Fall / Winter 2014

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to sophisticated
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Inside this
Issue:
Preparing for
the ICE Storm:
Conducting an
Internal I-9 Audit
Its Planning,
Not Uncertainty:
The Importance
of Pre and Post
Nuptial
Agreements
Introducing
Ikaika B. Rawlins
and Sommerset
K.M. Wong
Robert Thomas
& Mark Murakami
Take the
National Eminent
Domain Stage

Understanding Residential
Property Management
Agreements

By Ikaika B. Rawlins

ue to the amount of time and the potential liability involved in leasing and managing
residential real property, many of our clients elect to hire professional property management
companies to perform these services for their properties. The property management agreement
defines the rights and obligations of the property owner (the Owner) and property manager
(the Manager) with respect to the property covered by the agreement. In this article, I
highlight several common provisions found in a typical property management agreement that
Owners should be aware of before entering into an agreement with a management company.
Compensation. So how much should an Owner pay for property management services?
Well, I will give you the lawyerly answer it depends! In all seriousness, the amount an Owner
should expect to pay for property management depends on a Managers reputation and the
demand for their services, the amount of additional services required beyond basic property
management, and the scope and/or complexity of the property management assignment.
The structure of compensation in most agreements, however, is fairly uniform. Generally, the
Manager will charge a one-time set-up fee per property managed, expressed as either a fixed
dollar amount or a percentage of the monthly rent (generally 15-20%), plus a monthly
management fee, which market data indicates is currently
between 10-15%. Furthermore, most agreements provide
for a fee equal to a percentage of the cost of work performed
for the Managers coordination of repairs to the property and
substantial additional consulting fees for ancillary services
provided above and beyond standard property management
services. The Owners ability to negotiate more favorable
terms than those found in a management companys standard
agreement depends on the Owners bargaining power, which
is, unsurprisingly, a function of the amount of fees that the
Manager may expect to receive under the agreement.

Continued on page 2

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Continued from cover

Appointment of Manager and Owners Termination Rights. The typical agreement provides that the
Manager has exclusive rights to lease and manage the property for a specified period of time, with automatic,
periodic renewals thereafter. The agreement can generally be terminated by either Owner or Manager, for any
reason or none at all, with 30 days prior written notice from one party to the other; however, if the Owner
terminates before the expiration of the exclusive leasing and management period, the Owner is usually obligated
to pay the unpaid portion of the scheduled management fees. An Owner with bargaining power may be able to
amend this provision by, for example, making the Owner liable for payment of the unpaid portion of scheduled
management fees only for a termination without cause or limiting the termination fee to a specific dollar
amount.
Tenant Selection. The agreement also provides that the Manager will coordinate property showings, screen
rental applications, and select the most qualified applicant(s) for the rental unit. The determination of a qualified
applicant varies substantially from one agreement to another. In some agreements, there are no express criteria
for determining a qualified applicant, leaving the Manager with a substantial amount of discretion in selecting
a tenant from the pool of applicants; in others, strict income requirements (e.g., a 3:1 income to lease rent ratio)
must be satisfied and the Owner may have additional approval rights beyond meeting these minimum requirements
in order to qualify for the unit. Because an Owners rental property is usually one of their most substantial investment assets, it is a good idea when negotiating with a management company on an agreement to thoroughly
understand that companys tenant approval procedures and, if possible, work with the company to establish
criteria for approving tenants.

