Condo owners in Hawaii are raising alarms over a recent federal court ruling that found condo associations used the wrong part of the law to file hundreds of foreclosures, some going back nearly ten years.
Those owners fear the ruling will force their condo associations to return millions of dollars to former owners, resulting in huge increases in monthly association fees.
"It's not fair," said Harendra Panalal, who owns a condo in Waialua. His association foreclosed on two units several years ago using the same section of the state's foreclosure law. "The maintenance fees are almost $700, and is expected to go up substantially more. Many people will not be able to afford it."
The condo associations themselves are also worried about the impact of the ruling.
"Rulings against the associations will cause them to have to cough up to pay off hundreds of wrongful foreclosures," said Ian Lind, a condo owner and member of his condo board. "I would imagine you could see bankruptcies."
U.S. District Judge Leslie Kobayashi ruled last month that it was illegal for an association to use a section of the foreclosure law, known as Part 1, that didn't adequately protect consumers.
Kobayashi says associations should have instead used a separate section of the law, known as Part 2, which provided homeowners with more notice and an opportunity to address their defaults.
Attorney Steve Chung, who won the case on behalf of an Ewa couple, says the potential damages are staggering.
"We need to find out how many other homeowners have lost homes in this manner," Chung said. "We've identified close to 200 ourselves. I think you're talking about hundreds of millions of dollars (in damages) potentially."
But David Major, who represented the association, believes the ruling is incorrect.
"An association has the statutory right granted by the Hawaii Legislature in order to collect these amounts," he said.
The legal dispute isn't done yet; the case is still pending, and there are a number of similar cases proceeding through the state courts before they end up in the appeals process.