§519-3  Leases of real property by a
cooperative housing corporation.  (a)  All leases, including subleases
executed by a cooperative housing corporation as lessee, and all leases,
including subleases acquired by a cooperative housing corporation by assignment,
whether executed prior to or after June 12, 1982, which directly or by
incorporation provide for reopening of the contract for renegotiation of lease
rent terms, shall provide or be construed in conformity with the following:



(1)  Such renegotiations shall not be scheduled more
frequently than once every ten years; provided that the first of such
reopenings shall not be scheduled prior to the fifteenth year following the
initial date of the lease; and



(2)  Upon renegotiation, the lease rent payable by a
cooperative housing corporation as lessee, sublessee, or assignee shall not
exceed the amount derived by multiplying the "owner's basis" by the
original percentage rate.



(b)  In the event the parties to a lease are
unable to achieve an agreement under any reopening provision, the Hawaii
housing finance and development corporation or its designee shall arbitrate,
and its findings shall be binding and conclusive on both parties.  Arbitration
proceedings under this subsection will be subject to the following
requirements:



(1)  An advance deposit, which amount shall be
determined by the corporation, equal to projected expenses and fees of the corporation
or its designee for arbitration proceedings shall be required and shall be paid
equally by lessees and lessors.  All additional expenses and fees incurred by
the corporation or its designee while acting as the arbitrator shall be borne
equally by lessees and lessors.  These additional expenses and fees shall be
subject to monthly billings or other arrangements which may be specified by
contract.  If more than one lessee is involved in an arbitration proceeding,
all lessees shall share equally in one-half of the arbitration costs.  The same
division of costs shall apply if more than one lessor is involved in a
proceeding.



(2)  Failure on the part of lessees to comply with the
provisions of this subsection, including failure to make advance deposits or
payments, shall result in forfeiture of any rights or remedies under this
chapter for arbitration, and the lessees' sole rights and remedies shall be as
provided in the lease document.



(3)  If lessors fail to comply with the provisions set
forth in this subsection, including failure to make advance deposits or
payments, then arbitration proceedings under this chapter will cease and lease
rent shall be set at the most recent fixed lease rent.  Upon compliance with
the provisions set forth in this chapter, the arbitration may proceed, with the
determination of the new lease rent effective only from the date of compliance
by the lessor.



(4)  Except as set forth in paragraphs (b)(2) and
(b)(3) above, all new lease rents shall be effective as of the date of
reopening.



For the purpose of this subsection,
"arbitration proceedings" means the actual arbitration conducted by the
corporation or its designee pursuant to a contract executed by and among the
lessees, lessor, and the arbitrator detailing among other things, the
following:  description of properties involved, time of performance,
compensation, method of payment, settlement and other procedures, and
termination.



(c)  Any covenant or provision of a lease in
violation of this section shall not be enforceable in any court in this State.



(d)  For purposes of this section:



(1)  "Cooperative housing corporation" means
a corporation:



(A)  Having one and only one class of stock
outstanding;



(B)  Each of the stockholders of which is
entitled solely by reason of the shareholder's ownership of stock in the
corporation, to occupy for dwelling purposes the dwelling unit in a building,
owned or leased by the corporation, and situated on land leased by the
corporation;



(C)  No stockholder of which is entitled
(either conditionally or unconditionally) to receive any distribution not out
of earnings and profits of the corporation except in a complete or partial
liquidation of the corporation; and



(D)  Eighty per cent or more of the gross
income for the taxable year in which the taxes and interest described in 26
United States Code section 216(a) are paid or incurred is derived from tenant
stockholders.



(2)  "Offsite improvements" means all
physical improvements such as, but not limited to, roads, sewer lines, sewage
treatment plants, and underground utility cables, constructed or placed in a
subdivision or development off the land intended for occupancy, which
improvements are to be used in common by occupants of all lands adjoining such
improvements or by occupants of all lands for whose benefit the improvements
have been constructed or placed.



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



(4)  "Owner's basis" means the value of the
lessor's leased fee interest in the property that would apply if such interest
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 any method which is normally used by qualified appraisers in
establishing the fair market value of a lessor's leased fee interest in land.



(5)  "Original percentage rate" means the
percentage derived by dividing the annual lease rent established for the first
fixed rent period under the lease by the fair market value of the land as of
the first day of the first fixed rent period. [L 1982, c 220, §1; am L 1983, c
166, §2; am L 1984, c 47, §1 and c 191, §2; am L 1987, c 337, §16; am L 1988, c
104, §2; am L 1997, c 350, §14; am L 2005, c 196, §26(b); am L 2006, c 180, §16]



 



Attorney General Opinions



 



  Advance deposits cannot be used for processing arbitration
applications.  Att. Gen. Op. 85-19.



 



Case Notes



 



  Section does not provide for case where lessee's agent for
lease rent renegotiations is a cooperative housing corporation.  74 H. 210, 847
P.2d 652.