Repairs and Maintenance. Although the lease defines the scope of the Owners repair and maintenance
obligations on the property, the management agreement delegates the authority to perform these obligations
on behalf of the Owner up to a certain dollar limit (e.g., $200). If the cost of non-recurring repairs and/or
maintenance exceeds this dollar limit, the Owners approval of those repairs is required. Furthermore, it is also
common in management agreements for the Manager to have the authority to make emergency expenditures
above the repair and maintenance limit established in the agreement if, in the Managers opinion, the expenditures
are necessary to protect the property from damage, prevent injuries, avoid penalties, fines, or suspension
of services to tenants required by the lease or by law.
Mortgage Payments, Taxes, Insurance Premiums, and Homeowners Association Dues. Not everything
is delegated to the Manager under the agreement. Generally, a management agreement provides that the
Owner remains liable for paying any mortgages, real property taxes, insurance premiums, and homeowners
association dues.
Owners Indemnification of Manager. Most agreements provide that the Owner shall indemnify and hold
harmless the Manager from all costs, expenses, suits, liability, damages, and claims arising out of the leasing
and management of the property by the Manager, except to the extent due to the Managers gross negligence,
and, in that instance, damages are limited to the management fee collected. Put another way, even if the
Manager has been grossly negligent with respect to its leasing and management of the property, the Owner can
only recover up to the amount of the management fee collected.
First Right of Refusal to Sell During Management Period. In some management agreements, if the Owner
decides to sell the property at any time during the management period, the Owner will be required to list the
property for sale with the Manager. Beware of this provision! Although it is not as common as the others
mentioned above, it does appear in management agreements from time-to-time, particularly with companies
that offer below-market management rates as an inducement to the Owner to enter into this type of arrangement.
Residential property management agreements are complex documents that carry significant economic and
legal consequences. At Damon Key, we have years of experience in advising our owner clients on management
agreements and other legal issues concerning their real estate investments. Please feel free to contact us with
your real estate and business needs.

For more information on this article, please call Ikaika

at 531-8031 ext 610 email him at ibr@hawaiilawyer.com
or scan the code with your smartphone.
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Preparing for the ICE Storm:

Conducting an Internal I-9 Audit

istakes can be costly. For the 2013 fiscal year, the U.S. Immigration and Customs
Enforcements (ICE) Homeland Security Investigations (HSI) accomplishments
By Kelly Y. Morikone
included serving over 3,000 Notices of Inspection and 637 Final Orders totaling over $15
million in administrative fines. The ICE investigation led by HSI begins with a Notice of Inspection requiring the
employer to turn over all of its I-9s on file, current payroll, and other documentation. To protect your company,
we advise a periodic, annual internal self-audit of your companys I-9 forms and records to ensure compliance.
Your company should have a Form I-9 or
Employment Eligibility Verification Form (I-9) for
each current employee on payroll, including U.S.
citizens, hired after November 6, 1986. Each former
employees I-9 must be retained until the later of two
dates have passed: three years after the date of hire
or one year after employment is terminated. The I-9
is not required for certain employment categories
such as independent contractors or intermittent
domestic workers at a private household.
The I-9 consists of three parts: Section 1 Employee
Information and Attestation, Section 2 Employer or
Authorized Representative Review and Verification,
and Section 3 Re-verification and Rehires.
Section 1 must be completed, signed, and dated
by the employee on the date of hire along with the
Preparer and/or Translator Certification if a preparer
or translator is utilized. It is the employers responsibility to review and ensure that Section 1 is completed
properly and on time. If you notice errors, ask the
employee to draw a line through the incorrect information, enter the correct information, and initial and date
the correction. If there are major errors in Section 1,
such as entire portions left blank, a new I-9 can be
completed and attached to the old I-9. It is always
a good idea to write a note in the file regarding the
reason you made changes to the I-9 or completed a
new I-9 and note the date.

write in the date of hire and date you reviewed the

documents. Never suggest what documents the
employee should bring. Your responsibility is to
determine if the documents presented reasonably
appear to be genuine.
Section 3 may be completed when your employees
employment authorization expires (re-verification),
your employee is rehired within three years of the
date the I-9 was originally completed, or if your
employee changes his or her name. The date of
re-verification is the earlier of the expiration date in
Section 1 or expiration date of the document in
Section 1. Do not re-verify documents from U.S.
citizens, lawful permanent residents who presented
a permanent resident card, or one who presented
documents from List B. When you re-verify, if you
notice that the I-9 has expired, use the new I-9 to
complete Section 3 and attach it to the old I-9 form.
If you discover errors in Sections 2 or 3, draw a
line through the incorrect information, enter the correct
information, and initial and date the correction. We
recommend the I-9s to be stored separately and be
easily accessible in case of an audit.

