A National Basketball Association team and restaurant chain drew rebuke for seeking federal COVID-19 aid intended for small businesses. Now, many Hawaii homeowners, including residents in an ultra-luxury tower, are facing the same predicament.

Multiple Hawaii homeowner associations have applied and been approved for forgivable Payroll Protection Program loans despite not being eligible, according to a local Small Business Administration official.

Applicants include the association of owners at Kukui Plaza, a twin-tower downtown Honolulu complex described as the biggest condominium in the state with 908 units.

Also, the board of directors representing homeowners at Waiea, a glitzy tower at Ward Village in Kakaako where units first sold for an average $3.6 million, applied for a PPP loan despite misgivings from some board members.

These two condo associations and others benefiting private property owners competed for PPP aid against many small retailers, restaurants and other companies that are in dire straits after being forced to close or curtail operations under emergency government orders for slowing the spread of COVID-19.

An estimated 11,000 Hawaii small businesses tried but failed to snag PPP money during an initial and quickly exhausted $349 billion loan round in March where 11,553 Hawaii businesses received loans worth nearly $2.1 billion, according to the Hawaii Bankers Association.

A second round with $310 billion is still partly up for grabs.

The loans up to $10 million can be forgiven, and require recipients to spend at least 75% of proceeds to retain or rehire employees. The other 25% can be spent on utilities, rent and mortgage interest. If properly applied, the loan can be fully forgiven. Any unforgiven amounts become a two-year loan with a 1% interest rate.

Jane Sawyer, Hawaii district office director for the U.S. Small Business Administration, said multiple PPP loans were approved for local homeowner associations in the haste to help upended small businesses.

Sawyer, who has not tallied the number of these cases, said loans to homeowner associations need to be reversed because the nonprofit organizations representing private interests of homeowners don’t qualify for PPP.

The initial “interim final” rule for PPP included only two types of eligible nonprofit organizations — certain veterans’ groups and general charitable organizations with 501(c)3 designations that exclude entities organized or operated for the benefit of private interests.

Yet many entities later called out as ineligible rushed to snag PPP money because it was being given on a first-come, first-served basis and the window for applying opened at about the same time detailed rules were published following more general descriptions of PPP included in the Coronavirus Aid, Relief and Economic Security Act.

“I think there was a lot of confusion around eligibility,” said Dawn Bauman, a government affairs official with the Virginia-based Community Associations Institute.

Sawyer said this was true early on, because government officials generally said nonprofits would be covered by PPP, as would for-profit business chains if each establishment in the chain employed fewer than 500 people. A business with fewer than 500 employees is SBA’s standard definition of a small business.

“It was kind of a messy area,” she said. “There are so many interpretations.”

Still, Sawyer added that the SBA’s published rule makes clear that homeowner associations, which typically are “social welfare” organizations without 501(c)3 tax designations, are excluded from PPP.

Because the spirit of PPP was to help small businesses facing disaster, public outrage was strong when it became publicly known that loan recipients included the multibillion-dollar Los Angeles Lakers basketball franchise, national restaurant chain Shake Shack and other companies with incredibly valuable assets or easy access to capital.

The Lakers, Shake Shack and other rather big businesses returned their loans.

At Kukui Plaza, the board of directors representing owners said in an April 24 letter to owners that they applied and were approved for a PPP loan in part “to help preserve the strong financial health of the association regardless of how COVID-19 related events unfold.”

The letter, which did not disclose a loan amount, also said the loan would help “deal with the uncertainty we face in the coming months” and to defray the cost of employee payroll, utilities, debt interest and accounts payable.

Kukui Plaza’s board president and general manager could not be reached for comment Friday.

Accepting the loan is subject to approval by more than half of all Kukui Plaza homeowners, and there was a Friday deadline to vote on the issue, the letter said.

At Waiea, the board applied for a $414,710 loan over concerns including owners losing rental income and being unable to pay maintenance fees in connection with COVID-19 impacts, according to a copy of a letter to owners in the 171-unit tower that opened in 2016.

“The board would like to take advantage of this loan from the government to help subsidize the association’s costs for payroll and utilities,” said the letter from David Wei, board president.

Maintenance fees at Waiea were initially pegged to range from about $1,200 to $10,000 a month, or $417,000 for all units.

Waiea’s board president and a management representative of the tower could not be reached for comment Friday.

Another board member, Mikako Borden, said on Saturday that a conclusion was reached to drop the PPP application effort after seeking approval for the loan from all Waiea owners. Approval from more than half of all owners would have been required.

Borden personally objected to the loan, and said: “It would be nice if there were unlimited government funding for everyone affected by the pandemic, but the PPP is a zero-sum game, and we should not take advantage of the program at the expense of those who are in dire financial condition and who would need it more than us,” she said in an email.

It also appears that Waiea’s board was rebuffed by Central Pacific Bank, through which the loan application was made, according to Wei’s letter.

CPB conditionally approved a loan for Waiea owners, but later received word from the SBA on May 1 that homeowner associations weren’t eligible.

Positions from other local banks, all of which accept and process PPP applications for SBA, are less clear.

Bank of Hawaii said it had received a few applications from homeowner associations and that these applications are pending.

“We’re currently awaiting additional clarity and guidance as to whether the applications would qualify,” said bank spokeswoman Melissa Torres-Laing.

First Hawaiian Bank spokeswoman Susan Kam said loan officials were too busy working on PPP processing last week to assess how many if any homeowner associations have applied and whether any were approved.

Generally, homeowner associations are advised by their own counsel and professional management companies on issues of such import.

Richard Emery, vice president of government affairs for property management company Associa Hawaii, said his firm’s guidance on PPP loans is for associations to check the eligibility issue with their attorney and banker.

Sawyer with SBA said ultimately it is up to every borrower to understand whether they are eligible. She also noted that PPP rules include a safe harbor provision that allows loan recipients to return funds for a couple more weeks without any penalty.