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HB832
HOUSE OF REPRESENTATIVES
H.B. NO.
832
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII
A BILL FOR AN ACT
relating
to real property leases
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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SECTION 1.
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The legislature finds that, due to historic
factors, concentrations of Hawaii land ownership in far too few owners has
resulted in an artificial restriction on the availability of land for Hawaii
businesses and impacted the free market for such land, which in turn has caused
an excessive rise in the cost of land.
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The result has led to land rents rising above levels that are economic
for those businesses, loss of economic value of improvements by businesses,
bankruptcies, suppression of the creation and development of Hawaii's business
sector, suppression of available jobs and careers available to Hawaii
residents, and downward pressure on wages paid to workers in the State.
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The legislature finds that one major
practice of lessors has been the resetting of long-term lease rents during the
term of a lease at levels above the economic use to which the property is put
under the lease.
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Additionally, tenants
often forfeit tenant-created buildings, infrastructure, and improvements upon
termination of long-term leases.
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These
practices, among other factors, make it challenging for Hawaii businesses to
survive.
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The purpose of this Act is to:
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(1)
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Prohibit the
resetting of lease rents for long-term commercial leases above a level that is
economic for lessee's actual use of the property; and
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(2)
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Require that a lessee
whose long-term commercial lease has been terminated be compensated for the
value of buildings, infrastructure, and businesses created by the lessee that
will be retained by the lessor.
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SECTION
2
.
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Section 519-1,
Hawaii Revised Statutes, is amended to read as follows:
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"
[
[
]�519-1[
]
]
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Lease
renegotiations; calculation of rent;
long-term commercial leases;
compensation; right to purchase; appeals;
definition.
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(a)
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Whenever any agreement or document for the lease of private lands
provides for the renegotiation of the rental amount or other recompense during
the term of the lease and such renegotiated rental amount or other recompense
is based, according to the terms of the lease, in whole or in part upon the
fair market value of the land, or the value of the land as determined by its
highest and best use, or words of similar import, such value, for the purposes
of determining the amount of rental or other recompense, shall be calculated
upon the use to which the land is restricted by the lease document.
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(b)
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Notwithstanding any law to the contrary,
lessors, lessees, appraisers, and arbitrators involved in resetting lease rents
for long-term commercial leaseholds shall not reset the rental amount above a
level that is economic for the lessee's actual use of the leased property,
including provision for a lessee's return on investment for improvements,
infrastructure, and businesses created or constructed by the lessee.
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(c)
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Upon termination of any long-term commercial
lease, a lessee shall be compensated by the lessor for the value of buildings,
infrastructure, and businesses created or constructed by the lessee that are
remaining on the property and retained by the lessor.
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(d)
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A lessee operating a business on land under a
long-term commercial lease shall have the right to purchase the land from the
lessor in fee simple at the fair market value of the land, which shall be
determined based on the use to which the land is put by the lessee.
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(e)
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Notwithstanding any language in the lease or
otherwise, appraisers determining:
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(1)
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The value of
the land, improvements, or businesses for purposes of rent resetting;
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(2)
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Compensation of
lessees for improvements or compensating lessors for land acquired by the
lessee; and
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(3)
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Value for
lessee purchase of land from the lessor,
shall adhere to this section.
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(f)
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Notwithstanding any law to the contrary or
provision in a lease regarding arbitration, any party aggrieved by an
arbitration decision under this section shall be entitled to appeal to the
circuit court where the land is located and to a full trial de novo on all
issues by the court.
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[
(b)
]
(g)
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The term "lease", "lease
agreement", or "document" as used in this section, means a
conveyance leasing privately-owned land by a fee simple owner as lessor, or by
a lessee as sublessor, to any person, for a term exceeding five years, in
consideration of a return of rent or other recompense."
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SECTION 3.
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This Act does not affect rights and duties
that matured, penalties that were incurred, and proceedings that were begun
before its effective date.
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SECTION 4.
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Statutory material to be repealed is
bracketed and stricken.
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New statutory
material is underscored.
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SECTION 5
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This Act shall take effect upon its approval.
INTRODUCED BY:
_____________________________
Report Title:
Long-term
Commercial Lease; Rent Renegotiations; Lessees; Lessors
Description:
Prohibits the resetting of lease rents for long-term
commercial leases above a level that is economic for the lessee's actual use of
the property.
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Requires that a lessee
whose long-term commercial lease has been terminated be compensated for the
value of buildings, infrastructure, and businesses created by the lessee that
will be retained by the lessor.
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Allows a
lessee the right to purchase the property at fair market value.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.