Section 2 must be completed, signed, and dated

by the employer within three business days after
the date of hire. To complete Section 2, ask your
employee to bring in the original documents from
List A or a combination of List B and List C and
For more information on this article, please call Kelly
at 531-8031 ext 614 email her at kym@hawaiilawyer.com
or scan the code with your smartphone.
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Its Planning, Not Uncertainty: The Importance

of Pre and Post Nuptial Agreements

he majority of people believe that prenuptial agreements, commonly known as prenups,

reflect uncertainty about the success of a marriage. As a newly minted attorney,
however, I have learned that you should always be prepared. As one family law attorney
By Sommerset K.M. Wong
said, a prenuptial agreement is not a reflection of a persons uncertainty about his/her
marriage, its a way to ensure that in the event anything happens, the distribution of assets will not be governed by
high emotions and stress, but in accordance with an agreement that was executed with a clear mind. Prenuptial
agreements can be as broad or as narrow as you want them to be. For some, it is about keeping heirlooms within
the bloodline, while for others, it is about ensuring that certain family members are taken care of. Some even have
a sunset provision which provides that if parties are still married after a certain time, the prenuptial agreement
becomes null. No matter what the reason, a prenuptial agreement should not be seen as a reflection of uncertainty,
but rather a way of ensuring that both parties interests are protected if something ever happens.
As prenuptial agreements can be complicated, this article will only address two important things about prenups:
what these agreements can cover and the important financial disclosure requirement.
Haw. Rev. Stat. 572D-3 provides that prenuptial agreements can include the following:
Rights and obligations of each party in any property, whenever and wherever acquired
Right to buy, sell, use, or transfer property
4

Disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence
of any other event
Modification or elimination of spousal support
Making of a will, trust or other arrangement
Ownership rights in and disposition of death benefits from a life insurance policy
What law will apply to construe the agreement
Any other matter, including personal rights and obligations, so long as it is not in violation of public policy
or a statute imposing criminal liability
Once you and your partner have figured out what you want the agreement to cover, there is a financial
disclosure requirement. Some say ignorance is bliss, however, knowing about your partners finances and their
spending and saving habits may save a lot of heartache. In fact, the leading predictor of divorce is financial
disagreements. Luckily, one of the requirements of a prenuptial agreement in Hawaii is financial disclosure.
These disclosures generally identify all property, liability, and income of each of the parties. This is important
so both parties have all their cards on the table and are able to make a reasonably informed decision about
whether they want to enter into the prenuptial agreement.
All in all, although these agreements may seem straight forward, prenuptial agreements are highly scrutinized
by courts. Having legal advice will provide the best opportunity to ensure that your prenuptial agreement is
both fair and legally sound. An attorney can help you to ensure that the agreement says what you want it to say
and complies with the applicable state law.
Postmarital agreements are also an option. Some couples choose a postmarital
agreement because they either werent able to or didnt want to execute an agreement
prior to marriage. These agreements, like prenups, can determine the legal rights of
the spouse, either immediately or in the event of death or divorce. Sometimes these
agreements are executed in conjunction with estate plans for both spouses.

For more information on this article, please call Sommerset

at 531-8031 ext 615 email her at skmw@hawaiilawyer.com
or scan the code with your smartphone.
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Introducing Ikaika B. Rawlins and

