HAWAII COMMUNITYASSOCIATIONSA PUBLICATION OF COMMUNITY ASSOCIATIONS INSTITUTE - HAWAII CHAPTER

Volume 21 Issue 4 October 2007

continued on page 15continued on page 4

We all wantto feel safe andprotected aswe journeythrough life.We also wantour families andfriends to beable to steerclear of harm.

This month’s issue is aboutsafety, awareness and considera-tion. We chose to becomeinvolved in the community associ-ation business. No matter whatour position, we have an obligationto protect, preserve and keep safethe people and assets in our com-munities.

John Knorek, Esq., is a spe-cialist in employer labor law. It isimperative that anyone involved incommunity association manage-ment know the basics regardinghiring and firing employees, pro-tecting your association residentsand also minimizing the risk of liti-gation in these areas. While it’s acomplex subject, awareness of thelaw and your responsibility isessential.

John McCarthy warns usabout how the internet can beused for identity theft. With theprevalence of computers andaccess to the internet, thesethieves have found anothermethod to get personal informa-tion if we’re not careful.

Rocksford Takamatsu dis-cusses the upside of gated com-munities as a deterrent to crime.

Mary Bergmann gives us

President’sMessage

Legal Considerations in ConductingBackground Checks in HawaiiBy John L. Knorek, Esq.

Unfortunately, as we know too well, Hawaii is not immune from the grow-ing trend nationwide of workplace violence. The workplace is often an islandof security for individuals who have personal problems with family or finances.The frustration builds whenever their job is placed in jeopardy. Violence is partof our culture -- cartoons and action movies, guns and drugs, all can beblamed in part for this increased concern. Society places responsibility oneach of us for our actions. Under the laws of our state, an employer has aduty to provide a safe workplace and may be held liable if the employer knowsor should have known of a dangerous employee and failed to take appropriateaction to protect employees and others who may come into contact with thatperson as a result of his/her job duties. Liability is usually imposed by thedegree to which the violent behavior was foreseeable by the employer.

A recent Hawaii First Circuit decision illustrates the obligation under safetyand health laws. A supervisor allegedly assaulted a subordinate. HLRB heldthat the employer willfully violated the state’s general duty clause, HAR §§12-60-2(a)(3) and (b)(3), by failing to have or implement an effective workplaceviolence prevention program by safety training as a means to reduce the riskof employee exposure to the hazard of workplace violence, and by failing tomaintain an effective written safety and health provision to identify, evaluateand control the hazard of workplace violence. The Court upheld the Boardfine of $49,500.00.

Prevention begins with hiring safe employees. Background checks arecritical to ensuring you hire the right person. All studies show one the greatestcorrelation is between violent employees and drug use. Pre-employment test-ing for the illegal use of drugs is therefore a very important first screen.Assessment of an employee's work habits, safety record and, perhaps, psy-chological and criminal record profiles may all be relevant to fulfilling the dutyto provide a safe workplace.

Is not past behavior the surest predictor of future conduct? How can wesay as a society that serving time in jail rehabilitates every convict? If we trulybelieved our criminal detention system rehabilitates, why have we passedMegan’s Law to publicly disclose former sex offenders? Just as citizensdemand the right to know who they live next to, should not every employeefeel secure to know who she or he works next to? If so, what standard of carewill Hawaii juries place on businesses to ensure that a coworker is not a mur-derer, rapist or thief?

The number one tool to prevent employee-initiated violence is pre-employ-ment screening. Nationally, Pinkerton reports 81% of its survey respondentsconduct criminal background checks of potential hires. What does this sayabout where the ex-cons are getting jobs? If you are not checking, you maybe employing a former criminal rejected from other employers.

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continued on page 4

P.O. Box 976, Honolulu, Hawaii 96808(808) 488-1133

email: caihawaii@hawaiiantel.netwww.caihawaii.org

OFFICERS AND BOARD OF DIRECTORS

President Surita SavioInsurance Associates

Vice PresidentAl Denys, PCAMCertified Management

SecretaryLois EkimotoHawaiiana Management

TreasurerMary Bergmann, CPAHomeowner

President ElectJoani TaylorHomeowner, Marco Polo

DirectorsPat FujisakiService Printers Hawaii

Milton MotookaMotooka Yamamoto & Revere

Boyd ReadyAkahi Service

Immediate Past PresidentSteve Glanstein, PRP

NEWSLETTER COMMITTEE

Co-Editor:Lillian McCarthyHawaiiana Management

Co-Editor:Steve Pherigo, PCAMHawaiiana Management

Jodee Acoba-Suganuma, PCAMHawaiiana Management

Patricia DykstraHawaiiana Management

Pat FujisakiService Printers Hawaii

Legal Coordination:Jacqueline Thurston, Esq.Motooka Yamamoto & Revere

The Hawaii Community Associations newsletter is pub-lished for associations leaders and other related profession-als of CAI. Authors are encouraged to submit articles forpublishing consideration.This publication is designed to provide accurate andauthoritative information regarding the subject matter cov-ered. It is issued with the understanding that the publish-er is not engaged in rendering legal, accounting or otherprofessional services.CAI Hawaii Community Associations newsletter providesan opportunity for information and/or comment. Articles donot necessarily reflect the viewpoint of the Chapter. Thereader should not act on information contained hereinwithout seeking more specific professional advice.

