Why the fees-on-fines point is the sharp one

Because of what Hawaii law already does and does not do about fines.

Fines cannot be foreclosed nonjudicially. Section 514B-146(a) prohibits an association from using the chapter 667 nonjudicial or power-of-sale remedies “to foreclose a lien against any unit that arises solely from fines, penalties, legal fees, or late fees” — such a foreclosure must be filed in court.

Fines are subject to a mediation stay. Under § 514B-146(g), an owner contesting fines, penalties, late fees, lien filing fees or attorneys’ fees has thirty days from a requested written statement to demand mediation — and once demanded, “the association shall be prohibited from attempting to collect any of the disputed charges until the association has participated in the mediation,” to be completed within sixty days.

And fines cannot default a payment plan. Section 667-94(c) provides that unpaid fines imposed while a payment plan is in effect “shall not be deemed a default under the payment plan,” that fines and related attorneys’ fees “shall not be deducted from the unit owner’s payments,” and that the parties shall attempt to resolve fine disputes through mediation within thirty days of written notice.

The Legislature has therefore repeatedly walled fines off from the association’s hardest collection tools. What it has not done is limit the legal fees generated by pursuing them — which, on a modest fine, routinely exceed the fine itself.

The number the courts have declined to police

Compare the planned community side. In Ewa Villages Owners Association v. Tautua (June 18, 2026), the Intermediate Court of Appeals affirmed $67,280.34 in fees and costs against a collection amount of $11,498.21, reasoning that HRS § 421J-10 entitles the association to “all” reasonable attorneys’ fees and declining “to find abuse based solely on the attorneys’ fees and costs exceeding the ‘collection amount.’”

That is the gap SB 2037’s cap was aimed at, and the courts have said plainly that proportionality alone will not close it.

What § 514B-157 does give an owner

One sentence, and it is the most valuable in Hawaii association fee law. Where an owner’s claim is not substantiated, the association recovers its fees — “unless before filing the action in court the owner has first submitted the claim to mediation, or to arbitration under subpart D, and made a good faith effort to resolve the dispute.”

Mediating first is the shield. It is free-standing, it does not depend on winning, and it is available to every owner.

The reciprocal also exists: under § 514B-157(a), if the claims on which the association acted “are not substantiated,” the owner’s costs and reasonable attorneys’ fees “shall be promptly paid on demand… by the association.”

Where 2027 is likely to go instead

The Act 189 task force recommended, on June 5 and 19, 2026, revising § 514B-104(a)(11) to preserve Act 195’s payment-priority protections: owner payments applied first to unpaid common expense assessments, with attorneys’ fees, collection costs, fines, penalties and interest subordinate — and an owner’s right to challenge a disputed fine or fee through dispute resolution not conditioned on prior payment.

That attacks the same problem from the other end. A cap limits what can be charged; a priority rule changes what a payment retires first. An owner paying down a balance under a priority rule reduces the assessment debt rather than the fee balance — which is what keeps a delinquency from compounding.

What a board can do

• Do not treat fines as a revenue mechanism. Between the foreclosure bar, the mediation stay and the payment-plan protection, fines are the least collectable thing an association levies.
• Give the itemised statement when asked under § 514B-146(d), separating common expenses, fines and other charges, and attorneys’ fees. The thirty-day mediation clock runs from it.
• Watch counsel’s billing on fine enforcement specifically, because those fees are the ones most likely to be found unreasonable and least likely to be recovered.

What to watch

Whether the 25% cap returns in 2027 as a stand-alone bill, and whether the task force’s payment-priority language is introduced. They are complements, not alternatives, and the industry will resist both.