Hawaii Real Estate State Practice Exam

In a condominium setting, common profits typically refer to any excess income generated by the condominium association after covering its operational expenses. By default, these profits are typically retained by the condominium association rather than being distributed to unit owners. This retention is essential for the maintenance and improvement of the property, allowing the board to ensure that there are sufficient funds available for future repairs, upgrades, emergencies, and ongoing operational costs.

When profits are retained, they contribute to the reserves and budgets that are necessary for the overall management of the condominium. This financial strategy helps maintain property values and supports the long-term financial health of the association. While unit owners may be permitted to vote on specific financial matters, including the distribution of profits, the standard practice is not to distribute profits directly to them unless there is explicit provision or a decision made by the board indicating otherwise.

This understanding clarifies why the choice indicating that common profits are distributed to owners is not aligned with typical condominium practices. Instead, they are retained for the collective benefit and management of the condominium community.