Identity Theft & the Internet: Part 1By John McCarthy

Technology has made our livesboth easier and more complex at thesame time. Unfortunately it hasn’ttaken thieves long to figure out theInternet is a great tool for plying theirtrade. Thieves have realized thatyour computer is a good, and ofteneasy, source for your personal infor-mation.

The first thing we should discussis phishing. Phishing is a criminalactivity using social engineeringtechniques to fraudulently acquirepersonal information from you to beused to commit identity theft. If youuse a computer and have an emailaddress it would be next to impossi-ble that you have never received oneof these phishing emails.

This usually occurs throughemails or sometimes text messag-ing. Often the bad guys will use atrustworthy company like eBay orPayPal to obtain your information.Locally, we have seen our bank andcredit union members targeted. Ithas been estimated that phishingcosts as much as 5 Billion dollarsannually and is growing.

These bad guys prey on the vic-tim’s naïve nature, fears and greed.Typically you will receive a some-what official looking email from areputable financial institution or othercompany. The email will sometimesask you for personal information as apart of an audit. At other times, theemail can be outright threatening bytelling you that if you don’t respondyour privileges willbe terminated. Byresponding tothese emails, yournightmare begins.

The phishingemail will oftenhave a link for youto respond to.They want you tothink that you areresponding to thetrusted company.In fact, if you usetheir link you areredirected to the

Reserve Studies for Community AssociationsHawaii, LLC

SSOCIATIONESERVES, INC.RA

808/936-4789808/883-2918 FAXmprice@reservestudy.com

crook’s website where the informa-tion is gathered and put to illegaluse. This is so profitable to thethieves that there have been web-sites set up by them to share yourpersonal and financial information.

There are things you can do toprevent yourself from becoming avictim. First, don’t respond to anyunsolicited emails asking you for per-sonal information. Your banks andother companies you deal withalready have your personal informa-tion and passwords. They don’t haveto send you an email asking for it forany reason whatsoever.

Secondly, if you suspect theemail might be real, don’t use theirlink. My wife and I once got an emailfrom a credit card company we use.The email informed us that there hadbeen some suspicious activity on thecredit card. We called the companyusing their listed 800 number. Sureenough, someone had tried to useour card and they became suspi-cious. This time the email was real,but if we had used their link and itwasn’t I’d hate to think what wouldhave happened to our information.

Lastly, know who you are dealingwith over the Internet and be respon-sible about it. The Internet is actuallya very safe method of conductingbusiness, but it must be done prop-erly. Know who you are communicat-ing with. All big and legitimate busi-nesses have something from or

3

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Identity Theft & the Internetcontinued from page 2

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associated with their company in their web address andemail. For example, my email is jmccarthy@honolulu.govindicating a legitimate government address. The badguys often use hotmail, yahoo or other generic emailaddresses. So if I was trying to pull one of these scams Imight use jmccarthy@uk.yahoo.com obviously not some-one working in an official capacity of a government. Theyuse these type emails to hide since it is virtually untrace-able by anyone, especially law enforcement.

Remember, you are your own best friend when itcomes to protecting yourself from becoming a victim.Aloha & be Safe.

About the author: John McCarthy is a detective with theHonolulu Police Department. Detective McCarthy may becontacted at jmccarthy@honolulu.gov.

President’s Messagecontinued from page 1

examples of simple safeguards to protect a community associ-ation’s assets. The management and protection of other peo-ple’s money is serious business.

Michael Pang’s “Lease Rent Renegotiation” explains theboard’s responsibilities and duties in various types of renego-tiations. Any board member in a community with leaseholdproperty will find this article informative.

My final term as President of CAI Hawaii ends with theNovember Annual meeting and election of new officers. CAIhas had a very good year. Without the help of our many will-ing volunteers, we could not have offered all the valuableseminars held and articles published. We have a very goodnetwork of volunteers and I thank all of you.

Mark your calendars now to attend our annual meetingon November 6th. As usual there will be lots of food, fun,and great door prizes. Check the details in this issue.

5CERTIFIED CERTIFIED CONNECTIONCONNECTION

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“Being a professional and extending professional service makes every difference.“

Reiko Marino Vice-President, O‘ahu AE Division

“Working closely with board members enables us to gain trust and confidence; thus, accomplishing great things for the associations.”

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Enforcement of the Governing DocumentsBy Connie Vohden

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Many board members, managersand owners may read the title of thisarticle and just cringe!

The rules enforcement party, beit the CC&R Committee [AKA:covenants, conditions and restric-tions], or the Architectural or DesignReview Committee, or the ResidentManager or Property Manager is theone that owners generally don’t liketo hear from. Some owners mayresent the function of the committeeand the committee members maynot enjoy their approval or enforce-ment function. However, this form ofcommittee may be very necessaryfor maintaining the association’sphysical appearance and standards.Each association has standards thatmust be maintained to keep the val-ues of its investments and communi-ty rising. Occasionally ownersunknowingly find that their actions

may violate one or more of the rulesadopted by the association.

So whose job is it to enforce therules? Typically it’s the Board ofDirectors or a committee appointedby the Board to carry out tasksassigned by the Board. Note:always check the governing docu-ments to verify the Board has theauthority to appoint this type ofcommittee. Some governing docu-ments establish this committee,while other documents are silent. Insome cases, the boards appoint acommittee with this responsibility.The committee may be provided witha detailed job description; moreinformation on this issue will be pro-vided in another article.

