Bill Text: HI HB1593 | 2010 | Regular Session | Amended
Bill Title: Leasehold; Commercial and industrial property; Agricultural Lands
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2009-05-11 - Carried over to 2010 Regular Session. [HB1593 Detail]
Download: Hawaii-2010-HB1593-Amended.html
Report Title:
Leasehold; Commercial and industrial property; Agricultural Lands
Description:
Clarifies provisions contained in long-term commercial and industrial ground leases. Protects agriculturally suitable lands. (HB1593 HD1)
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1593 |
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TWENTY-FIFTH LEGISLATURE, 2009 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to real property.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. The legislature finds that small businesses are an essential element in strengthening and diversifying Hawaii's economy and creating jobs for our people. 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. During 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 often depend on commercial and industrial leases, which may contain provisions that are so vague or onerous that they 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 locations such as Mapunapuna is no longer in business near where the consumer lives or works.
The legislature further 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 part is to stabilize Hawaii's economy by addressing some of the burdensome or vague 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 landowners 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 the rental amount or other recompense during the term of the lease and the renegotiated rental amount or other recompense is based, according to the terms of the lease, in whole or in part on a 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 any and all relevant attendant circumstances relating to the lease, including:
(i) Past renegotiation practices and policies throughout the previously renegotiated lease rents;
(ii) The uses and intensity of the use of the leased property during the term of the lease approved by the lessor;
(iii) The surface and subsurface characteristics of the leased property and the surrounding neighborhood of the leased property on the renegotiated date; and
(iv) The gross income generated by the lessee on the renegotiated 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 section.
(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 or entity, for a term exceeding ten years in consideration of a return of rent or other remuneration."
SECTION 3. This part applies to any lease in effect on the effective date of this Act, but does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.
PART II
SECTION 4. The legislature finds that the land use law was enacted to "preserve and protect land best suited for . . . agricultural purposes and to facilitate sound and economical urban development" (Senate Stand. Com. Rep. No. 580; 1961 Senate Journal). Since that time, however, lands classified by the land study bureau as class A and class B lands, the lands most suited for intensive agricultural use, have declined from three hundred fifty-nine thousand six hundred ninety acres (class A, one hundred twenty-five thousand one hundred sixty acres; class B, two hundred thirty-four thousand five hundred thirty acres) in 1960 to one hundred seventy-two thousand ninety-four acres (Class A, fifty-six thousand six hundred fifty-three acres; Class B, one hundred fifteen thousand four hundred forty-one acres) in 2007. These agricultural lands are a resource that cannot be replaced once they are lost to development.
The inventory of lands that are suitable for agriculture is essentially fixed. Unlike other agricultural inputs, agricultural lands cannot be manufactured when the demand for them increases. In 1960, the land study bureau estimated that there were nearly three hundred sixty thousand acres of class A and B lands on the six major islands. These were the lands upon which the State depended for profitable, competitive agricultural production. By 2007, the inventory of class A and B lands had declined to slightly more than one hundred seventy-two thousand acres, making it more important than ever to conserve Hawaii's most productive agricultural lands, especially in counties with a population of over five hundred thousand residents.
The purpose of this part is to carry out the mandate of Article XI, section 3, of the Hawaii Constitution to conserve and protect agricultural lands and assure availability of agriculturally suitable lands in counties with a population of over five hundred thousand residents.
SECTION 5. Chapter 519, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§519- Agricultural leases of real property. (a) Whenever any agreement or document for the lease of private agricultural lands with soil classified by the land study bureau's detailed land classification as overall (master) productivity rating class A or B for agricultural use in counties with populations of over five hundred thousand provides for the renegotiation of the rental amount and the term of the lease, and the lessee has made improvements or is seeking to make improvements on the land, the renegotiated term of the lease shall include an extension of the lease for a period of not less than seventy-five per cent of the original term of the lease.
(b) As used in this section, "lease" means a conveyance leasing privately-owned land by a fee simple owner as lessor, to any person or entity for consideration of a return of rent or other compensation."
SECTION 6. Section 205-3.1, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) District boundary amendments involving lands in the conservation district, land areas greater than fifteen acres, agricultural lands with soil classified by the land study bureau's detailed land classification as overall (master) productivity rating class A or B, or lands delineated as important agricultural lands shall be processed by the land use commission pursuant to section 205-4.
(b) Any department or agency of the State, and department or agency of the county in which the land is situated, or any person with a property interest in the land sought to be reclassified, may petition the appropriate county land use decision-making authority of the county in which the land is situated for a change in the boundary of a district involving lands less than fifteen acres presently in the rural and urban districts and lands less than fifteen acres in the agricultural district that are not agricultural lands with soil classified by the land study bureau's detailed land classification as overall (master) productivity rating class A or B, and are not designated as important agricultural lands."
SECTION 7. Section 205-4, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) Any department or agency of the State, any department or agency of the county in which the land is situated, or any person with a property interest in the land sought to be reclassified, may petition the land use commission for a change in the boundary of a district. This section applies to all petitions for changes in district boundaries of lands within conservation districts, agricultural lands with soil classified by the land study bureau's detailed land classification as overall (master) productivity rating class A or B, lands designated or sought to be designated as important agricultural lands, and lands greater than fifteen acres in the agricultural, rural, and urban districts, except as provided in section 201H-38. The land use commission shall adopt rules pursuant to chapter 91 to implement section 201H-38."
2. By amending subsection (h) to read:
"(h) No
amendment of a land use district boundary shall be approved unless the
commission finds upon the clear preponderance of the evidence that the proposed
boundary is reasonable, not violative of section 205-2 and part III of this
chapter, and consistent with the policies and criteria established pursuant to
sections 205-16 and 205-17[.]; provided that for a boundary amendment
for agricultural lands with soil classified by the land study bureau's detailed
land classification as overall (master) productivity rating class A or B, no
amendment of a land use district boundary shall be approved in counties with a
population of over five hundred thousand where:
(1) A farming operation as defined in section 165-2 is being conducted on the land;
(2) The land is important for agriculture based on the stock of similarly suited lands in the area;
(3) The district boundary amendment will harm the productivity or viability of existing agricultural activity in the area; and
(4) The district boundary amendment will cause fragmentation of or intrusion of nonagricultural uses into largely intact areas of agricultural lands with soil classified by the land study bureau's detailed land classification as overall (master) productivity rating class A or B.
Six affirmative votes of the commission shall be necessary for any boundary amendment under this section."
PART III
SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 9. This Act shall take effect on January 1, 2046.
