Hawaii HOA Budget Approval

Section 1: Overview, how HOA budgets are approved in Hawaii

Hawaii runs its common-interest community budgeting on two separate tracks. The Condominium Property Act, HRS Chapter 514B, governs condominium associations. The Planned Community Associations Act, HRS Chapter 421J, governs planned communities. For condominiums, the board adopts the budget: assessments rest on a budget that the board adopts and distributes — or makes available — to unit owners at least once a year, and the statute adds no owner-ratification or member-approval step.¹ The real constraint on that budget comes from HRS § 514B-148, the reserve mandate. It requires the board to build the budget on a reserve study and to fund a statutory minimum of the association's estimated replacement reserves.² Chapter 514B took effect on July 1, 2006, replacing the older condominium statute, Chapter 514A, which no longer governs condominiums created after that date.³ Hawaii built a comprehensive, reserve-mandate system. It borrowed selectively from the Uniform Common Interest Ownership Act without adopting it, and it does not use UCIOA's negative-option budget-ratification mechanism. The table and the chapter-by-chapter walkthrough below lay out how each statute works.

Section 2: The budget approval mechanism

This table reflects HRS Chapter 514B for condominiums and HRS Chapter 421J for planned communities. Each filled value traces to a primary statutory provision in the correct chapter; where a chapter is silent, the recorded declaration or bylaws govern.

2A. Quick-Reference Budget Mechanics Table

2B. The budget and reserve sequence under each chapter

Under Chapter 514B, the board drives the condominium budget cycle. HRS § 514B-144(a) provides that "assessments shall be made based on a budget adopted and distributed or made available to unit owners at least annually by the board." That language does two things: it creates the annual budget obligation, and it names the board as the body that adopts it.¹ No second step follows in which owners ratify or vote to approve the budget. The board adopts it, and assessments flow from it. The reserve mandate sits inside that budget. HRS § 514B-148(a) requires the budget to include a detailed summary, and item (5) requires "the estimated replacement reserves assessments that the association will require to maintain the property based on a reserve study performed by or on behalf of the association"; if an independent reserve study preparer did not prepare the study, one must review it at least every three years.² Section 514B-148(b) sets the funding floor: the association must assess owners to fund "a minimum of fifty per cent of the estimated replacement reserves assessments or fund one hundred per cent of the estimated replacement reserves assessments when using a cash flow plan."² The statute defines a "cash flow plan" as a minimum 30-year projection of income and expense requirements, and it requires separate designated reserves for any component whose capital expenditure or major maintenance will exceed $10,000.² So the reserve calculation feeds the budget before the board adopts it: the reserve study sets the required contribution, the contribution becomes a line in the annual budget summary, and the association then levies the assessment against units in proportion to common-interest allocations under HRS § 514B-144(b). Adopting the budget and levying the assessment are two distinct steps — the budget is the board's adopted financial plan, and the assessment is the per-unit charge that comes out of it.

Chapter 421J runs on a different track. The Planned Community Associations Act contains no section that parallels HRS § 514B-148. It requires no reserve study, sets no reserve-funding minimum, and names no body to adopt the budget or method to do it. Each association's recorded declaration and bylaws govern those matters. The statute touches assessments only at the edges. HRS § 421J-9 requires the board to "notify members in writing of any increase in regular assessments at least thirty days prior to the increase,"⁶ and HRS § 421J-3.5 requires meeting notices to state the general nature of, and the rationale for, any proposed special assessment unless the governing documents already provide the authority.⁴ The budget-approval model is therefore asymmetric. For condominiums, the board adopts under HRS § 514B-144, constrained by the reserve mandate of HRS § 514B-148. For planned communities, the board acts under the declaration and bylaws, constrained only by the notice rules of HRS §§ 421J-9 and 421J-3.5.

2C. Variation, the 514A transition, and the corporate-law overlay

Within Chapter 514B, the reserve and budget provisions of HRS § 514B-148 set a statutory floor. Section 514B-148(f) provides that the section's requirements "override any requirements in an association's declaration, bylaws, or any other association documents" on budget preparation and reserve funding, with two exceptions: documents that require collecting more than 50 percent of reserve requirements, and provisions on upgrading common elements.² In short, governing documents may demand more reserve funding than the statute, but not less. For the Chapter 514A transition, Part VI of Chapter 514B — management, which includes the fiscal sections — applies to condominiums created before July 1, 2006, so the budget and reserve rules reach older projects even though Chapter 514A created them.³ Many incorporated associations also organize as nonprofit corporations under HRS Chapter 414D, which supplies general corporate-governance rules but no separate budget-approval threshold; where it conflicts with the condominium or planned-community statute, the specific statute controls.⁸

