vires, meaning it is beyond the legal power and authority granted to the board. The nature of the expenditure, a non-essential capital improvement, rather than its label, dictates the required procedure. A broker involved in a transaction within this community has a duty to recognize the irregularity, understand its potential to become a significant financial liability or legal dispute for a new owner, and advise their client accordingly. This disclosure is a critical component of a broker’s due diligence and duty to protect their client’s interests.

Determination of Property Tax Exemption Status for the Fiscal Year: Assessment Date for the relevant fiscal year (July 1 to June 30): January 1. Seller’s qualification status on January 1: Owner-occupant, qualifying for the Homeowner’s Exemption. Legal consequence: The property’s tax status, including the Homeowner’s Exemption, is fixed for the entire fiscal year based on the January 1 assessment. Calculation basis for proration at closing: The annual tax bill, which is calculated as (Assessed Value – Homeowner’s Exemption Amount) × Tax Rate. Conclusion: The exemption remains in effect for the full fiscal year, and prorated taxes are calculated based on this reduced annual tax amount. In Hawaii, real property taxes are administered at the county level, and the tax liability for an entire fiscal year, which runs from July 1 to June 30, is determined based on the property’s status as of the assessment date on the preceding January 1. The homeowner’s exemption, a significant tax benefit, is granted to a property if the owner owns and occupies it as their principal residence on this January 1 assessment date. Once this status is established, the exemption applies to the property for the entire upcoming fiscal year. This status is not altered or revoked mid-year simply because the property is sold. Therefore, even if the property is sold to a new owner who would not independently qualify for the exemption, such as an investor, the pre-existing exemption remains effective until the end of that fiscal year. At closing, the proration of taxes between the buyer and seller is calculated based on the annual tax bill that already reflects the seller’s exemption. The new owner effectively benefits from this lower tax liability for the remainder of the fiscal year. The property’s classification and eligibility for any exemptions will only be re-evaluated for the subsequent fiscal year based on its use and ownership on the next January 1 assessment date.

The Federal Fair Housing Act, part of the Civil Rights Act of 1968, prohibits discrimination in the sale, rental, and financing of dwellings based on race, color, religion, sex, national origin, disability, and familial status. Familial status protects households that include one or more individuals under the age of 18. An advertisement that expresses a preference or limitation based on any of these protected classes, such as “no children,” is a direct violation of the Act. While the Act includes certain exemptions, they are narrowly applied. One such exemption is colloquially known as the “Mrs. Murphy” exemption. This applies to owner-occupied buildings with four or fewer residential units. In the given scenario, the owner lives in one unit of a four-unit building, which means the property type itself would typically fall under this exemption for the act of renting, provided no real estate broker is used. However, there is a critical and overriding limitation to this exemption. The “Mrs. Murphy” exemption does NOT permit discriminatory advertising. Section 3604(c) of the Fair Housing Act makes it unlawful to make, print, or publish any notice, statement, or advertisement with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on a protected class. This prohibition on advertising applies universally, even to transactions that might otherwise be exempt from other provisions of the Act. Therefore, the owner’s advertisement is an illegal act, as the language “No children, please” explicitly discriminates on the basis of familial status. The legality is determined by the content of the advertisement itself, not the potential exemption of the rental transaction.

The procedural pathway for a complaint against a real estate licensee in Hawaii begins with the filing of a written complaint with the Regulated Industries Complaints Office, known as RICO. RICO, operating under the Department of Commerce and Consumer Affairs, is the state’s primary investigative body for licensed professions. It is RICO’s responsibility, not the Real Estate Commission’s, to conduct the initial investigation into the allegations. If RICO’s investigation uncovers sufficient evidence of a violation of Hawaii Revised Statutes Chapter 467 or the Commission’s administrative rules, RICO will file a formal Petition for Disciplinary Action against the licensee with the Real Estate Commission. The Commission then acts as the adjudicatory body, holding a formal hearing to review the evidence and determine if a violation occurred. If the licensee is found to have violated the law, the Commission has the authority to impose a range of sanctions, including fines, license suspension or revocation, or mandatory education. This disciplinary process is entirely separate from any civil action the aggrieved party may take or any claim against the Real Estate Recovery Fund. A claim against the Recovery Fund can only be made after the aggrieved party has obtained a final civil judgment against the licensee for fraud, misrepresentation, or deceit, and has demonstrated that they are unable to collect on that judgment. A payout from the Recovery Fund results in the automatic termination of the licensee’s license.

The correct order of payment from the foreclosure sale proceeds is determined by the rules of lien priority under Hawaii law. According to Hawaii Revised Statutes §246-55, a lien for real property taxes “shall have priority over all other liens.” This is often referred to as a “super-priority” lien. This means the lien for unpaid real property taxes is superior to all other encumbrances on the property, including mortgages, mechanic’s liens, and judgment liens, regardless of when those other liens were recorded or attached. Therefore, the City and County of Honolulu’s tax lien for the delinquent 2023 taxes must be satisfied first from the proceeds of the sale. After the tax lien is fully paid, the remaining proceeds would then be distributed to the other lienholders based on their priority, which is typically determined by the date of recording. In this case, the first mortgage lien, recorded in 2020, would have priority over the mechanic’s lien that attached in 2022. The mechanic’s lien would be paid last from any remaining funds. The critical concept is the absolute priority granted to real property tax liens by state statute, which overrides the general “first in time, first in right” principle that governs most other liens.