This committee may go by thedifferent names at the beginning ofthis article and it’s the committee’sfunction to bring violations to the

homeowner’s attention. The commit-tee/enforcement person performsregular inspections of the property.Remember, each owner has theobligation to abide by the CC&R’s,Bylaws, Design Covenants, andHouse Rules documents, if applica-ble.

The committee must ensure thatits inspection process is done fairlyand in a legal manner. The commit-tee, and the board, must not treatowners inconsistently as this canlead to confusion and hard feelings,and can create precedents thatcould damage the association byincreasing liability for “wrongfulenforcement. “

The inspectors should documenteach and every violation. A commonowner complaint is, “You cited meand not my neighbor and they havethe same problems that I’ve been

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cited for”. Homeowners must realizethat they are not singled out for anyspecial treatment. One way toensure fair treatment is to have thehomeowner provide information whythe owner perceives that the neigh-bor didn’t receive a violation notice.Nine times out of ten the owneradmits that they really have noknowledge and they were justassuming.

Owners should have appeal anddue process rights. These should bein the bylaws or part of a boardaction establishing policy for thecommittee. Owners, committeemembers, and board members mustbe careful that any appeals be prop-erly documented, sent within theappropriate time limits, and handledcorrectly.

The board or appeals committeeshould review the written appealand/or meet with the owner to gath-er all available information or per-spective he/she may have concern-

ing the violation. Owners must pre-sent their case in a manner thatproves their position. Traditionally, inthese cases, the burden of proof ison the owner. The board or appealcommittee takes the facts pf the vio-lation and previous history ofenforcement into consideration andwill determine a response, usually inwriting.

Ideally the enforcementperson/committee and the appealscommittee (usually the Board) will becomprised of different members, i.e.no one member serves on bothcommittees. This must be a fair pro-cedure with due process available toall owners.

The association’s governingdocuments, and/or its enforcementand fining policy, should outline theprocess. This written policy pro-vides the owner an opportunity to bemade aware of the violation and totake the necessary steps to resolveit. The process begins with either a

verbal or written warning. If the vio-lation is not resolved, then a subse-quent notice is issued perhaps witha noted fine, and if the violation isstill not resolved then a third noticeis issued with a noted fine, etc.

Remember, that the violation,dates, amount of the fine, the time toremedy the fine, and the possiblefuture fine should all be noted on theviolation notice, along with theappeals process. As a last resort, ifthe violation is not resolved per diemfines may be assessed at reasonabledaily rates and or legal action maybe taken. Caution is advised: checkwith the association’s attorney toensure that the correct procedure isused to implement any of these poli-cies. The board or appropriate com-mittee should establish a pattern ofresolving violation issues with mini-mal use of the fine procedure.

Unfortunately, this does notalways happen and when repeat vio-

continued on page 8

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lations are documented and fines assessed, peoplebecome angry, tempers rise, and associations have thebeginning of controversies that can become legal matters.

Generally, this is when an upset or irate owner con-tacts the community association manager. The owner maybelieve that he or she does not deserve this violationnotice and is offended by it. Sometimes, the owner sim-ply needs to be heard and the community associationmanager is on the front line. Community association man-agers must face these challenges every day. They mustlisten carefully to the owner and follow-up even thoughthey usually don’t have the authority to provide any directresolution. The owner’s perception of the facts may differfrom that of the board, committee, or other individuals.The community association manager, usually an employeeof the Managing Agent, must explain that their role is torelay information between the owner and the enforcementcommittee or the board. This again can be upsetting tothe owner because they want an instant resolution, rightnow! It is important that the owner put any request inwriting so they can be forwarded to the committee or theboard for further action. This system is not flawless andviolations and fines may continue to accrue.

Violation enforcement must be fair and balanced. Thecourts also use the “reasonable standard” rule, i.e. what areasonable, impartial person would see or do in the situation.

Hopefully every association has a board or committeethat listens to their community association manager and isable to resolve issues between the owner and the boardor respective committee. Occasionally, there are circum-stances that have definitive answers and the board orcommittee may not have the authority to compromise oneor more issues with an owner.

Community association managers are able to providesome assistance and guidance consistent with the knowl-edge that the board or committee has a fiduciary duty tothe entire association. There is always the hope that “coolheads prevail.” However, an owner’s failure to comply withvalid requirements can and has led to contact with theassociation’s attorney. In extreme cases, it has led to legalproceedings to enforce the association’s documents.

The community association manager has found it overthe years to be desirable to consider what is reasonable,maybe the violation cannot be resolved immediately, but if aconversation can develop and a compromise agreement canbe reached, everyone wins and the community will thrive.

Finally, it is important to recognize the owner for com-ing forward and being willing to discuss the matter.Sometimes listening to the person and giving them recog-nition for their effort to contact you is all that is required toresolve the matter or to achieve compliance.

About the Author: Connie Vohden is an AccountExecutive with Certified Management in their Kona office.She can be reached at (808) 443-5969.

