HOUSE OF REPRESENTATIVES

H.B. NO.

844

TWENTY-SIXTH LEGISLATURE, 2011

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to real property.

 

 

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

 


     SECTION 1.  The legislature finds that certain inequities exist in the relationship between fee simple owners of commercial and industrial real properties and holders of long-term leasehold interest in those real properties who undertake the leases for the purpose of developing, improving, operating, and subletting the properties.  These inequities accrue to the detriment of Hawaii's business and economic development and harm Hawaii's working and retired taxpayers.  Uncomplicated and fair legislative remedies exist that can obviate these inequities.

     The purpose of this Act is to implement certain conditions governing long-term leases of commercial and industrial real properties.

     SECTION 2.  Chapter 519, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§519-    Leases of commercial and industrial real property.  (a)  Notwithstanding any other law to the contrary, any lease of commercial or industrial leasehold property where the lessor is the owner, directly or indirectly, of fifty thousand square feet or more of commercial or industrial leasehold property in the State shall be subject to the following terms and conditions:

     (1)  Where a lease condition requires that a lessee obtain the approval of the lessor for the assignment, transfer, or encumbrance of the leasehold property, the approval of the lessor shall not be unreasonably withheld;

     (2)  Where a lessee is required by a lease with less than thirty years remaining on its term to make major and substantial improvements to any structures on the leasehold property or to any infrastructure supporting the leasehold property, the lessee:

          (A)  Shall not be required to make substantial new improvements to infrastructure or structures; and

          (B)  Shall be limited to making reasonable maintenance and repair work to satisfy federal, state, and county laws, ordinances, and code requirements to ensure the public's health, safety, and welfare;

     (3)  Where a lease provides for the reversion of any improvements on the leasehold property at the termination of the lease, the improvements shall be returned subject to reasonable wear and tear that may have resulted from the use of the improvements over the full term of the lease;

     (4)  Where a lease provides for periodic resets, increases, or step-ups in lease rent over the term of the lease, the increases in lease rent shall be determined, in part, on a determination of the financial feasibility of the rent increase in relation to the current use of the leasehold property; and

     (5)  In the event that a lessor sells the leasehold interest and all improvements on the leasehold property to the lessee, the lessor shall be entitled to exclude from state income taxes in the year of the sale any gain the lessor realizes from the sale.

     (b)  For purposes of this section, "commercial or industrial leasehold property" means any real property:

     (1)  Situated in the State;

     (2)  Zoned by a county for commercial, industrial, or mixed use; and

     (3)  That is subject to a lease with an unexpired term of twenty years or more."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

     SECTION 4.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 2011.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Real Property Leases

 

Description:

Mandates conditions applicable to commercial and industrial leases where the lessor owns fifty thousand square feet or more of commercial or industrial leasehold property in the State.

 

 

 

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