Sommerset K.M. Wong

amon Key Leong Kupchak Hastert welcomes Ikaika B. Rawlins

and Sommerset K.M. Wong as the firms newest Associates.
Ikaika joins the firms Real Estate, Corporate Law, and Estate
Planning and Probate Practice Groups. Sommerset joins the
Dispute Resolution Practice Group. The new attorneys arrive at
the firm with diverse backgrounds but a common track record
of helping to successfully advance the interests of others.
A recent graduate of the University of Hawaii, William
S. Richardson School of Law, Ikaika brings prior
experience in commercial real estate and Hawaiian
affairs. While in law school, Ikaika served as Co-Editor
in Chief of the University of Hawaii Asian-Pacific Law
and Policy Journal. Immediately prior to joining the
firm, he was a Summer Associate with Damon Key,
a Judicial Extern with Hawaii Supreme Court Chief
Justice Mark Recktenwald, and Committee Clerk
with the Senate Hawaiian Affairs Committee.
In a career that preceded law school, Ikaika worked
for nearly five years with CB Richard Ellis, Inc.,
specializing in shopping center leasing, sales and
development. During his time there, he managed
leasing programs for landlords such as Kamehameha
Schools and Safeway, Inc., and successfully concluded
transactions with local and national retailers. While
working in commercial real estate, Ikaika developed a
great appreciation for the important work that attorneys
do on a daily basis to help solve client problems and
was inspired to apply to law school.
Originally from Hilo, Ikaika earned his bachelors
degree in Biology from the University of Hawaii at Hilo.
He then became a Trustee Aide and Committee Clerk
with the Office of Hawaiian Affairs. He was also an
Educational Support Specialist with Aha Punana Leo,
a non-profit organization dedicated to serving the
Hawaiian language community. In this role, Ikaika
taught students applied math, science and resource
management through traditional Hawaiian navigation
aboard the Hokualakai voyaging canoe, serving as a
crew member on long distance ocean voyages.
Ikaika enjoys spending his spare time surfing and
playing basketball. He is a member of the Hawaii
Chapter of the American Judicature Society.

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Sommerset K.M. Wong graduated magna cum

laude from the William S. Richardson School of Law
where she was Executive Editor of the University
of Hawaii Law Review, a Criminal Justice Teaching
Assistant and Law School Visit Coordinator. Her
extensive involvement at the school included serving
as the Richardson School of Law Student Ambassador
and Class Representative, as well as a University of
Hawaii Student Caucus Representative.
Sommerset was also active with the Hawaii
Innocence Project, an organization committed to providing free representation to incarcerated individuals
with a credible claim of actual innocence, serving as
both a volunteer case manager and teaching assistant.
Prior to joining the firm, Sommerset was a Volunteer
Intern with the Federal Bureau of Investigation, a
Summer Extern with Chief Judge Susan Oki Mollway
of the United States District Court of Honolulu and a
Research Intern with the Hawaii State Bar Association.
Most recently, Sommerset became a recipient of
the John S. Edmunds Award for Civility and Vigorous
Advocacy, which recognizes those who vigorously
advocate for others but do so with abundant civility.
She currently serves as Secretary of the prestigious
University of Hawaii Regents Candidate Advisory
Council.
Sommerset earned her bachelors degree in
Psychology, with a minor in Criminal Justice, from
The George Washington University, magna cum
laude. Both Sommerset and Ikaika are graduates of
Kamehameha Schools, Kapalama campus.

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Robert Thomas and Mark Murakami Take the National

Stage at Eminent Domain Conference

D
6

amon Keys Robert Thomas and Mark Murakami will play key
roles at the 2015 American Law Institute-Continuing Legal
Educations Eminent Domain and Land Valuation Litigation conference
in San Francisco, February 5-7, 2015. The conference is the premiere
Robert H. Thomas
Mark M. Murakami
national program on eminent domain and condemnation law, and the
annual gathering of the countrys most experienced and successful eminent domain lawyers. The only Hawaii
attorneys on the faculty of the three-day conference, Robert and Mark will draw on their extensive experience
to help address key areas of the rapidly evolving practice area.
Robert is the Co-Planning Chair of the annual
conference, now in its 32nd year. As such, he produced the agenda and gathered the faculty (along
with his co-Chair, his colleague Joe Waldo of Norfolk,
Virginia). Robert will present the conference overview,
speak on the topic of Ethics in Eminent Domain, and
participate in the National Forum: Issues Facing
Practitioners around the Nation. He will also moderate
several panels. Mark will join two other national
experts to speak on the subject of Denominators and
Bright Lines: The Search for the Relevant Parcel in
Eminent Domain and Regulatory Takings.
Both Robert and Mark are members of Damon
Keys Real Estate and Construction Practice Groups,
and are the firms attorneys who deal regularly with
eminent domain issues. Attorneys from the firms
practice group have been involved in some of the most
important cases in the field in Hawaii and beyond.
A land use and appellate lawyer, Robert focuses on
regulatory takings, eminent domain, water rights, and
voting rights cases. He has tried cases and appeals in
Hawaii, California, and the federal courts. He serves
as Chair of the Eminent Domain Law Committee of the
American Bar Associations Section on State & Local