Enforcement of the Governing Documentscontinued from page 7

9

Lease Rent Renegotiation (§514B-151, Hawaii Revised Statutes)By Michael Pang

In 2000, §514A-90.6, HawaiiRevised Statutes, was added to thecondo statute which obligated anassociation of apartment owners(“AOAO”) to represent its leaseholdmembers in lease rent renegotiation,even if the project was partially con-verted (some fee simple, and someleasehold apartments). The AOAO’sboard was obligated to handle therenegotiation and assess the costs toits leasehold members

In 2007, the recodified condomini-um statute refined the AOAO’s require-ments regarding representing theirleasehold members in lease rent rene-gotiation. §514A-90.6, HRS, gave wayto§514B-151, HRS. The AOAO’sBoard is still obligated to represent itsleasehold members, but the new lawaddresses some issues the old onedidn’t. In general, for the three most

common situations:

UNCONVERTED PROJECTS (allleasehold apartments)

The AOAO, via its Board ofDirectors (“Board”), is required by lawto represent all its members collectivelyin the renegotiation (negotiation and/orarbitration) of the new lease rent andassess the costs to all of the apartmentowners as a common expense inaccordance with each apartmentowner’s common interest.

PARTIALLY CONVERTED PRO-JECTS (both leasehold and fee sim-ple apartments)

The AOAO, via its Board, isrequired by law to represent its remain-ing leasehold members collectively inthe renegotiation (negotiation and/orarbitration) of the new lease rent and toassess the costs only to the remaining

leasehold units (not the fee simpleunits) meaning units that are still lease-hold on the “earlier of any date speci-fied in the lease or sublease for thecommencement of lease rent negotia-tion or nine months prior to the rene-gotiation date”…. “in the same propor-tion that the common interest appur-tenant to each lessee’s units bears tothe common interest appurtenant to allremaining lessees’ units whose leaserent is to be renegotiated” (we call thatthe “reapportioned common interest”).The only exception to this is if there isonly one leasehold unit remaining; inthat event, this statute does not apply.

AOAO IS THE FEE OWNERThis situation occurs when an

AOAO buys the entire leased-fee inter-

continued on page 10

10

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Lease Rent Renegotiation continued from page 9

est in bulk and still has remaining unsold leased-fee interestswhen a renegotiation date occurs. The AOAO, via its Board,is still required by law to represent its remaining leaseholdmembers collectively in the renegotiation (negotiation and/orarbitration) of the new lease rent even though it must alsorepresent itself as the fee owner in the renegotiation.

The AOAO must appoint (retain) a “Lessee Counsel,” whomust be an attorney, to represent the remaining lessees in therenegotiation. By doing so, the AOAO fulfills its obligation tothe lessees under the law. The AOAO as the lessor can retainany representative it chooses; it does not have to be an attor-ney. Each side pays their own expenses, the lessees’ cost areassessed based on reapportioned common interest.

Approval of the negotiated lease rent, or the decision toarbitrate it, is done “in accordance with the vote or writtenconsent of a majority of the lessees casting ballots or submit-ting written consents” as determined by the reapportionedcommon interest. This means that non-voting lessees arebound by the decisions made by a majority of the votinglessees. In an extreme case, if only one lessee votes, thatlessee can bind all of the remaining lessees to the new leaserent or to authorize arbitration.

Today, there are approximately 504 condo and co-opprojects in Hawaii with leasehold units, 370 of them are par-tially converted and only 134 have had no fee conversionsales. Handling lease rent renegotiation, especially in thenumerous partially-converted projects or one where theAOAO is the lessor, is better defined but more complicatedby §514B-151, HRS.

It is recommended that all boards seek professionaladvice in lease rent renegotiation matters and start work on itearly, especially in cases where the project is partially con-verted due to the law’s requirement to assess the remainingleasehold apartments nine months in advance of the renego-tiation date.

For a copy of §514B-151, HRS, please visit our websiteat www.mpi-hi.com.

About the Author: Michael Pang has been in real estate for30 years, the past 20 as president and principal broker ofMonarch Properties, Inc. and the past 15 representing condoand co-op projects in fee conversion and lease rent renegotia-tion matters.

11

Protecting for Your Association’s FinancesThere have been several recent incidences publicized

nationally concerning alleged embezzlement of communi-ty association funds and other financial improprieties. Inlight of the vulnerabilities surrounding financial matters,CAI Hawaii wants to remind community association lead-ers and managers of the importance of closely monitoringyour association’s finances.

Directors, who are elected by the association mem-bers, have a fiduciary responsibility to manage and pro-tect their association’s assets. Managers are retained byassociations to provide the association’s directors andofficers with responsible, professional guidance in thedaily management of the community, including itsfinances.

Directors, officers, and managers should arm them-selves with information about how best to ensure soundfinancial practices for their associations.

Here are a dozen things you can do to monitor andprotect your association’s funds:

1. Understand the role that your Association’s prop-erty management company has as your agent inensuring that its internal controls are adequate toprotect association funds. Any property manage-ment company worth its salt would be more thanpleased to give you a site tour of their accountingdepartment and demonstrate its controls, such asseparation of duties, check approval procedures,etc. You can also institute any additional controlsappropriate for your association’s particular situa-tion. For example, some boards require twoboard officer signatures before reserve funds canbe disbursed. Others may establish a dollar limiton how much the resident manager can approvefor nonrecurring items.

2. Make sure that all association funds are held inaccounts in the name of the association and notcommingled with the funds of the managementcompany or other associations.

3. Hire an independent certified public accountant(preferably one with community association expe-rience) to conduct the annual audit of the associa-tion’s financial statements, as well as a transitionaudit of your association changes to a new man-agement company. Understand the scope of theauditor’s work – they aren’t there to watch overthe day-to-day operations, but to audit the annualfinancial statements and to test internal controls.

