Report Title:

Condominium; Leasehold

 

Description:

Establishes a fair market value standard (FMVS) for appraising the leased fee interest of condo and co-op housing corporations for leases that do not specify an appraisal standard and for leases on or after effective date of this Act; allows FMVS if lessor and lessee agree for leases prior to date of this Act.

 

THE SENATE

S.B. NO.

845

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to residential lease-to-fee conversion.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that a standard is needed to clarify the conditions in which a fee simple owner offers a leased fee interest in condominiums and cooperative housing corporations to be purchased by a lessee. The appraisal of these properties should be based on their fair market value to ensure equity and fairness in the process.

One method to accomplish this purpose would be to first calculate the fair market value of the real property. After determining the total interest of the fee owner, this percentage of the property would be assigned to determine proportionate percentages of ownership between the fee owner and the lessee.

The purpose of this Act is to establish a fair market value standard for determining the value of the leased fee interest to be purchased by a lessee.

SECTION 2. Chapter 514C, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"514C-    Appraisal method for condominium and cooperative housing corporation lease-to-fee conversion. (a) All leases, including subleases executed by a condominium or cooperative housing corporation as lessee, and subleases acquired by a condominium or cooperative housing corporation by assignment, executed prior to the effective date of this Act, that establish within the lease or sublease an appraisal method for determining the value of the lease-to-fee conversion, may use the following fair market value conversion appraisal method to compute the value of a lease-to-fee conversion:

(1) A state licensed real estate appraiser shall determine the fair market value of the leased fee interest using generally accepted appraisal methods in conformance with the Uniform Standards of Professional Appraisal Practice (USPAP); and

(2) The lessee's interest shall be determined in conformance with the USPAP. The fee owner's total interest in the property shall be determined by deducting the lessee's interest from the fair market value;

so long as all parties to the lease agree to the use of this method.

(b) All leases, including subleases executed by a condominium or cooperative housing corporation as lessee and subleases acquired by a condominium or cooperative housing corporation by assignment executed:

(1) On or subsequent to this Act; or

(2) Prior to this Act that do not specify an appraisal method in the lease;

shall use the fair market value conversion appraisal method set forth in subsection (a) to compute the value of a lease-to-fee conversion.

(c) For purposes of this section:

"Lease" or "sublease" means a conveyance of land or an interest in land, by a fee simple owner as lessor, or by a lessee or sublessee as sublessor, to any person, in consideration of a return of rent or other recompense, for a term, measured from the initial date of the lease or sublease, of twenty years or more, including any periods for which the lease may be extended or renewed at the option of the lessee.

"Lessee" means any person to whom land is leased or subleased, and the lessee's heirs, successors, legal representatives, and assigns.

(d) This section shall not apply to lease-to-fee conversion through condemnation."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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