STAND. COM. REP. NO.700

Honolulu, Hawaii

, 2001

RE: H.B. No. 1131

H.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 1131, entitled:

"A BILL FOR AN ACT RELATING TO REAL PROPERTY APPRAISALS,"

begs leave to report as follows:

The purpose of this bill is to provide that a lease rent appraisal based on fair market value that is less than the rental amount being paid at the time of rent renegotiation, shall prevail over an existing lease contract provision that bars the lowering of lease rents upon renegotiation.

Testimony in support of this bill was received from STI Industries, Wholesale Motors, Inc., Windward Town and Country Plaza Phases I and II, King University Plaza, Moiliili Plaza, Thomas Square Hale Anue, University Plaza, Waialae Plaza, Waiakamilo Shopping Center, Windward Post Office, and several concerned citizens.

Testimony in opposition to this measure was received from the Department of Business, Economic Development, and Tourism, Appraisal Institute, Estate of James Campbell, Gentry-Pacific, Ltd., Hawaii Association of Realtors, Hawaii Bankers Association, Hawaii Reserves, Inc., Institute of Real Estate Management, Kamehameha Schools, Land Use Research Foundation of Hawaii, Mark A. Robinson Trusts, Maui Land and Pineapple Company, and Small Landowners Association.

Your Committee finds that land ownership in Hawaii is characterized by the concentration of fee title to lands in a few estates, trusts, and other private landowners. Rather than sell the fee-simple title, these landowners establish long-term leases. The inflation of land prices in the 1980s due to investments by wealthy international buyers, allowed these landowners to negotiate artificially high ground rents. In the current economy, these high rents have created an abundance of problems for lessees, who have made significant investments in their businesses, and in infrastructure and other improvements to the land. Examples of these problems, which affect Hawaii's businesses and their employees, include negative cash flow, mortgage foreclosure, and even bankruptcy.

Your Committee finds that the problem that this bill seeks to address affects the entire community, and deserves further discussion and efforts toward mitigation, or resolution. Your Committee has amended this bill by:

(1) Including clarification of the legislative purpose and justification for the proposed measure, to address issues concerning the constitutionality of the bill; and

(2) Changing its effective date to January 1, 2050, to allow further consideration of this matter by the Legislature.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1131, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1131, H.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,

____________________________

KENNETH T. HIRAKI, Chair