4. In addition to an annual audit, Hawaii law requiresmost associations to conduct an unannouncedcash verification once a year. Make sure it truly is“unannounced”. Some auditors routinely combinethis requirement with their preliminary work inpreparation for the audit, which predictably hap-pens at the same time every year.

5. Make sure your board meeting packet is com-plete, consistent with what the association’s man-agement contract requires, and that it includes themost recent financial statements.

6. Now that you’ve got the financial statements,review them. This means understanding them,and it is where many board members feel uncom-fortable because they aren’t trained professionals.But it is important to sit down with your auditorand/or your community association manager tolearn the basics that will give you a working levelof knowledge. At the very least, study the checkregister which shows the cash going out.

continued on page 12

12

7. Inquire about new vendors or unusual paymentsthat appear on the cash disbursements or checkregister or in the general ledger. Periodically (atleast once a year), ask your community associationmanager for an updated vendor list along with thechecking account disbursements sorted by vendor.Now you can see at a glance who received pay-ments and the total amount they were paid for theentire period of time you requested.

8. Make sure you have copies of your Association’scontracts covering the administration and operationof the project. You can’t possibly know if expendi-tures are appropriate if you don’t understand yourcontracts.

9. Make sure the contracts are being fulfilled asagreed. Pay attention to red flags that may indicateOwners aren’t getting what they are paying for.Insist that your Resident or Site Manager attend allBoard meetings and present complete writtenreports covering issues and problems involvingoperations and upkeep of the property.

10. Watch your receivables. Have a clear and reason-able collection policy that is distributed to allOwners and follow it.

Protecting for Your Association’s Finances continued from page 11

11. Work with an insurance professional, preferablyone who is knowledgeable about the particularneeds of community associations, to ensure thatthe association is adequately insured, includinghaving appropriate fidelity bond coverage anddirectors and officers insurance.

12. If there are issues that are not satisfactorilyresolved by management or that remain trouble-some to the board, the board should directly con-tact your association’s attorney, auditor, or otherqualified professional for advice.

Be sure you know who’s responsible for your associa-tion’s funds and remind them to ensure that internalaccounting controls are adequate, to understand andreview the financial information provided, to stay informedabout the operations of the association, and to seek addi-tional professional guidance when needed. If you are onthe Board – that’s you.

About the Author: This article was excerpted from vari-ous CAI publications and reviewed and edited by MaryBergmann, who serves as Treasurer on CAI Hawaii’sBoard of Directors. She has also served as a Hawaiiassociation’s board president or treasurer for 14 years.

1313

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HONOLULU, HAWAII. Hawaiiana ManagementCompany, Ltd., has recently been awarded contractsfor more than 100 new clients, including Maui’s Iliahiat Kehalani and Aina Nalu Resort, Kona Kai on theIsland of Hawaii, and Oahu’s Kahala Towers, HawaiiKai Peninsula and Kaimala Marina. In addition,Hawaiiana continues to attract high-profile clientsduring the construction phase of their property,including Baccarat Resort, Trump International Hotel &Tower at Waikiki Beach and The Vanguard Lofts.

Hawaiiana President Emory Bush said, “Hawaiianawelcomes our 100 newest clients. Our clients and employees are the primaryreason that Hawaiiana is number one. In addition to our new clients, we paytribute to our long-time clients who have been Hawaiiana customers for morethan a quarter of a century.”

Loyal Hawaiiana clients for over 25 years include:

99% Client Retention Rate, withMany Returning ClientsHawaiiana’s client retention rate of 99% is the highest in the industry. Thispercentage, however, may be understated. The reason? Formerclients Chateau Waikiki, Oahu Surf I, Watercolors at Makakilo, Kahala Tow-ers and Bluestone all returned to Hawaiiana in 2007. Bush said, “We appreciatethe growing numbers of clients who return to Hawaiiana and oftenbecome our most vocal supporters!”

Hawaiiana has offices on Oahu, Maui and the Island of Hawaii, and is the onlyHawaii-based firm to be recognized as one of the top 50 property managementcompanies in the United States, according to industry publication CommercialProperty News. Hawaiiana serves over 500 residential, commercial and mixed-use properties throughout the state.

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Many condominium ownersaspire to live in a gated community,because it conveys a sense of priva-cy and exclusivity, as well as addedfeelings of safety and security. Butare gated communities really worththe additional price to keep the crim-inals out? “It makes all the differ-ence in the world,” says Mr. ShawnMartin, general manager of WaialaeIki V.

“It makes a big difference” hasbeen the common response fromproperty managers, resident man-agers, board of directors and own-ers, but why? Honolulu PoliceDepartment Officer Antone Pacheco,of the District 8 CommunityResource Team explained that youhave to look at it from the criminal’spoint-of-view: “Bad guys want tocruise the area in their cars to casethe area, but they can’t get into agated community.”

Mr. Tom Heiden, SeniorManagement Executive, HawaiianaManagement, explained that therehave not been any planned out bur-glaries at his Coconut Plantationgated community in Ko Olina—“Onlycrimes of opportunity—an open dooror window, petty theft of a purse,watch or laptop computer.”

Mr. Ray Aubrey, owner of

Electronic Resources, Inc., a compa-ny that provides security hardwarecomponents for gated communities,said “Criminals are looking foropportunity, especially at night, putyourself in the criminal shoes…ifthere’s a gate, security cameras andlights—where would you go?” Mr.Martin, of Wailae Iki V, says “Peopledrive up and see the gate, securityguard, and then they make a U-turnto leave.”

