Real Estate Law Journal

Legislature Again Seeking to Change Hawaii Commercial Leases

by Bruce D. Voss

The Hawaii State Legislature is once again considering bills to change the terms of commercial and industrial leases in Hawaii.

House Bill 1829 requires lessors of business and industrial property to give the lessee the “option to renew the lease according to terms that are fair and reasonable to both the lessor and lessee.” The bill would limit the amount of rent that could be charged, and require that the renewal be for “not less than 35 years, with a rent that is fixed for the initial 15 years.” If the lessor and lessee are unable to agree on the terms of a lease renewal, House Bill 1829 would give the lessee an option to buy fee simple title to the property. The bill also contains various other provisions intended to drive down rents charged to business and industrial lessees.

House Bill 1831 would establish a program for “mandatory lease-to-fee conversion” of business and industrial zoned properties in “development tracts” of five acres or more. The bill is superficially modeled on the state’s residential Land Reform Act.

Similar bills (SB 2452 and SB 2456) are pending in the state Senate. Another bill, House Bill 1830, would purport to require the State to provide lists of “unbiased” real estate appraisers for business lease rent arbitrations.

The bills all appear to be blatantly unconstitutional, particularly given the U.S. District Court’s ruling two years ago in HRPT v. Lingle. Our law firm obtained the ruling in the HRPT case, declaring a state statute unconstitutional under the Contracts and Equal Protection clauses.

Despite the serious constitutional problems, the Legislature is already scheduling hearings on the bills.

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