Report Title:

Real Property Leases

Description:

Requires lessor at termination of lease to pay a tax upon the assessed value of any lessee improvements unless the lease is extended to its original term or the lessee is permitted to purchase the fee interest of the leased property.

HOUSE OF REPRESENTATIVES

H.B. NO.

2721

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO REAL PROPERTY LEASES.

 

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

SECTION 1. Chapter 519, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§519- Reversion of improvements; imposition of tax. (a) This section shall apply to all leases of private lands, except:

(1) Leases as defined by section 516-1, of residential lots, as defined by section 516-1;

(2) Leases, including subleases, of residential condominium property regimes created under chapter 514A; and

(3) Leases, including subleases, executed by a cooperative housing corporation as defined in section 519-3.

(b) At the termination of any lease, or at the expiration of the lease term, the lessee, if not then in default under the terms of the lessee's lease, may remove all onsite improvements on the lot that were constructed at the cost of, or otherwise paid for by, the lessee, without compensating the lessor for such improvements. In the event that:

(1) The lessee notifies the lessor in writing within one hundred twenty days before the termination or expiration that the lessee declines to remove such onsite improvements and the lessee is not then in default under the terms of the lessee's lease; and

(2) The lessor refuses to:

(A) Extend the term of the existing lease or to issue a new lease for a term of not less than the original term of the lease at a lease rental and on terms mutually agreed to by the parties or, failing such agreement, that is determined by arbitration pursuant to chapter 658A; or

(B) Sell to the lessee the fee interest to the lease property at its the current fair market value, unencumbered by any onsite improvements,

the lessor shall be subject to a windfall profits tax, upon the receipt of the ownership of the improvements at the termination of the lease, payable to the State and equal to fifty per cent of the current assessed value of the improvements for real property tax purposes. In the event of the purchase by the lessee of the fee interest in the lease property, if the parties cannot agree upon a fair market value, an appraisal shall be completed at the expense of the lessee. The appraiser selected shall be by mutual agreement of the lessee and the lessor or in conformance to chapter 658A. The compensation shall be determined by mutual agreement or in conformity with chapter 658A, and the compensation shall be paid upon the termination of the lease or within thirty days of determination, whichever first occurs.

(c) The department of taxation shall prescribe and have printed all forms and rules necessary for the implementation of this section.

(d) All taxes realized by this section shall be for the use of the State and shall be paid into the state treasury at such times as the director of finance shall direct."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act shall take effect on July 1, 2004.

INTRODUCED BY:

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