The Havens of Ii Vista in Mililani’sgate has had significant impact onthe level of crime in their community.“Huge difference in grafitti—1%compared to the other communities Imanage” says Ms. Angel DeCosta,C4 Management owner, “It’s also adeterrent to loitering, if nothing else.”

HPD Officer Pacheco trackscriminal statistics for the communi-ties in district 8 and he found thatnew gated communities’ crime ratedrops significantly, “10 burglarieswould drop to between zero to fourburglaries.”

Gated communities are not afortress of protection, because somegated communities are still openalong certain areas of their communi-ties or their walls or fences are toolow to prevent access, “We’re tryingto prevent people from going over

the wall…can’t guarantee 100%security” says Mr. Tom Tabacco,Account Executive, CertifiedManagement, of Crosspointe,although their community is gatedwith 24-hour security officers.

Mr. Aubrey of ElectronicResources emphasizes educatingthe residents about their role insecurity in a gated community, “Getthe residents to help reduce crimeby not allowing someone you don’tknow to tailgate behind you…be vig-ilant out there.”

Gated communities are designedto keep out the unwanted visitor tothe community, but they not onlykeep out the criminals, but also peo-ple that could compromise yoursecurity. Ms. DeCosta of C4Management says that she changesthe temporary vendor codes regular-ly, “I even had one real estate agentadvertise the access code on theirlisting.”

Ms. Jema Geronimo, realtorassociate with Marcus & Associates,finds that a gated community can bean inconvenience to realtors, but shedoes find that her clients do valuegated communities for the addedvalue to the community, “A homeprice difference could be $60,000 to$70,000 for a gated community—

Gated Communities: Do They Really Prevent Crime?By Rocksford Takamatsu

1115

sometimes that will affect the buyer,especially if they are a first-timebuyer.”

When there are incidences ofcrime, usually they are from withinthe community, “We don’t have acrime rate here at Hawaii Loa Ridge,but we had an incident where theyhad a sticker on the vehicle and agate access card, there was nothing

we could do, they knew the otherperson was on vacation,” says Ms.Lavelle Sanchez, administrativeassistant at Hawaii Loa Ridge.

Providing a deterrent to crimetakes many forms—a gate, securityofficers, cameras, lights, vigilantcommunity, but it all seems to beworthwhile for some communities.Mr. Vic Cornell, resident manager of

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Kuilima Estates West says, “Thepeople feel a lot safer with a securitygate system on the property.”

About the Author: RocksfordTakamatsu is a Senior ManagementExecutive with HawaiianaManagement. He can be reached atxxx-xxxx

Background Checkscontinued from page 1

The Hawaii Employment Practices law, H.R.S. § 378, prohibitsany discrimination in employment on the basis of a variety ofimmutable characteristics (sex, age, race, ancestry/national origin,sexual orientation, etc.) including “arrest and court record”. Thisphrase is broadly defined to include “any information about anindividual having been questioned, apprehended, taken intocustody or detention, held for investigation, charged with anoffense, served a summons, arrested with or without a war-rant, tried, or convicted pursuant to any law enforcement ormilitary authority.” H.R.S. § 378-1. Responding to widespreadopposition to rules drafted by the Hawaii Civil Rights Commissionto interpret this prohibition, the Legislature amended Hawaii law toprovide as follows:

Employer inquiries into conviction record

(a) Subject to subsection (b), an employer may inquireabout and consider an individual's criminal convictionrecord concerning hiring, termination, or the terms,conditions, or privileges of employment; provided thatthe conviction record bears a rational relationship tothe duties and responsibilities of the position.

(b) Inquiry into and consideration of conviction records forprospective employees shall take place only after theprospective employee has received a conditional offerof employment which may be withdrawn if the prospec-tive employee has a conviction record that bears arational relationship to the duties and responsibilities ofthe position.

(c) For purposes of this section, "conviction" means anadjudication by a court of competent jurisdiction thatthe defendant committed a crime, not including finaljudgments required to be confidential pursuant to sec-tion 571-84; provided that the period for which theemployer may examine the employee's convictionrecord shall not exceed the most recent ten years,excluding periods of incarceration. If the employee orprospective employee claims that the period of incar-ceration was less than what is shown on the employ-ee's or prospective employee's conviction record, anemployer shall provide the employee or prospectiveemployee with an opportunity to present documentaryevidence of a date of release to establish a period ofincarceration that is shorter than the sentence imposed

continued on page 16

16

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for the employee's orprospective employee'sconviction.

H.R.S. § 378-2.5.What is a conviction? It cer-

tainly includes trafficoffenses, thereby makingany requirement forapplicants to provide aclean driver abstractbefore being consideredfor employment suspect.However, a “DAGS” pleais not a conviction. Statev. Ritte, 68 Haw. 253(Haw. S. Ct. 1985); Statev. Sugimoto, 62 Haw.259, 614 P.2d 386(1980).

Federal law would probably beinterpreted the same. United Statesv. Bosser, 866 F.2d 315 (9th Cir.1989).

