HAR §16-119.4-4. indicating the amount deposited in escrow

The commission shall only accept promissory notes where the funds have been escrowed. (c) "Availability of sufficient funds" to pay all costs required to be paid to complete the project as used in sections 514B-92 (b) (3) (B) and 514B- 93 (b) (3) (B), HRS, does not include: (1) Any projected purchaser's deposits not escrowed; (2) Interim or permanent loan commitments and other sources of funding from a developer's subsidiary or affiliate, except where a developer's subsidiary or affiliate has irrevocably earmarked funds to pay for all costs to complete the project as evidenced by a notarized declaration filed with any state, other than with the commission, or federal agency; (3) All funds encumbered for purposes other than those specified in sections 514B-92 (b) (3) (A) and 514B-93 (b) ( 3) (A) and (B), HRS; and (4) Other funds as excluded by the commission. (d) Funds from any interim or permanent loan commitment and any other commission approved source of funds shall be: (1) Provided as follows: (A) By a federally-insured financial institution located in this State or by a nationally chartered bank; (B) By a federally-insured financial institution located in this State or by a nationally chartered bank or any other lending entity in good standing where the entity is qualified to do business; or (C) Deposited in trust for purposes of sections 514B-92 and 514B-93, HRS, under a written escrow agreement with an escrow depository licensed pursuant to chapter 449, HRS. The escrow agreement and evidence of the deposited 119.4-18 3 6 2 6 §16-119.4-5 funds shall be submitted to the commission; (2) Immediately available for use as provided by a written agreement to pay all costs to complete the project as required by sections 514B-92 (b) (3) and 514B-93 (b) (3), HRS; (3) Excluded as collateral for other projects or purposes; (4) Evidenced by a written agreement that is signed by the developer and all other parties to the agreement dated within nine months of the submission. The written agreement shall be submitted to the commission; (5) Excluded from the funds any portion which has been encumbered for purposes other than to those purposes specified in sections 514B-92 and 514B-93, HRS; (6) Exclusive of any projected deposits; (7) Exclusive of interim or permanent loan commitments and other sources of funding from a developer's parent entity, subsidiary, or affiliate, except where a developer's parent entity, subsidiary, or affiliate has irrevocably earmarked funds to pay for all costs to complete the registered project. A developer's declaration of the irrevocable earmarked funds shall be notarized and filed with a state, other than with the commission, or federal agency; and (8) In compliance with other excluded conditions as may be required by the commission. [Eff MAR 2 6 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-92, 514B-93) §16-119.4-5 Completion; performance bond; irrevocable letter of credit alternatives. (a) A completion or performance bond issued by a non-surety material house shall at minimum contain the following: (1) The non-surety material house shall be: 119.4-19 3 6 2 6 - §16-119.4-5 (A) Located in this State; (B) Duly qualified and registered to do business in this State; and (C) An issuer in the normal course of its business of non-surety completion or performance bonds; (2) A letter from the project's construction lender, if any, stating that the completion bond or performance bond issued by a non- surety material house is satisfactory to the lender; (3) A written agreement between the developer and escrow agent that use of purchaser's deposits to pay project costs shall be made in accordance with section 514B-45, 514B-91, 514B-92, or 514B-93, HRS; (4) Names the commission and the developer as bond obligees; (5) Bond's obligation to complete the construction contract conditioned on the default of the contractor to faithfully perform the construction contract in accordance with the stipulations, agreements, covenants, and conditions of the construction contract, and any modifications of such, free from all liens and claims and without further cost, expense, or charge to the commission and the developer; (6) Provision that the bond's obligation also inures to the benefit of all persons entitled to file claims for labor performed or materials furnished; (7) Provision that upon default of the contractor, all bond funds shall be paid to and disbursed from an escrow account for the completion of construction; (8) Bond is maintained and continued in full force and effect continuously through the entire period from the beginning to the completion of construction; (9) Provision that the bond's expiration date is the date when construction is completed; 119.4-20 362 6_ - §16-119.4-5 (10) Provision that the contractor shall immediately amend the amount of the completion or performance bond to cover any significant cost increase to complete construction; (11) Disclosures in the developer's public report of the developer's use of a non-surety material house completion or performance bond and the restrictions on such use; and (12) Such other conditions and restrictions as required by the commission. (b) As used in sections 514B-92(c) and 514B- 93(c), HRS, "otherwise qualified, financially disinterested person" includes any third person unrelated to or not affiliated with the developer with financial expertise in accounting or with reviewing budgets, income, and expense documentation. (c) An irrevocable letter of credit shall at minimum contain the following: (1) An amount in addition to the amount of the _ security for the administration of the letter of credit to