What a twenty-year window means operationally

An association’s REO unit is not safe because the lender went quiet. A board that foreclosed its own lien, took title and has been renting the unit for a decade while hearing nothing from the mortgagee should not read that silence as abandonment. The lender has time.

That interacts directly with two 2026 appellate decisions on rents. Where the association acquired title through its own foreclosure, the excess-rental-income regime of HRS § 514B-146(n) runs from the first judgment determining a senior mortgagee’s priority — frequently the association’s own decree — and the surplus above the statutory deductions belongs to lienholders, not to the association. Twenty years of exposure and an accounting that starts at the association’s own judgment are a combination worth reserving against.

The six-month special assessment is the association’s only real recovery against a foreclosure purchaser. Hawaii is not a super-lien state: under § 514B-146(a) the association’s lien is subordinate to a mortgage recorded before the association’s notice of lien. What § 514B-146(j)–(l) gives instead is a special assessment against the mortgagee or other purchaser at foreclosure, capped at “the total amount of unpaid regular monthly common assessments that were assessed during the six months immediately preceding the completion” of the foreclosure.

That cap excludes late charges, fines, penalties, interest, and collection costs — and it excludes other special assessments, except one imposed on all units as part of a § 514B-148 budget. Twenty years of accrual, six months of recovery.

The planned community version is different, and worse

Under HRS § 421J-10.5 a planned community association’s lien has no statutory priority at all — priority is “as provided in the association documents or, if no priority is provided… by the recordation date of the liens.” The six-month special assessment exists, but with an extra carve-out: a mortgagee whose mortgage is not subordinate to the association’s lien and who acquires at foreclosure “shall not be obligated to make, nor be liable for, payment of the special assessment.” A later buyer from that mortgagee is liable.

What a board can actually do

• Track the senior mortgage on every delinquent and REO unit, including its recording date and whether a foreclosure has ever been commenced. Twenty years is longer than most boards’ institutional memory.
• Do not treat rents on an REO unit as free revenue. Run the § 514B-146(n) waterfall annually if title came through foreclosure, and segregate anything above it.
• Watch the association’s own six-year lien clock. A recorded association lien “shall expire six years from the date of recordation unless proceedings to enforce the lien are instituted,” and enforcement proceedings must begin “within six years after the assessment became due,” tolled during bankruptcy until thirty days after the stay lifts. The association’s window is a third of the lender’s.
• Know when title transfers for the purpose of cutting off the prior owner’s assessment liability — § 514B-146(b) sets four alternative dates, the earliest controlling, including thirty days after the public sale in a nonjudicial power-of-sale foreclosure.

What to watch

Whether the twenty-year holding produces a wave of revived foreclosures on long-dormant Hawaii mortgages, and how associations holding those units account for a decade or more of rent when it does.