Section 3: Budget-adjacent obligations

A. Reserves in the budget

The reserve mandate is the defining feature of Hawaii condominium budgeting, and Chapter 514B imposes it alone. HRS § 514B-148 requires the annual budget to rest on a reserve study, requires an independent review of that study at least every three years where it was not independently prepared, and requires the association to fund at least 50 percent of estimated replacement reserves — or 100 percent under a 30-year cash flow plan.² The provision is mandatory, and it overrides contrary governing-document language except where documents require more reserve funding. Chapter 421J imposes no comparable reserve study or reserve-funding requirement on planned communities, so for those associations reserves are a governance decision under the declaration, not a statutory floor.

B. Special assessments

For condominiums, Chapter 514B sets no fixed owner-vote percentage for special assessments. Instead, HRS § 514B-148(e) limits the board to exceeding its total adopted annual operating budget by no more than 20 percent in a fiscal year. Any larger extraordinary expense requires approval of a majority of unit owners unless it qualifies as an emergency — in which case the board must adopt a written-findings resolution and distribute it with the notice of assessment.² For planned communities, Chapter 421J specifies no special-assessment approval threshold; HRS § 421J-3.5 requires only that the meeting notice state the proposal unless the governing documents already supply the authority.⁴

C. Assessment increase limits

Neither statute caps the percentage of a regular-assessment increase. Hawaii's primary budget control is the reserve mandate, not a Davis-Stirling-style cap. The closest condominium constraint is the in-year 20 percent operating-budget-overrun limit of HRS § 514B-148(e), which restricts mid-year spending rather than capping the size of the adopted budget or the regular assessment.² For planned communities, the only statutory limit is procedural: 30 days' advance written notice of any regular-assessment increase under HRS § 421J-9.⁶

D. Financial review, audit, and disclosure tied to the budget cycle

Chapter 514B requires condominium associations to obtain an annual audit of the association's financial accounts and at least one annual unannounced verification of the association's cash balance by a public accountant. Associations of fewer than 20 units may waive both by a majority vote of unit owners, and the association must make the audit available to owners at least 30 days before the annual meeting that follows the fiscal year (HRS § 514B-150).⁷ Chapter 421J contains no statutory audit or financial-review requirement for planned communities, so any audit obligation arises only from the governing documents.

Section 4: Recent legislative and judicial activity

A. Recent bills

One enacted measure dominates recent condominium-budget activity: Act 157 of 2025, which sharpened the enforcement behind the budget-summary and reserve-disclosure requirements.

B. Recent appellate rulings

No Hawaii appellate decision in the past 36 months squarely interprets the budget-adoption or reserve-funding mechanics of HRS § 514B-148, or any Chapter 421J fiscal provision. Two recent decisions reach adjacent association-finance questions, and we note them for that reason.

C. Active legislative debates

Condominium-finance bills stayed active in the 2026 regular session, including measures relating to condominiums (SB2433) and condominium associations (HB2580). Reserve adequacy and budget disclosure continue to draw legislative attention in the wake of Acts 62, 199, and 157.

Section 5: National positioning and related coverage

Hawaii belongs to the small group of states that pair a statutory reserve study requirement with a statutory reserve-funding minimum. The Community Associations Institute lists Hawaii among the 12 states that require condominium reserve studies (California, Colorado, Delaware, Florida, Hawaii, Maryland, Nevada, Oregon, Tennessee, Utah, Virginia, and Washington) and among the 12 states that require condominium reserve funding (Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, Ohio, and Oregon).¹² The states that do both form a narrower group still. California, for example, requires a study but not a funding floor, so Hawaii sits with Delaware, Florida, Maryland, Nevada, and Oregon as states that mandate both. Hawaii's posture stands apart from the larger UCIOA negative-option family and from the minority of states that require no reserves at all. Hawaii borrowed selectively from UCIOA without adopting it, and it governs condominiums and planned communities under separate statutes, Chapters 514B and 421J. For a multi-state operator entering Hawaii, the practical implication is direct: reserve compliance under HRS § 514B-148 decides the condominium budget, because the reserve contribution is a mandatory line in the adopted budget rather than a discretionary policy choice.

HOA Weekly's Hawaii Budget Approval coverage updates quarterly as the Legislature and the Hawaii courts act. Federal frameworks — including the Fair Housing Act, the Americans with Disabilities Act, the Fair Debt Collection Practices Act, the Servicemembers Civil Relief Act, and the FCC's OTARD rule — apply to Hawaii associations regardless of the state budget framework.

