Fall 1991 Home   Newsletters

Fall 1991

Spring 1992

President's Message - Don't Let it Happen Here (Evelyn Bender)
Board Highlights
Members Appreciated
Leasehold in Hawaii
Update on Educational Revitalization (Libby Oshiyama & Marion Saunders)
Time for Action - League Supports Gejdenson Proposal
State Council
Health Care Consensus
National Convention
Urgent: Leasehold Conversion and Lease rent cap Legislation Needed (Richard Port)
Mandatory Conversion Laws Covering Leasehold Projects (Bruce C. Dinman)
Small Landowners' Perspective on Leasehold (James K. Mee)
Legislature and the Elusive Leasehold Issue - 1991 (Virginia Isbell)
Talk to LWVHI on Nov. 5, 1991 by Oswald Stender (Irene Coogan)
Mandatory Conversion Could Benefit Lessors (Joan Hayes)

Urgent: Leasehold Conversion and Lease rent cap Legislation Needed

Owners of condominium apartments in Hawaii are the last participants in a feudal land system. They purchase apartments on someone else's land for a specified period, usually for fifty or fifty-five years, and then, having paid for the apartment, the maintenance of the building, all the taxes for the building and the land, and the monthly land lease rent, they must vacate the premises at the end of the lease period, owning nothing of value.

Hawaii was not he only state with residential leased lands, but now has the unfortunate distinction of being the last state with a significant number of people living on residential leased land.

Hawaii's elected officials addressed this problem in 1967, but in a most unsatisfactory way. The Land Reform Act of 1967 gave owners of the single family dwellings the right to purchase the land under their homes through state condemnation, which provided land owners with the fair market value of the land plus certain tax benefits.

Many condominiums are approaching their first increase in land lease rents, which usually occur at the end of twenty-five years and are generally tied to increases in the value of the land, Since land values in Hawaii are escalating much faster than personal income, this has resulted in some shocking increases.

The increase in the lease rents at the Sandalwood in 1990 was more than 1000%. Recently, the Pawaa Gardens condominium land owner announced lease rent increases from the current $35 a month to $785 a month, an increase of 2500%. The result is that a fifty-five year lease has become a twenty-five year lease for those owners who do not have an extra $750 when they pay their bills at the end of each month.

The apartment owners at the Pawaa Gardens cannot sell their units because no one will buy them. Those who cannot afford to pay the additional $750 cannot simply abandon their units because the land owners ,will not only acquire their apartments thirty years early, but also any other assets these apartment owners might have.

The land owners say, "We have a contract signed by the apartment owners. The apartment owners knew, or should have known, what they were signing."

Some knew, but were told by realtors that the legislature would extend the Land Reform Act to cover condominiums. Others were never shown the master lease, and the contracts referred to them as buyers and referred to the persons they were buying from as sellers. Still others knew the lease rents would go up, but had no experience with leased property and believed these increases would be reasonable. Few, if any, understood that the increases were open-ended.

The result is that, although neither the land owners nor the apartment owners could have predicted the increases in lease rents facing apartment owners today, the lessors are insisting that apartment owners fulfill the terms of their contracts. It is this

insistence that apartment owners meet the terms of these contracts that has forced the apartment owner to the legislature and, more recently, to the city council with their requests for help.

Elected officials are faced with the unenviable task of dealing with a problem which is likely to get much worse. They must choose between the growing social problem facing apartment owners and signed contracts held by the apartment owners.

A bill is currently before the Honolulu City Council which would establish a cap on lease rents tied to increases in the consumer price index. A proposal by the state would extend the Land Reform Act to include condominium apartment owners, allowing them to purchase the land under their property.

These bills, if passed, will probably be appealed through the courts, perhaps all the way to the U.S. Supreme Court. Ultimately, the Court's decision will be based on 1.) the public purpose to be achieved by the legislation and 2.) fair compensation to the land owners. Apartment owners and the attorneys who have examined the bills for the apartment owners, believe the bills will be found to be constitutional.

If these bills are not approved by the City Council, the social disruption in our community will be tremendous. Some apartment owners, especially senior citizens will lose their homes and be included in the growing ranks of the homeless. That's a prediction that I hope will never be tested.

Richard Port
Director, Hawaii Council of Associations of Apartment Owners

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