Under current Hawaii law, theonly inquiry that can be made foremployment purposes is limited to 1)post-offer; 2) convictions only and 3)limited to the past ten years.However, any conviction that bears a“rational relationship” to the job isgrounds for rejection or termination.While the Legislative history providesample grounds for construing thistest most expansively to enable

Background Checkscontinued from page 15

employers to protect their business-es, customers and employees, theHawaii Supreme Court further cloud-ed the area in a recent SupremeCourt decision, Wright v. HomeDepot (2006). There, the Court vacat-ed judgment dismissing employee'swrongful discharge and discrimina-tion action against his employerbecause whether employee would beable to demonstrate that his priordrug conviction did not bear a "ratio-nal relationship" to his employmentwas question of fact for the jury andnot matter of law amenable on amotion to dismiss by the judge.

In the one reported decision ofthe Hawaii Civil Rights Commissioninvolving the “arrest and courtrecord” protection, the petition for adeclaratory order raised the issue ofwhether individuals, with no arrestand court record, who are associatedby marriage, friendship, or otherwisewith a person who has an arrest andcourt record, are protected from anemployer's discriminatory acts. TheCommission interpreted H.R.S. §378-2 to require that the individual'smembership in one of the enumerat-ed protected classes be part of thereason for the discrimination. Basedupon this analysis, the Commissionconcluded that H.R.S. § 378-2 doesnot prohibit discrimination becauseof an individual's association toanother person with an arrest andcourt record. The Commission rec-ognized the unfairness and irony of

denying protections to a person whois not a criminal nor has a record ofany involvement with the criminaljustice system if, in fact, she was dis-criminated against in employmentbecause of her husband's arrest andcourt record. “Unfortunately, underHawaii law and the federal caseswhich have found associational pro-tections, the Commission does notbelieve that it has the power orauthority to investigate a complaintalleging associational discriminationbecause of the arrest and courtrecord of another person.” In thematter of Jane Doe, HCRC DR-93-009 (1994). The Commission wenton to note gratuitously that this doesnot bar a claim of marital status dis-crimination.

In addition, Hawaii law offersseveral statutory exceptions that mayapply to a particular business. Therequirement that inquiry into andconsideration of a prospectiveemployee's conviction record maytake place only after the individualhas received a conditional job offer,and the limitation to the most recentten-year period, excluding the periodof incarceration, shall not apply toemployers who are expressly permit-ted to inquire into an individual'scriminal history for employment pur-poses pursuant to any federal orstate law …including:

■ - (16) The board of directorsof a cooperative housing cor-poration or the manager of a

17

cooperative housing projectpursuant to section 421I-12;and

■ - (17) The board of directorsof an association of apart-ment owners, or the managerof a condominium projectpursuant to section 514B-133.

In recent years the Commissionobtained settlements in several casesinvolving arrest and court recordclaims. An insurance claims adjusterwas terminated after he voluntarilyinformed employer of his arrest andcourt record a year after he was hired.The Complaint settled for $25,000 andaffirmative relief. Another employerterminated Complainant for lying inresponse to a question on theemployer's application form asking ifhe had been convicted of any felony.Settlement included a payment of$35,000. An applicant for a custodianposition settled for $1,500 and affir-mative relief including eliminating anunlawful inquiry into convictionrecords on respondent's employmentapplication.

It should also be rememberedthat relying on the actual underlyingconduct may avoid liability underH.R.S. 378-2 as well. Kinoshita v.Canadian Pacific Airlines, 803 F.2d471 (9th Cir. 1986).

Employers are increasingly beingchallenged in court for the harmincurred by employees and cus-tomers or other third parties simplybecause of the employment relation-ship. Typically, the injuries for whichplaintiffs seek to recover are (1)assaults, (2) thefts and (3) harass-ment. Because a claim for negligenthiring is a tort, both compensatoryand punitive damages may be avail-able. Jury awards can thereforereach astronomical sums.

To avoid liability for negligent hir-ing and retention of unfit employees,a careful review of the applicantscreening process is required.Pressure to fill all vacancies in a tightlabor market increases the concernthat proper evaluation of applicantsmay not always be conducted.Since such lawsuits usually focus onthe acts or omissions of the human

resources manager and the employ-ee's supervisor or manager, employ-ers must constantly be wary of ques-tionable information in any appli-cant's background and workplaceperformance.

In Hawaii, the theory of negligenthiring had its crystallization inJanssen v. American Hawaii Cruises,Inc., 69 Haw. 31 (1987). In that case,the Hawaii Supreme Court declaredthat an employer is liable to thosewho it owes a duty of care for theforeseeable harm caused by anemployee. "Duty" as the courtopined, is "only an expression of thesum total of those considerations ofpolicy which lead the law to say thata particular plaintiff is entitled to pro-tection". Whether a duty exists in aparticular case is a question of lawfor the court to decide.

Negligent hiring must be distin-guished from the employer's liabilityunder the doctrine of respondeatsuperior. Respondeat superiormakes the employer liable for

continued on page 18

18

wrongs committed by an employee acting WITHIN thescope of his employment or in furtherance of his employ-er's duties. Negligent hiring may make the employerliable for acts of employees OUTSIDE the scope ofemployment.

In 1991, the Hawaii Supreme Court clarified the stan-dard for employer liability under the doctrine of respon-deat superior. Conduct of an employee is "within thescope of employment" if (1) it is the kind he is employedto perform, (2) it occurs substantially within authorizedtime and space limits, and (3) it is actuated, at least inpart, by a purpose to serve the employer. The employer'sliability is limited in a general sense, therefore, by the testof whether the employer's risks are incident to his enter-prise, or "enterprise theory", which finds liability if theemployer's enterprise would have benefitted by the con-text of the act of the employee but for the unfortunateinjury.