cover at minimum the cost of escrow and the commission's hiring of a private consultant to oversee the completion of construction. The initial fee shall be set by the commission and any additional fees that may be adopted by the director; (2) The commission and commission's authorized representative as beneficiaries of the irrevocable letter of credit and the only entity which can withdraw funds from the irrevocable letter of credit or which can reduce the amount of the irrevocable letter of credit; (3) Issued by: (A) A federally-insured financial institution located in this State; (B) A nationally chartered bank and confirmed by a state federally insured financial institution; or 119.4-21 .3 ,62 ti §16-119.4-5 (C) An out-of-state federally insured financial institution and confirmed by a state federally insured financial institution; (4) Where the contractor and developer have failed to complete the project construction, a provision permitting the beneficiaries to draw funds from the letter of credit to complete the project construction; (5) A provision that the developer or the contractor shall immediately amend the amount of the irrevocable letter of credit to cover any significant cost increase to complete construction; (6) Provision for the same security and protections as a completion or performance bond issued by a Hawaii-licensed surety company; and (7) Such other conditions and restrictions as required by the commission. The developer or contractor shall renew an irrevocable letter of credit or cause to be issued a new letter of credit in the amount required to complete construction thirty days prior to the expiration of an irrevocable letter of credit. (d) Any other alternative security shall at minimum contain the following: (1) An amount in addition to the amount of the security for the administration of any other alternative security to cover at minimum the cost of escrow and the commission's hiring of a private consultant to oversee the completion of construction. The initial fee shall be set by the commission and any additional fees shall be adopted by the director; (2) The commission and commission's authorized representative as the beneficiaries of the security and the only entity which can withdraw funds from any other alternative security or which can reduce the amount of the alternative security; 119.4-22 3626 §16-119.4-6 (3) A provision that the developer or the contractor shall immediately amend the amount of the other alternative security to cover any significant cost increase to complete construction; (4) Provision for the same level of security and protections as a completion or performance bond issued by a Hawaii-licensed surety company; and (5) Such other conditions and restrictions as required by the commission. The developer or contractor shall renew any other alternative security or cause to be issued any other alternative security in the amount required to complete construction thirty days prior to the expiration of any other alternative security. [Eff MAR 26 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-92, 514B-93) §16-119.4-6 Reduction of a completion, performance bond, letter of credit, or other alternative security amount for completion of construction. (a) The commission may approve a developer's written request to reduce the security amount of a completion, performance bond, letter of credit, or other alternative security for the completion of construction. The request must contain the following: (1) For each project or phase, an architect's certification as to the percentage of the project or phase that has been constructed; (2) Written evidence for each completed project or phase of construction that all construction work has been billed and paid for together with lien releases obtained from the general contractor and all subcontractors; (3) An agreement that the developer shall not convey any unit to a purchaser prior to the expiration of the forty-five-day mechanic's 119.4-23 1,/ '!i ffffl §16-119.4-6 and materialman's lien period, unless the purchaser receives a title insurance policy with a mechanic's lien endorsement; and (4) An architect's and general contractor's certification as to the percentage of the project or phase remaining to be completed and the dollar amount needed to achieve full completion of the project's construction. (b) The commission may approve a developer's written request that a submitted completion, performance bond, letter of credit, or other alternative security for the completion of construction be released. The request must contain the following: (1) An architect's certification that the project has been constructed and completed; (2) Written evidence that all construction work has been billed and paid for together with lien releases obtained from the general contractor and all subcontractors; (3) A filed marked court copy of the "Affidavit of Publication of Notice of Completion" and a copy of the notice covering the completion of construction for the entire registered project and the units therein made pursuant to section 507-43, HRS; (4) The developer's declaration that the mechanic's and materialman's lien period has expired and no application for a lien has been filed; and (5) An agreement that the developer shall not convey any unit to a purchaser prior to the expiration of the forty-five-day mechanic's lien period unless the purchaser receives a title insurance policy with a mechanic's lien endorsement. [Eff MAR 2 6 2026 ] (Auth: HRS §514B-61) (Imp: HRS §§514B-45, 514B-92, 514B-93) 119.4-24 §16-119.5-1 HAWAII ADMINISTRATIVE RULES TITLE 16 DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS CHAPTER 119.5 CONDOMINIUMS - SALES TO OWNER-OCCUPANT