Recommendations

• For condominium boards and managers (act now): Treat the reserve study as the gate to the budget cycle. Confirm that a current reserve study exists, that an independent reserve study preparer prepared or reviewed it within the last three years, and that the adopted budget funds at least 50 percent of estimated replacement reserves (or 100 percent under a 30-year cash flow plan). Build the full HRS § 514B-148(a) summary into the adopted budget itself rather than cross-referencing other documents. After Act 157, omitting the summary forfeits the board's good-faith defense and opens the association to a unit-owner injunction with the burden of proof on the association.
• The benchmark that changes the approach: If reserve funding falls below the 50 percent floor, or if the most recent independent review is more than three years old, the budget is presumptively non-compliant and the board should not adopt it as-is. If an extraordinary expense would push spending more than 20 percent over the adopted operating budget, secure majority owner approval — or document a qualifying emergency with a written-findings resolution — before levying.
• For planned-community boards and managers: Do not assume the Chapter 514B reserve, audit, or special-assessment rules apply. They do not. Look to the recorded declaration and bylaws for the budget-adoption model, the reserve policy, and the special-assessment threshold, and observe the one firm statutory rule: at least 30 days' written notice before any regular-assessment increase (HRS § 421J-9). Commissioning a voluntary reserve study still makes sense where lenders, insurers, or buyers expect one, but it is a governance choice, not a statutory duty.
• For multi-state operators: Onboard Hawaii condominium portfolios with reserve compliance as the first diligence item, because the reserve contribution is a non-discretionary budget line. Keep condominium and planned-community compliance workflows separate, because the two statutes share almost no fiscal mechanics.

Caveats

• The reserve-funding standard stated here — a minimum of 50 percent of estimated replacement reserves, or 100 percent under a minimum 30-year cash flow plan — is the current standard under HRS § 514B-148 as amended through Act 199 (2023) and Act 157 (2025). Earlier guidance that references a 20-year cash flow projection reflects the pre-Act 62 standard and is superseded.
• Chapter 421J's silence on budget adoption, reserves, and audits is itself the finding. Those cells read "Not specified by statute" because the statute does not address them, and the governing documents control. No Chapter 514B provision was imported into the Chapter 421J analysis, or the reverse.
• The two appellate decisions in Section 4 do not interpret the budget or reserve mechanics directly; they appear as adjacent association-finance rulings. No qualifying appellate decision construing HRS § 514B-148 or a Chapter 421J fiscal provision issued within the past 36 months turned up.
• Act 157's effective date is reported as June 3, 2025, the date the Legislative Reference Bureau's 2025 enacted-bills list confirms; the enrolled bill states it takes effect "upon its approval," and the individual measure-status page on capitol.hawaii.gov could not be rendered directly because of bot protection. The 2026-session bills (SB2433, HB2580) are noted as pending and were not verified as enacted.

1. HRS § 514B-144, Association fiscal matters; assessments for common expenses (capitol.hawaii.gov) ↩
2. HRS § 514B-148, Association fiscal matters; budgets and replacement reserves (capitol.hawaii.gov) ↩
3. HRS Chapter 514B, Condominiums, chapter contents and applicability (HRS §§ 514B-21, 514B-22) (capitol.hawaii.gov) ↩
4. HRS § 421J-3.5, Notice required; regular, annual, and special meetings (capitol.hawaii.gov) ↩
5. HRS § 421J-2, Definitions (capitol.hawaii.gov) ↩
6. HRS § 421J-9, Notification of assessment increases (capitol.hawaii.gov) ↩
7. HRS § 514B-150, Association fiscal matters; audits, audited financial statement (capitol.hawaii.gov) ↩
8. HRS § 421J-11, Applicability of other laws (capitol.hawaii.gov); HRS Chapter 414D, Hawaii Nonprofit Corporations Act ↩
9. HB70, 2025 Regular Session (Act 157, SLH 2025), Relating to Condominium (capitol.hawaii.gov) ↩
10. Wong v. Association of Apartment Owners of Harbor Square, No. SCAP-22-0000552 (Haw. Feb. 29, 2024) (courts.state.hi.us) ↩
11. Association of Apartment Owners of Regency Park v. Harder, No. CAAP-20-0000373 (Haw. Ct. App. Sept. 16, 2024) (mem. op.) (Hawaii State Judiciary) ↩
12. Community Associations Institute, Reserve Requirements and Funding for Community Associations (state-by-state reserve study and reserve funding lists) ↩