Hawaii Real Estate State Practice Exam

The correct answer is that common profits must be distributed in proportion to the common interest unless stated otherwise in the declaration or bylaws. This means that distribution of profits is based on the individual ownership interests of the owners in the common elements of the property. In most condominium and common interest ownership scenarios, the declaration or bylaws outline how the common funds and profits are to be managed, but if such specifics are not detailed, the standard practice is to allocate profits according to each owner’s percentage of ownership in the common areas.

This approach ensures fairness and aligns with the principles of shared ownership, where each owner's stake in the association translates into rights and responsibilities, including profit distribution. Owners with larger percentages of ownership in the common elements naturally have a larger claim to any profits generated by those elements, reinforcing the connection between ownership interest and benefit.

The other options do not reflect the standard practice for distributing common profits. Equally among owners would ignore the ownership structure, individual assessment would imply a different mechanism of charging for services or costs rather than profit distribution, and discretion of the board could lead to arbitrary or unequal distributions, which is generally avoided in order to maintain transparency and fairness within the ownership structure.