Bill Text: HI HB845 | 2011 | Regular Session | Amended
Bill Title: Ground Leases; Residential Real Property; Tax Credit
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2011-04-06 - (S) The committee on JDL deferred the measure. [HB845 Detail]
Download: Hawaii-2011-HB845-Amended.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
845 |
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TWENTY-SIXTH LEGISLATURE, 2011 |
H.D. 2 |
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STATE OF HAWAII |
S.D. 1 |
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A BILL FOR AN ACT
RELATING TO GROUND LEASES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. The legislature finds that Hawaii's unique real estate market, in which fee-simple ownership of real property was unavailable to most residents until the intervention of the legislature and ultimately the United States Supreme Court at a relatively recent date, creates unique challenges for homeowners, landowners, and for public policy. Since a significant class of homeowners in the State own their housing units but hold only a leasehold interest in the land on which their residences are situated, these homeowners may be subject to removal from their home upon the expiration of the ground lease for the property that underlies the housing unit. For residents of these housing units, expiration of a ground lease means loss of a home through no fault of their own. Further, many leasehold units in condominiums and cooperative housing projects are currently used as affordable rental units by long-term tenants who have deep ties with the local community. However, the legislature finds that the property rights of homeowners and long-term residents in these cases must be weighed against the competing property rights of landowners who hold the expiring ground lease.
Taking into account the real trauma associated with the loss of a home, including the special hardships for seniors and individuals with a fixed income, the legislature must acknowledge that a long-term residential ground lease arrangement is a private contract that allows for the purchase of a home at a significantly lower cost than the purchase of a fee-simple ownership. Further, many lessors of long-term residential leasehold property are either individuals with modest land holdings or institutions that hold land in support of a primary institutional purpose such as education that ultimately serves the public good. The legislature finds that important rights and legitimate interests lie on the lessee and lessor sides of the long-term residential ground lease relationship.
The legislature further finds that the shortage of affordable housing in the State is a persistent problem, with a shortfall of over 24,000 units projected by 2015. The legislature finds that the expiration of long-term residential ground leases will result in the loss of approximately 13,000 affordable units at a time when homelessness due to a lack of accessible housing is becoming more prevalent.
The legislature finds that in order to achieve the difficult task of balancing the interests of landowners and leasehold homeowners and in servicing the larger public policy of upholding the property rights of homeowners and landowners, the legislature finds that legislative action regarding residential leasehold land holdings is warranted. Therefore, the purpose of this Act is to mitigate the negative effects of the expiration of a class of long-term residential ground leases by providing incentives for lessors and lessees to engage in negotiations to extend long-term ground leases when extension is possible and to provide alternate means for leasehold homeowners and long term renters to remain in their homes where lease extension is not possible.
SECTION 2. Chapter 666, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§666- Expiration of long-term residential ground leases. (a) No later than five years prior to the expiration of a long-term residential ground lease for housing units in a condominium or cooperative housing project, the lessor shall notify all lessees as to whether the lessor plans to develop or redevelop the property that is subject to the long-term ground lease and whether the lessor is willing to extend the long-term ground lease or sell the leased-fee interest or whether the lessor intends to enforce the expiration of the lease.
(b) If the lessor of a long-term residential ground lease intends to develop or redevelop all or any part of the property subject to the long-term ground lease no sooner than five years after the expiration of the long-term ground lease, a lessee may request an extension of the long-term ground lease for all or any part of the land that is not subject to development or redevelopment within the five-year period for a minimum of ten years.
(c) If a lessor extends a long-term residential ground lease pursuant to subsection (b), ownership of all residential units situated on the land subject to lease extension shall be extended until the commencement of development or redevelopment of the subject land. Pursuant to section 235- , if the lessor extends the long-term residential ground lease for a period of thirty years or more, the lessor shall be entitled to an income tax credit of per cent of the annual rental income collected from the property.
(d) If a lessor does not extend a long-term residential ground lease pursuant to subsection (b), the lease shall terminate on the expiration date specified in the lease; provided that any owner-occupant or long-term renter shall be allowed to remain in the occupant or lessee's unit as a tenant subject to chapter 521 until the commencement of development or redevelopment of the subject land; provided that:
(1) The monthly rent payable to the lessor by an owner‑occupant of a unit shall not exceed the total of the amount of the monthly maintenance fee plus the lease rent payable for the unit as of the expiration date of the long-term residential ground lease;
(2) The monthly rent payable to the lessor by a long-term renter shall not exceed the rental amount under the rental agreement with the unit owner as of the expiration date of the long-term residential ground lease; provided further that if the rental amount under the rental agreement does not include general excise tax, the rental amount shall be amended to include general excise tax;
(3) The lessor may increase the rent payable under paragraphs (1) and (2) by an amount that does not exceed the consumer price index increase for the period of the rental increase;
(4) Ownership of all leasehold improvements, including household appliances that replace the original appliance included in the unit at the time of purchase, shall revert to the lessor and the lessor shall not be required to reimburse the unit owner for the improvements; and
(5) Monthly rent calculated pursuant to paragraphs (1) and (2) shall be personal to the owner-occupant or long-term renter and shall not be transferrable to any person who was not designated on the title to the unit as an owner or on the rental agreement as a tenant as of the expiration date of the long-term residential ground lease.
(e) For purposes of this section:
"Long-term renter" means a person who has lived in a residential housing unit in a condominium or cooperative housing project as a tenant under a rental agreement for any specified term for at least one year prior to the expiration of a long-term residential ground lease that applies to the housing unit.
"Owner-occupant" means a person who owns a leasehold interest in a residential housing unit in a condominium or cooperative housing project in which the person lives as the person's primary residence."
PART II
SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Tax credit to promote the extension of long-term residential ground leases. (a) For taxable years beginning after December 31, 2012, any taxpayer that is the lessor of a long-term residential ground lease subject to section 666‑ (c) that properly files an income tax return for the taxable year may claim an income tax credit under this section against the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.
(b) The tax credit shall be per cent of the annual rental income collected from the property subject to a lease extension pursuant to section 666- (c); provided that the taxpayer extends the term of a long-term residential ground lease for a period of thirty years or more pursuant to section 666- (c); provided further that the taxpayer submits evidence of the continuation of the long-term residential ground lease for the specified term and the continued occupation of the property by the lessee for each year that the credit is claimed.
(c) If the tax credit claimed by the taxpayer under this section exceeds the amount of income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.
(d) The director of taxation shall prepare any forms that may be necessary to claim a credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91 to effectuate the purpose of this section.
(e) All of the provisions relating to assessments and refunds under this chapter and under section 231-23(c)(1) shall apply to the tax credit under this section.
(f) Claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the taxable year for which the credit may be claimed."
SECTION 4. New statutory material is underscored.
SECTION 5. This Act shall take effect on July 1, 2050; provided that part II of this Act shall apply to taxable years beginning after December 31, 2012.
Report Title:
Ground Leases; Residential Real Property; Tax Credit
Description:
Requires notice of intended disposition of land subject to an expiring long-term residential ground lease; provides for extension of a long-term residential ground lease; provides for the conversion of owner-occupancy or long-term rental of units subject to an expired long-term residential ground lease to tenancy subject to the landlord-tenant code; provides an income tax credit for rental income collected from property subject to an extension of thirty years or more of a long-term residential ground lease. Effective 7/1/2050. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
