PART I. 
GENERAL PROVISIONS



 



§516-1  Definitions.  Unless otherwise
clear from the context, as used in this chapter:



"Corporation" means the Hawaii housing finance and development corporation created by chapter 201H.



"Development tract" means a single contiguous
area of real property not less than five acres in size which has been developed
and subdivided into residential lots, including residential lots which may have
been converted to fee simple and streets and roadways developed as an integral
part of the development tract.  Two or more pieces of real property shall be
considered as a single contiguous area if they would be contiguous except for
the interposition or existence of a road, street, stream, fee lot, or other
like interference.



"Fair market value" means that amount
of money that a purchaser willing, but not obliged, to buy an interest in land
would pay an owner willing, but not obliged, to sell it, taking into
consideration all uses to which the land is adapted or might in reason be applied.



"Fee simple lands" means absolute
ownership of land for an indefinite duration, freely transferable and
inheritable.  For the purposes of this chapter, a lessee shall be deemed to own
fee simple lands if such fee simple real property is held under any trust
agreement or fiduciary arrangement in which another person holds legal title to
the land and where the lessee, whether as trustee, co-trustee or beneficiary,
holds or retains the controlling interest and right to direct the trust with
regard to management or control of the trust or its assets.



"Fee simple owner" and "fee
owner" mean the person who owns the fee simple title to the land which is
leased, including a life tenant with a remainder over, vested or contingent,
and a holder of a defeasible estate, and the holder's heirs, successors, legal
representatives, and assigns.



"Lease" means a conveyance of land or
an interest in land, by a fee simple owner as lessor, or by a lessee or
sublessee as sublessor, to any person, in consideration of a return of rent or
other recompense, for a term, measured from the initial date of the conveyance,
twenty years or more (including any periods for which the lease may be extended
or renewed at the option of the lessee).



"Leased fee" and "leased fee
interest" means all of the interests of the fee owner, lessor, and all
legal and equitable owners of the land which is leased, other than the lessee's
interest as defined by this chapter.



"Legal and equitable owners" means
the fee simple owner and all persons having legal or equitable interests in the
fee or in the lessor's leasehold estate, including mortgagees, developers,
lienors, and sublessors, and their respective heirs, successors, legal
representatives, and assigns.



"Lessee" means any person to whom
land is leased or subleased, and the lessee's heirs, successors, legal
representatives, and assigns.



"Lessor" means any person who leases
or subleases land to another, and the lessor's heirs, successors, legal
representatives, and assigns.



The terms "lessor", "lessee",
"fee simple owner", "fee owner", and "legal and
equitable owners" include individuals, both masculine and feminine, and,
except as to the term "lessee", the terms also include corporations,
firms, associations, trusts, estates, and the State or its political
subdivisions.  When more than one person are the lessors, lessees, fee simple
owners, fee owners, or legal and equitable owners of a lot, the terms apply to
each of them, jointly and severally.



"Lot", "houselot",
"residential lot", and "residential houselot" mean a parcel
of land, two acres or less in size, zoned for residential use, which is used or
occupied or is developed, devoted, intended, or permitted to be used or
occupied as a principal place of residence for one or two families.



"Offsite improvements" means all
physical improvements such as, but not limited to, roads, sewer lines, sewage
treatment plants, gutters, curbs, sidewalks, fire hydrants, street lights, land
dedicated for public purposes and underground electric cables, constructed or
placed in a subdivision off the lots intended for occupancy, which improvements
are to be used in common by occupants of all lots adjoining such improvements
or by the occupants of all lots for whose benefit the improvements have been
constructed or placed.



"Onsite improvements" means all
physical improvements placed on a residential lot intended for occupancy which
improvements are for the benefits of occupants of that lot, including, but not
limited to, dwelling units, garages, service buildings, stairs, walkways,
driveways, walls, trees, shrubs, landscaping, and pools.



"Owner's basis" means the value of
the lessor's leased fee interest in the lot that would apply if such interests
were normally traded on an open market.  The fair market value of the owner's
basis shall be established to provide the lessor with just compensation for the
lessor's interests in the lot and shall take into consideration every interest
and equity of the lessee in establishing that market value.  The value may be
determined by either of the following methods, or any other method which is
normally used by qualified appraisers in establishing the fair market value of
a lessor's leased fee interest in land:



(1)  The sum of:  (i) the future rental income stream
for the lot for the term of the lease discounted to present worth from the
expiration date of the lease; and (ii) the value of the lessor's reversionary
interest in the lot discounted to present worth from the expiration date of the
lease.  The discount rate shall be based on the maximum rate of return for
insured passbook demand saving account paid by the savings and loan
institutions in Hawaii plus three and three-fourths per cent; provided,
however, that the discount rate may be modified by mutual agreement of the
lessor, lessee, and the corporation; or



(2)  The current fair market value of the lot, valued
as if it were a fee simple lot and as if the fee title were unencumbered, and
excluding onsite improvements, established by a market data approach utilizing
comparable sales, less the following:



(A)  The value of the lease, including any
rights therein, if any, which accrues to the lessee;



(B)  That percentage of the general enhancement
of the neighborhood which has been paid for or contributed directly or
indirectly by the lessee;



(C)  The current replacement cost of that
portion of existing offsite improvements, including overhead and profit at
prevailing rates, which were paid for or otherwise contributed, directly or
indirectly, by the lessee;



(D)  That percentage of the general enhancement
of the development tract and the lot caused by the onsite improvements on the
lot paid for, or contributed, directly or indirectly, by the lessee;



(E)  That amount, not otherwise deducted
herein, allocated to the lot, which was paid for or otherwise contributed,
directly or indirectly by the original lessee, computed at prevailing rates for
overhead and profit in developing the development tract established by existing
practice in the community; and



(F)  That amount for fees and costs which would
ordinarily be borne by lessor in transferring such interest to lessee,
including, but not limited to, attorneys' or realtors' commissions, other costs
of sale, and similar fee;



provided, however, that the values
established by any one of the foregoing shall not be duplicated in any one of
the other provisions.



