Report Title:

Leasehold; Mandatory Conversion Actions; Persons Ineligible

Description:

Provides that any person who purchased or acquired a condominium or cooperative residential leasehold apartment after June 17, 1991, and entitled to proper disclosures pursuant to law shall be ineligible to participate in any mandatory conversion proceeding of eminent domain or acquisition of leased fee interest initiated by the State or counties. (SD1)

THE SENATE

S.B. NO.

261

TWENTY-SECOND LEGISLATURE, 2003

S.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to Land Use.

 

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

SECTION 1. In 1989, the legislature first enacted a leasehold disclosure law embodied in chapters 516 and 516D, Hawaii Revised Statutes. In enacting this law and amendments thereto, the legislature was responding to concerns that buyers of residential leasehold properties were not being adequately informed of the nature and terms of their leases.

To remedy this, chapters 516 and 516D, Hawaii Revised Statutes, require that any seller of residential leasehold property provide the buyer with documentation and basic information regarding the property, including the length of the lease, lease rent terms, lease rent renegotiation terms, how renegotiated rents will be calculated, and surrender clause provisions. The law further requires that the buyer expressly acknowledge in writing that the buyer has been informed of these terms, that rents may increase significantly, and that the buyer may be required to surrender the property at the end of the lease. In the case of multi-family leaseholds, sections 516D-11.5 and 516D-ll.6, Hawaii Revised Statutes, provide that the buyer further acknowledge that there are currently no statutory provisions for the mandatory conversion of multi-family properties and that there have been no assurances that such measures will be enacted in the future.

Despite the fact that buyers have signed such disclosure forms, the legislature understands that many such buyers are seeking to participate in mandatory conversion proceedings

before the city and county of Honolulu. Such buyers have argued that despite signing disclosure forms, they have "relied" on the fact that the city and county of Honolulu passed a mandatory conversion ordinance. In certain instances, such buyers have threatened suit against the city and county of Honolulu if they are not allowed to participate in such actions.

The legislature finds that it is fundamentally unfair for a person who formally acknowledged that the person did not have a right to mandatory conversion to later argue that they did have the legal right to compel such conversion. Such persons bought leasehold property with their "eyes open", and should not thereafter be able to change their position to reap a windfall.

The purpose of this Act is to clarify that a buyer who has been provided a disclosure of leasehold terms in accordance with chapter 516D, Hawaii Revised Statutes, and has acknowledged the same shall not be entitled to participate in any mandatory conversion proceeding.

SECTION 2. Chapter 516D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§516D- Participation in mandatory conversion actions. Any person who has purchased or acquired a condominium or cooperative residential leasehold apartment after June 17, 1991, and who was entitled to receive a leasehold disclosure under this chapter shall be ineligible to participate in any mandatory conversion proceeding in which an eminent domain action is or is

intended to be initiated to acquire the leased fee interest in the property for which disclosure was required, whether such proceedings are authorized by the State, or by a county. Notwithstanding section 516D—11(a), no direct or indirect transferee of a person who is a co—owner, spouse, parent or child of the person; has acquired an interest in the property by devise, descent, or court order; or has acquired an interest in the property by operation of law, including, but not limited to, any transfer by foreclosure, bankruptcy or partition sale, shall be eligible to participate in such proceedings."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon approval, and shall apply to all persons covered by this Act, whether or not mandatory conversion proceedings have been commenced on behalf of the person, unless legal title to the leased fee interest has, as of the effective date of this Act, vested in the person.