How the new rule and the new statute fit together

The three-year independent review in the rule is the same requirement that Act 100 (2026) just carved an exception into. Act 100 amended HRS § 514B-148(a)(5) to let an association of fewer than twenty units in buildings of no more than two stories waive the independent review for a single three-year period, never twice running, by majority vote of owners present or represented at a duly noticed meeting.

So the sequence for 2027 budgeting is: the rule sets the default, the Act supplies a narrow escape, and the escape does not touch the reserve study itself, the annual disclosure, or the funding math.

The statutory items the rule sits on top of

Section 514B-148(a) requires the budget summary to state, among other things:

• the estimated costs of fire safety equipment or installations meeting a building fire and life safety evaluation required by a county with a population over five hundred thousand — which means Honolulu — and permits the reserve study to “forecast a loan or special assessment” to fund them;
• “Planned increases in the estimated replacement reserve assessments over the thirty-year plan”;
• whether last year’s actual assessments fell short of what the study called for, by how much, and the impact on future assessments; and
• whether the amount was calculated using a per cent funded or a cash flow plan — and that the method “shall not circumvent the estimated replacement reserves assessments amount determined by the reserve study.”

Section 514B-148(c) requires separate, designated reserves for each part of the property for which capital expenditure or major maintenance will exceed $10,000; smaller parts may be aggregated. Act 157 (2025) added the closing rule that “The budget summary shall contain all required information without referring the reader to other portions of the budget” — and rewrote the enforcement clause so that “Any unit owner shall have standing” to sue the association for a violation and seek an injunction.

Where this collides with lending

The state rule and the secondary mortgage market now both police reserves, on different tests, and an association can satisfy one and fail the other.

Fannie Mae’s Full Review requires the budget to fund replacement reserves at at least 10% of the budget — annual budgeted reserve allocation divided by annual budgeted assessment income. A reserve study may substitute only if it shows funded reserves equivalent to that standard and the budget meets or exceeds the study’s recommendations, and baseline funding may not be used to waive the 10%. Studies must be no more than three years old and prepared by an independent third party.

Two consequences for a Hawaii board. A cash flow plan that satisfies HAR 16-119.6 is not automatically a study that satisfies a Full Review. And the state’s three-year independent-review cycle happens to match the lender’s three-year study-age limit — so an association that takes the Act 100 waiver should check what its lender-facing documentation will look like in year three, because the two clocks stop being aligned.

The AI warning that belongs in this section

The Real Estate Commission published guidance in March 2026 aimed squarely at reserve work: a certified reserve specialist “will refuse to complete a reserve study report until the omitted information is provided. An AI has no similar hesitation providing a report on needed repairs based on incomplete data.” An AI-generated reserve estimate is not a reserve study, and it will not satisfy either regime.

What to do before the next budget

• Identify which method you are on — per cent funded or cash flow plan — and state it in the summary, as the statute requires.
• If on a cash flow plan, test the back end. The new rule prohibits loading the last five years of the thirty-year projection.
• Strip borrowed funds out of the reserve balance unless the loan qualifies under § 16-119.6-12 and it is the loan’s first year.
• Check the $10,000 line — components above it need their own designated reserve.
• Diary the three-year independent review, and if you intend to waive it under Act 100, record the vote and the cycle.

What to watch

Whether the Commission publishes worked examples or a compliance checklist for 16-119.6, and whether any 2027 bill revisits the funding percentages — a 2026 measure that would have mandated depositing at least 10% of all revenues into reserves, with personal liability for non-complying directors, died without a hearing.