"Sustainable affordable development"
means a development tract that satisfies all of the following requirements:



(1)  The sales price at the time of initial sale of at
least thirty per cent of all the residential lots in the development tract
shall be limited in accordance with directly applicable state or county law,
regulation, policy, or agreement, such that households earning not more than
the required percentages of the median income for the applicable county
(according to the directly applicable law, regulation, policy or agreement)
will be required to spend no more than the allowable percentage of their gross
incomes for housing costs as determined by secondary mortgage market standards
or as otherwise agreed, all as determined as of the time of the initial sale of
the residential lots;



(2)  The sales price at the time of the initial sale
of at least fifty-one per cent of the residential lots in the development
tract, including the lots subject to the requirements of paragraph (1), and the
sales price at the time of a resale of at least fifty‑one per cent of all
the residential lots in the development tract, shall be no higher than eighty
per cent of the fair market value of the residential lots in fee at the time of
initial sale or resale, as appropriate, including all buildings and
improvements, unencumbered by the restrictions of the lease;



(3)  All residential lots sold in satisfaction of
paragraph (1) or (2) shall be leased under sustainable affordable leases;



(4)  The state or county agency that approves the
sustainable affordable development may reduce the minimum percentage of
residential lots to be sold in satisfaction of paragraph (1) or (2) upon a
showing that the sustainable affordable development comprises a portion of a
housing project that includes other housing, which together with the
residential lots comprising the sustainable affordable development, satisfies
the state or county agency's affordable housing requirements as set forth in
the applicable state or county law, regulation, policy, or agreement; and



(5)  For the purposes of this chapter, the residential
lots in a development tract comprising a sustainable affordable development are
not required to be in a single contiguous area as long as all non-contiguous
lots are:



(A)  Within a ten-mile radius of each other;
and



(B)  Leased by the same fee owner under a
sustainable affordable lease.



"Sustainable affordable lease" means
a residential lot lease in a sustainable affordable development that satisfies
all of the following requirements:



(1)  The lease provides for a consideration to the fee
owner below a fair market return on the fair market value of the land; provided
that compensation to the fee owner for land, including lease rent, shall be
either:



(A)  Totally capitalized into the initial sales
price for the residential lot, including all buildings and improvements; or



(B)  Partially capitalized with a share of
appreciation paid to the lessor upon resale of the residential lot;



(2)  In order to maintain the continued affordability
of the residential lot, the lease limits the lessee's maximum sales price on
the residential lot upon resale, including all buildings and improvements, to
the lesser of:



(A)  The fair market value of the residential
lot, including all buildings and improvements, encumbered by the restrictions
of the lease; or



(B)  The sum of:



(i)  The lessee's purchase price for the
residential lot, including all buildings and improvements;



(ii)  Any appreciation on the residential lot,
including all buildings and improvements as measured by multiplying the amount
in clause (i) by the increase in the consumer price index for all urban
consumers as determined by the United States Department of Labor for the
applicable county (or if not published for the county, then for the State),
from the date of the purchase to the date of the contract for resale; and



(iii)  The fair market value of all lessor‑approved
capital improvements made by the lessee; and



(3)  The lease may allow the lessor to receive a share
of the appreciation in accordance with paragraph (2), as agreed to by the
lessor and lessee, and as set forth in the sustainable affordable lease. [L
1967, c 307, §2; HRS §516-1; am L 1968, c 46, §2a to d; am L 1975, c 184,
§2(1); am L 1976, c 242, §1; am L 1978, c 140, §1; am L 1979, c 227, §1; am L
1980, c 39, §2 and c 107, §2; gen ch 1985; am L 1986, c 165, §1; am L 1988, c
104, §1; am L 1992, c 158, §1; am L 1997, c 350, §§14, 15; am L 2003, c 29, §1;
am L 2005, c 196, §26(b) and c 197, §3; am L 2006, c 180, §16; am L 2007, c
249, §27]



 



Attorney General Opinions



 



  Computation of area of development tract; "residential
lot", what constitutes.  Att. Gen. Op. 85-16.



 



Law Journals and Reviews



 



  Hawaii's Land Reform Act:  Is it Constitutional?  6 HBJ 31.



  For discussion of an approach to concentration of land
ownership, see The Antitrust Laws and Land:  An Answer to Hawaii's Housing
Crisis?  8 HBJ 5.



 



Case Notes



 



  Portions of definition of "owner's basis" are
invalid but are severable.  471 F. Supp. 871.



  An "open market", as referred to in the definition
of "owner's basis", means "an unrestricted competitive market in
which any buyer and seller is free to participate".  79 H. 321 (App.), 901
P.2d 1300.