Haw. Code R. § 4-158-34 - Rights of holder of security interest
(a) Whenever any
notice of breach or default is given to any party under section 4-158-33 or
under the terms of any lease, license, agreement, or other instrument issued or
to be issued under this chapter, a copy of the notice shall be delivered by the
department to all holders of record of any security interest in the land or
interest covered by the lease, license, agreement, or other instrument whose
security interest has been recorded with the department. Should the board seek
to forfeit the privilege, interest, or estate created by the lease, license,
agreement, or other instrument, each holder may, at its option, cure or remedy
the breach or default, if the same can be cured or remedied, by the payment of
money or, if such is not the case, by performing or undertaking in writing to
perform all the terms, covenants, restrictions, or conditions of any lease,
license, agreement, or other instrument capable of performance by the holder,
as determined by the board, within the time period provided in section 4-158-33 or within such additional period as the board may allow for good cause and add
the cost thereof to the mortgage debt and the lien of the mortgage. Upon
failure of the holder to exercise its option, the board may:
(1) Pay to the holder from any moneys at its
disposal, including the special fund, which is made available for that purpose,
the amount of the mortgage debt, together with interest and penalties, and
secure an assignment of the debt and mortgage from the holder, or if ownership
of the interest or estate shall then have vested in the holder by way of
foreclosure or action in lieu thereof the board shall be entitled to a
conveyance of the interest or estate upon payment to the holder of the amount
of the mortgage debt, including interest and penalties, and all reasonable
expenses incurred by the holder in connection with the foreclosure and
preservation of its security interest, less appropriate credits, including
income received from the privilege, interest, or estate subsequent to the
foreclosure; or
(2) If the property
cannot be reasonably reassigned without loss to the department then terminate
the outstanding privilege, interest, or estate without prejudice to any other
right or remedy for arrears of rent or for any preceding or other breach or
default, and use its best efforts to redispose of the affected land to a
qualified and responsible applicant free and clear of the mortgage and the debt
thereby secured; provided that a reasonable delay by the board in instituting
or prosecuting any right or remedy it may have under this section shall not
operate as a waiver of the right or to deprive it of the remedy when it may
still resolve the violation created by the breach or default
involved.
(b) The
proceeds of any redisposition under subsection (a)(2) shall be applied: first,
to reimburse the department for costs and expenses in connection with the
redisposition; second, to discharge in full any unpaid purchase price or other
indebtedness owing the department in connection with the privilege, interest,
or estate terminated; third, to the mortgagee to the extent of the value
received by the department upon redisposition which exceeds the fair market
lease value of the land as previously determined by the department's appraiser;
and fourth, to the owner of the privilege, interest, or estate. Nothing
contained in this section shall be construed in a manner as to infringe upon or
prejudice in any way the rights of a holder of record having a security
interest which shall have vested prior to the effective date of a foreclosure
sale, judicial or nonjudicial, or by way of assignment in lieu of foreclosure,
or when the institutional lender sells or causes the sale of the lessee's
interest in a lease by way of a foreclosure sale, judicial or nonjudicial. The
institutional lender shall convey a copy of the sale or assignment as recorded
in the bureau of conveyances.
Notes
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