Hawaii Real Estate State Practice Exam

Are common profits distributed based on individual usage of common elements?

1. Yes, according to usage

2. No, by proportion of common interest

3. Only if specified in bylaws

4. Yes, if owners agree

The correct answer is: No, by proportion of common interest

In a condominium or community association structure, common profits typically are not distributed based on individual utilization of common elements but rather proportionately based on the ownership share or common interest of each unit. This means that owners receive a share of common profits relative to the percentage of ownership they hold in the association. This ownership percentage reflects their contribution to the common areas and shared property, ensuring that all owners who have a larger stake in the property also share more significantly in the profits generated from the common elements. The notion that profits would be distributed according to individual usage is inconsistent with the principles of condominium ownership and could lead to disputes and complexities that do not align with the intent of shared ownership. The governing documents of the association, such as the bylaws, outline the standard practices for handling common revenues and expenses. Therefore, the established practice of distributing profits by proportion of common interest reflects the foundational principles of shared ownership rather than individual use.