Because of the substantial damages involved in negli-gent hiring lawsuits, employers must pay close attentionto gaps in a job applicant's employment record becausethey might indicate time spent in jail. A foreshortened

Background Checkscontinued from page 17

MOTOOKA YAMAMOTO & REVERE Attorneys at Law

1000 Bishop St. Suite 801 • Honolulu, HI 96813

A leader in Community Association Legal Services, providing comprehensive, economical services to

nearly 300 Associations statewide.

timely, experienced advice to keep you running smoothly

effective problem solving and covenant enforcement

efficient, productive collection of delinquent assessments, with monthly reports on all accounts

experienced, effective advocates when the need to litigate arises

Milton M. Motooka Myles T. Yamamoto Terry M. Revere

Randall K. Sing Jacqueline E. Thurston Kapono F. Kiakona Rebecca A. Szucs

www.myrhawaii.com email: Milton@myrhawaii.com Ph: 532-7900

CAI Hawaii accepts articles forpublication on topics that are directlyrelevant to CAI Hawaii's main purpose- improving the management and oper-ation of homeowner associations inHawaii. CAI Hawaii edits articles forclarity, not content, so the viewsexpressed in published articles arethose of their authors and not neces-sarily the views of CAI Hawaii.

military career also should be investigated, since it mayhave resulted from a court-martial for criminal activity.Also, employers should not hesitate to ask prospectiveemployees to explain any questionable information inthe job applicant's employment record.

Employers conducting investigations of applicantsor employees usually telephone the references listed bythe applicant and/or make written requests for informa-tion, accompanied by a release signed by the subject ofthe inquiry. Employers enjoy a qualified privilege tocommunicate truthful information relating to an employ-ee's work-related abilities. Vlasaty v. Pacific Club, 4Haw. App. 556 (1983); Turner v. Halliburton Co., 722P.2d 1106 (Kans. 1986); H.R.S. 663-1.95

Under the Fair Credit Reporting Act, 15 U.S.C.§1681-1686t, if an employer utilizes a third party to con-duct a background check rather than doing the workitself, and that information is wholly or partly responsiblefor a denial of employment or discharge, the employer isobligated to notify the affected party about use of aconsumer report and the name and address of theagency that prepared the report. An employer mustalso notify the employee or prospective employee inwriting that such a report may be made and that theemployee may request a fuller disclosure of the extentof that report.

While employees are armed with a wide variety oflegal theories and new statutory protections, Hawaii'semployers have generally fared well in defending againstsuch claims because they have prepared their policiesand personnel for the potential claims of disgruntledapplicants and employees. Proper training of hiring per-sonnel to avoid the risk of litigation is the best insurancean employer can have against the new tide of employeelawsuits that will likely continue well into the future.

About the Author: John Knorek, Esq. is with the lawfirm of Torkildson, Katz, Moore & Hetherington, special-izing in the representation of management in all aspectsof employment and labor law. He can be reached at:523-6000 or via e-mail at jlk@torkildson.com.

19

CAI ANNUAL MEETING

Join us and celebrate at the CAI Annual Meeting

Tuesday, November 6, 2007

Japanese Cultural Center

Sign In 5:30PM - Meeting Begins at 6PM

Awards Presentation To Follow

Heavy Pupus and Door Prizes

Register: Phone 488-1133 Fax 532-7910Email: caihawaii@hawaiiantel.net

Reservations must be made before 12 Noon, November 2, 2007

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20

P.O. Box 976Honolulu, Hawaii 96808

PresortedStandard

U.S. Postage PAIDHonolulu, HI

Permit No. 59

CAI SEMINARS 2007Thursday seminars include Lunch

Saturday Seminars include Breakfast

Date Topic, Seminar Coordinator

October 18, Thursday Board Dos & Don’tsNoon-1:30 pm Hale Koa Hotel

Milton Motooka, Motooka Yamamoto & Revere

October 20, Saturday MAUI: Board Dos & Don’ts10 am-11:30 pm (In conjunction with the

Condominium Council of Maui)Milton Motooka, Motooka Yamamoto & Revere

CAI SEMINARS 2008Date Topic, Seminar Coordinator

January 26, Sat. Avoiding Disasters at Annual MeetingsJapanese Cultural Center

March 27, Thurs. Dealing with Hazards-Asbestos/MoldJapanese Cultural Center(Will be repeated in Kona in April; date and location to be determined)

April 26, Sat. ABCsJapanese Cultural Center

June 28, Sat. Disaster Preparedness & Health IssuesJapanese Cultural Center

July 24, Thurs. Legislative UpdateHale Koa Hotel(To be repeated in Maui; date and location to be determined)

August 21, Thurs. Covenants EnforcementHale Koa Hotel

September 25, Thurs. Top Traits of Boards & ManagersHale Koa Hotel

October 25, Sat. Defending & Winning Suits Against the Association or BoardsJapanese Cultural Center

Seminars are partly funded by funds from the Condominium Education Fund, Real Estate Commission, Professional and Vocational Licensing Division,Department of Commerce and Consumer Affairs, State of Hawaii for condominium apartment owners whose associations are registered with theReal Estate Commission.

2007 PMDP CoursesNovember 29-30 M-205

Thursday-Friday

December 6-8 M-100Thursday-Saturday

To register or for more information: Call CAI Direct: (888) CAI-4321

Call CAI’s Fax Back Service: (703) 836-6904or visit www.caisecure.net/pmdp/mv