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Government Law, and is also the Secretary of the

Section. He is the exclusive Hawaii member of
Owners Counsel of America, an invitation only
national network of the most experienced eminent
domain and property rights lawyers. Robert is
listed in Best Lawyers for Eminent Domain and
Condemnation Law, and Land Use & Zoning Law.
He was Best Lawyers Lawyer of the Year for 2014
for Eminent Domain and Condemnation Law and in
Super Lawyers for Appellate Law, Land Use/Zoning,
and State/Local/Municipal Government Law.
Marks experience in Eminent Domain, Land
Use and Zoning includes representing property
owners in condemnation and inverse condemnation
lawsuits, as well as property owners and businesses
in litigation involving land use, zoning, and environmental litigation. He is listed in Best Lawyers in the
categories of Land Use and Zoning and Eminent
Domain and Condemnation Law. He was Best
Lawyers Lawyer of the Year for 2013 for Eminent
Domain and Condemnation Law, and was named a
Super Lawyer in 2012, 2013 and 2014.
Damon Key wishes Robert and Mark the best at
the February conference!

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Damon Key
Ohana Picnic 2014
A Time to Refresh & Build Relationships.
At Damon Key, weve built our firm on a
foundation of strong relationships. Thats
why each summer the Damon Key ohana
gathers for a time of fun and fellowship at the
firms annual beach picnic. Its an excellent
time to catch up with long-time colleagues,
as well as to meet and mingle with those
who are new to the firm. The festivities are
made complete with family members joining
in the day filled with great food, games and
conversation.
The event provides a time to refresh and
revitalize the team. Its indisputable that
getting to know each other better outside
of the office enhances working relationships
inside the office. With a growing firm, it is
essential that employees across the various
practice groups remain connected and our
annual family picnic is successful in doing
just that.

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A D V E R T I S I N G

M A T E R I A L

Legal Alert is published periodically by Damon Key Leong Kupchak Hastert to inform clients of legal matters of general interest. It is not intended to provide legal advice or opinion.

Attorneys in the News

Bethany C.K. Ace was on the faculty of the

National Business Institutes seminar entitled
Everything You Dont Know about E-Discovery
(but Wish You Did) on November 19th. Ms. Ace
presented on Handling Social Media, Email, Video
and Other Electronically-Stored Information and
Making Your Electronic Evidence Usable in the
Courtroom.
Clare M. Hanusz will be speaking at the Center
for Korean Studies Auditorium on January 16, 2015
at the Human Trafficking in Asia and the Pacific
Symposium. Clare will cover Labor Trafficking in
Hawaii: A Case Study of Thai Farm Workers with
Global Horizons and Aloun Farms.
Christine A. Kubota, Caron N. Ikeda and Sara
E. Coes spoke at the Hawaii International Real
Estate Councils Look Way Ahead Investment
Strategies For Your International Clients program
on November 21st at the Oahu County Club.
Christine A. Kubota has been reappointed to
the Hawaii Supreme Courts Committee on Court
Interpreters and Language Access, and shall
continue to serve as co-chair of the Committee.

Gregory W. Kugle and Matthew T. Evans

prevailed at the Hawaii Supreme Court. In Friends
of Makakilo v. D.R. Horton-Schuler Homes, LLC,
No. SCAP-13-0002408 (Oct. 30, 2014), the States
highest court unanimously agreed with the position
advocated by Greg and Matt, resulting in a significant victory for Damon Keys client. The Courts
opinion established an important new precedent
concerning the availability of relief under Hawaiis
Administrative Procedure Act.
Mark M. Murakami and Gregory W. Kugle
presented at the Hawaii State Bar Associations
Real Property and Financial Services Sections
2nd Annual Real Estate Litigation Update on
November 21st.
Robert Thomas recently spoke to the ABAs
Section of Real Property, Probate & Trust Sections
Condemnation Law Committee about Starr
International v. USA, the $25 billion takings lawsuit
by the former chairman of AIG for the governments
alleged mishandling of AIGs financial bailout. The
podcast of the talk is posted on Roberts blog,
inversecondemnation.com.