Hawaii-2010-HB1593-Introduced

SECTION 1. The legislature finds that small businesses are an essential element in strengthening and diversifying Hawaii's economy and creating jobs for our citizens. More than ninety-five per cent of all Hawaii establishments are small businesses, and they provide jobs for sixty per cent of all Hawaii employees.

The legislature further finds that despite their contribution to Hawaii's economy, small businesses are at a disadvantage in terms of land ownership. The commercial and industrial properties that exist within the State's urban districts are primarily owned by a few landowners. These landowners control large tracts of land and retain their ownership by means of leases to small businesses, which in turn supply services and products to the communities within or adjacent to the commercial and industrial properties. Without these neighborhood businesses, consumers would be compelled to travel long distances and expend large amounts of time and effort to locate these needed services and products.

In the city and county of Honolulu's "Annual Report on the Status of Land Use on Oahu, Fiscal Year 2006" (February 2008), growth projections show a decided shift away from the primary urban center for industrial jobs. Approximately eighty per cent of industrial jobs were located in the primary urban center in 2000, and by 2030 that projection drops to seventy-one per cent. For that same period, industrial jobs in the Ewa region will nearly double, from seven to thirteen per cent, and increase by nearly fifty per cent, from seven to ten per cent in central Oahu.

The legislature further finds that small businesses are often dependent on commercial and industrial leases, which may contain provisions that are so onerous as to force these businesses to relocate to rural areas and away from the urban centers. In practical terms, consumers will find that the auto service center or the small retailer in Mapunapuna is no longer in business near where the consumer lives or works.

The legislature finds that the proximity of small businesses to urban communities serves to stabilize Hawaii's economy, especially during the recessionary period that the United States has entered. Thus, maintaining close geographic ties between small businesses and the communities they serve is a public purpose that requires legislative support.

The purpose of this Act is to stabilize Hawaii's economy by addressing some of the burdensome provisions of existing commercial and industrial leases of certain lands within urban districts by clarifying provisions in long-term commercial and industrial ground leases, without substantial reduction in the economic benefit to the owners or impact on their ownership of the land, without impairing their lease contracts, and without the taking of any property rights without due process of law.

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 property. (a) Notwithstanding any other law to the contrary and unless expressly stated to the contrary in the lease, any lease of commercial or industrial leasehold property shall be subject to the following terms and conditions:

(1) Whenever a lease existing on July 1, 2009, or entered into thereafter, provides for the renegotiation of rent during the term of the lease and the renegotiated rent is based, according to the terms of the lease, on fair and reasonable annual rent as of the commencement of the term, that provision shall:

(A) Be construed to require that the rent shall be fair and reasonable to both the lessor and the lessee to the lease; and

(B) Take into account the uses and intensity of use approved by the lessor, and the surface and subsurface characteristics of the site and the neighborhood on the renegotiation date; and

(2) Unless otherwise specified in the lease, if the lessee has subtenants with subleases that provide for recovery by the lessee of ground lease rent, those subtenants shall be charged their pro-rata share of the fair and reasonable annual rent as renegotiated pursuant to this paragraph.

(b) For purposes of this section:

"Commercial or industrial leasehold property" means any ground lease of real property:

(1) Situated in the State;

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

(3) That is subject to a lease with a term of ten years or more and an unexpired term of five years or more; and

(4) Where the lessor is the owner, directly or indirectly, of fifty thousand square feet or more of industrial and commercial property in the State.

"Lease" means a conveyance leasing privately owned land by a fee simple owner as lessor, or by a lessee as sublessor, to any person, for a term exceeding ten years in consideration of a return of rent or other remuneration."

SECTION 3. This Act applies to any lease in effect on its effective date, but 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 upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1593
TWENTY-FIFTH LEGISLATURE, 2009
STATE OF HAWAII