The situation involves an in-house transaction where one brokerage represents both the seller and the buyer. Hawaii law, specifically Hawaii Revised Statutes section 467-1.6, allows for designated agency to manage this potential conflict of interest. The broker-in-charge, Leilani, has established a designated agency relationship. In this structure, she appoints one licensee, Keanu, as the seller’s designated agent and another licensee, Malia, as the buyer’s designated agent. This appointment fundamentally alters the agency duties compared to a traditional dual agency scenario. As the designated agent for the Chen family, Malia’s legal responsibility is to act as their exclusive agent, providing them with the full range of fiduciary duties. These duties include undivided loyalty, reasonable care, disclosure, accounting, and, most critically in this case, confidentiality. The duty of confidentiality requires Malia to protect her clients’ private information, which includes their financial position and negotiation strategy. Therefore, she is legally and ethically obligated to not disclose the Chens’ maximum budget to the seller or the seller’s designated agent, Keanu, even though they are affiliated with the same brokerage. The purpose of designated agency is to allow both buyer and seller to receive full representation from their respective agents within the same firm, thereby avoiding the limitations and conflicts inherent in a single-person dual agency relationship.

The legal principle at the core of this scenario is the nature of tenancy by the entirety as recognized under Hawaii law. This form of co-ownership is available exclusively to married couples and is characterized by the legal fiction that the spouses are a single legal entity. For a tenancy by the entirety to exist, the five unities of time, title, interest, possession, and person (marriage) must be present. The most significant feature of this tenancy is the right of survivorship and the protection it affords against the individual creditors of one spouse. Because the property is owned by the marital unit as a whole and not by the individual spouses as separate persons, the separate debt of one spouse cannot be satisfied by levying against or forcing the sale of the property held in tenancy by the entirety. A creditor of just one spouse cannot attach the property to satisfy their claim because doing so would infringe upon the property rights of the non-debtor spouse. The entire estate is considered owned by the indivisible marital entity. Therefore, a lien for an individual debt cannot be foreclosed upon as long as the marriage and the tenancy by the entirety both continue to exist. The property is shielded from such individual liabilities.

The National Association of REALTORS (NAR) Code of Ethics, specifically Article 12, establishes a strict standard for honesty and truthfulness in all real estate communications. The core principle is the obligation to present a “true picture” in advertising, marketing, and any other representations. This duty is not limited to avoiding factual falsehoods; it extends to preventing the creation of misleading impressions through exaggeration, omission, or the use of deceptive imagery. In the context of digital marketing, where visual content is paramount, this obligation is critically important. While artistic or technical enhancements in photography, such as adjusting lighting or using certain lenses, may be permissible to a degree, they cross an ethical boundary when they fundamentally misrepresent the property. A material misrepresentation occurs when the advertising creates a false belief about a significant characteristic of the property that a reasonable consumer would rely upon. For instance, selectively showcasing a feature, like an ocean view, in a way that implies it is a prominent and easily enjoyed aspect of the property when it is actually limited and obstructed, is a direct violation of the “true picture” standard. This is because it deceives the consumer about a highly valued attribute. This type of misrepresentation is considered more severe than a technical violation, such as omitting a firm’s name, because it directly impacts a consumer’s understanding of the property’s value and desirability. The overall impression created by the marketing must be accurate and not lead a potential buyer to a false conclusion about the property’s key features.

Step 1: Identify the governing law for the landlord-tenant relationship, which is the Hawaii Residential Landlord-Tenant Code (HRS Chapter 521). Step 2: Pinpoint the specific landlord duty related to the physical condition of the premises. This falls under HRS §521-42, which mandates the landlord maintain the dwelling unit in a habitable condition. Step 3: Analyze the nature of the reported problem. A persistent water leak causing damage and potential mold growth directly impacts habitability and poses a health and safety risk to the tenant. Step 4: Evaluate the property manager’s role. As the agent for the landlord, the property manager assumes the landlord’s statutory duties toward the tenant. Step 5: Synthesize the duty with the problem. The manager’s primary legal obligation is to the tenant under the lease agreement and HRS 521. This duty to provide a habitable unit is immediate and is not contingent upon the cooperation of a third party, such as an upstairs neighbor or the AOAO. Step 6: Conclude the required course of action. The manager must take prompt action to mitigate the damage and restore the unit to a habitable state. This involves initiating repairs and remediation directly. The separate issue of financial responsibility and recovering costs from the at-fault party is a subsequent step and does not delay the primary duty to the tenant. The Hawaii Residential Landlord-Tenant Code, specifically under HRS §521-42, imposes a non-delegable duty upon landlords to maintain their rental units in a fit and habitable condition. This includes ensuring plumbing is in good working order and that the premises are safe and clean. When a condition arises that threatens habitability, such as a significant water leak, the landlord or their agent must act promptly to remedy the situation. In a condominium context, while the source of the problem may be another unit, the landlord’s contractual and statutory obligation is to their own tenant first. The property manager, acting on behalf of the landlord, cannot postpone repairs while waiting for another party to accept responsibility. The immediate priority is to protect the tenant’s right to a safe dwelling and to mitigate further damage to the client’s property. The process of assigning financial liability and seeking reimbursement from the responsible unit owner or their insurer is a secondary action that follows the initial remediation. Failure to act promptly could expose the landlord to legal action from the tenant, including lease termination and claims for damages, as outlined in HRS §521-63.