Two 2026 rulings make how an association took title decide the rent accounting
Two 2026 rulings make how an association took title decide the rent accounting
2026-09-10 · Hawaii · Courts
Two Hawaii appellate decisions two months apart in 2026 draw one line: an association that forecloses and rents the unit out owes an accounting for surplus rents, and an association that took the same unit by deed in lieu does not. Both are unpublished, and neither had a certiorari disposition on record as of this writing.12
The statute in question
HRS § 514B-146(n) applies “[a]fter any judicial or nonjudicial foreclosure proceeding in which the association acquires title to the unit,” and defines excess rental income as net income received by the association “after a court has issued a final judgment determining the priority of a senior mortgagee.” Excess rental income goes to lienholders by priority, not to the association.
Yang: the clock starts at the first judgment, including the association's own
AOAO of Kawaihae Crescent East v. Yang, No. CAAP-24-0000480, memorandum opinion filed July 22, 2026. The owner defaulted on both his mortgage and his assessments in 2011. The association judicially foreclosed in 2012 and obtained a 2013 judgment that also determined the mortgage was senior. It then held and rented the unit, collecting $230,792.90 in rent over eleven years. When the lender finally foreclosed and its sale was confirmed in 2024, the circuit court found $65,701.37 in excess rental income.
The association argued that only the $7,050 collected after the 2024 judgment could qualify. The ICA read the words as written: “Nothing in this language requires the judgment be the senior mortgagee’s foreclosure judgment.… which in this case was the 2013 Judgment.” On purpose: “the legislature intended for a foreclosing association to be able to collect what it was due and no more… There is no reason for the association to retain this amount while a mortgagee goes unpaid.”
Haleakala Gardens: a deed in lieu is not a foreclosure
US Bank Trust National Association v. AOAO Haleakala Gardens, No. CAAP-24-0000505, summary disposition order filed June 8, 2026. The owners quitclaimed their unit to the association on June 18, 2013 to settle a maintenance-fee debt. No foreclosure. The association rented and maintained it; when the lender foreclosed in 2024 the circuit court ordered eleven years of rents accounted for and disgorged.
Vacated: “the AOAO did not acquire the Property through judicial or nonjudicial foreclosure proceedings.… We conclude that neither HRS § 514B-146(n), nor Elima, provides legal authority for the circuit court to order the AOAO to account for and disgorge rental proceeds.”
What the pair means for an association holding a rented unit
If you foreclosed, assume disgorgement exposure and reserve for it. Yang means the accrual runs from the association’s own priority judgment forward — potentially a decade before anyone raises the subject. Recoverable categories under § 514B-146(n)(1)–(4) have to be tracked contemporaneously from that date, because everything above them is not the association’s money and treating it as income now creates a liability later.
The practical failure mode is bookkeeping, not law. An association that has been booking eleven years of rent as revenue, spending it, and never running the statutory waterfall arrives at the lender’s confirmation hearing with a number it cannot produce.
If you took a deed in lieu, the statutory hook is gone. That is a real and probably underappreciated argument for negotiating a deed in lieu rather than completing a foreclosure where the association intends to hold and rent the unit for years.
Do not over-read Haleakala Gardens
The panel vacated only the portion of the order that rested on § 514B-146(n) and Elima Lani. It expressly left open that some other equitable basis might support an accounting on remand. So the holding is that the statute does not reach a deed-in-lieu acquisition — not that the association keeps the money whatever happens.
A board choosing a settlement route because of this decision is choosing a better statutory position, not immunity.
Where Elima Lani sits now
Nationstar Mortgage v. AOAO of Elima Lani Condominiums, 152 Hawaii 406 (2023), is the Supreme Court decision both panels work from. Yang distinguishes it on the ground that in Elima Lani the priority determination and the lender’s foreclosure judgment happened to be the same document, so the court never confronted a case where they were years apart. That is a narrow and honest distinction, and it is the reason Yang is not a departure.
The operational checklist
- Identify the judgment that first determined a senior mortgagee’s priority in any association foreclosure — it is frequently the association’s own decree, and its date is now the accounting start date.
- Run the § 514B-146(n) waterfall annually, not at the end. The lien for delinquent assessments is paid, credited or reimbursed first under the statute; the remaining deductions follow, and the residue is held for lienholders by priority, not pro rata.
- Segregate the surplus. An association that has spent it has a cash problem on top of a legal one.
- Record how title was acquired in the file, prominently. After these two decisions it is the first question anyone will ask.
What to watch
Certiorari in either case — neither showed a disposition on record as of this writing, and the Yang window is recent. Also watch for the equitable-accounting theory the Haleakala Gardens panel preserved: if a court adopts it on remand, the distinction between the two routes narrows considerably.
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