REPORT TITLE:
Real Property Appraisals
DESCRIPTION:
Provides that during lease renegotiations for private lands, fair
market value, as determined through appraisal, if less than
current rent amount, shall prevail over any contract provision
that bars the lowering of rent. Provides that disagreements over
fair market value shall be settled by appraisement and not
arbitration. (SB873 HD2)
873
THE SENATE S.B. NO. S.D. 1
TWENTIETH LEGISLATURE, 1999 H.D. 2
STATE OF HAWAII
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A BILL FOR AN ACT
RELATING TO REAL PROPERTY APPRAISALS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
1 SECTION 1. Leasehold ownership in Hawaii is, has been, and
2 will be for the foreseeable future a common form of ownership of
3 land. Lease agreements generally contain a lease rent
4 renegotiation provision that utilizes real property appraisals to
5 determine a critical component in the renegotiation process, that
6 is, the fair market value of the land. Residential and
7 commercial leases are commonly structured whereby the fee simple
8 owner leases the land to the lessee, who as a sublessor then
9 subleases the land or a portion of the land to a sublessee.
10 The legislature finds that it is in the public interest that
11 the lease rent and sublease rent should be based on the fair
12 market value of the land.
13 Leases commonly prohibit a reduction in rent at
14 renegotiation even though a resale property appraisal determines
15 that the lease rent based on the land's fair market value is less
16 than the current lease rent.
17 The purpose of this Act is to:
18 (1) Provide that lease rent based on fair market value as
19 determined by a real property appraisal, that is less
20 than the rental amount currently being paid, shall
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H.D. 2
1 prevail over an existing lease contract provision,
2 which bars the lowering of lease rents upon
3 renegotiations; and
4 (2) Provide that differences over appraised value be
5 resolved by an appraisement process set forth in
6 statute and not by arbitration.
7 SECTION 2. Section 519-1, Hawaii Revised Statutes, is
8 amended to read as follows:
9 "[[]ยง519-1[]] Lease renegotiations; calculation of rent;
10 definition. (a) Whenever any agreement or document for the
11 lease of private lands provides for the renegotiation of the
12 rental amount or other recompense during the term of the lease
13 and such renegotiated rental amount or other recompense is based,
14 according to the terms of the lease, in whole or in part upon the
15 fair market value of the land, or the value of the land as
16 determined by its highest and best use, or words of similar
17 import, such value, for the purposes of determining the amount of
18 rental or other recompense, shall be calculated upon the use to
19 which the land is restricted by the lease document[.]; provided
20 that the lease rent, based on fair market value as determined by
21 a real property appraisal, that is less than the rental amount
22 currently being paid, shall prevail over any existing contract
23 provision, which bars the lowering of lease rent upon
24 renegotiation.
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H.D. 2
1 (b) Any disagreement over fair market value that cannot be
2 resolved by negotiation shall be settled by the procedure of
3 appraisement set forth in sections 10-13.6(b) and 171-18.5(b) and
4 not by arbitration under chapter 658.
5 [(b)] (c) The term "lease", "lease agreement", or "document"
6 as used in this section, means a conveyance leasing privately-
7 owned land by a fee simple owner as lessor, or by a lessee as
8 sublessor, to any person, for a term exceeding five years, in
9 consideration of a return of rent or other recompense."
10 SECTION 2. Statutory material to be repealed is bracketed.
11 New statutory material is underscored.
12 SECTION 3. This Act shall take effect upon its approval.