Posted on: Monday, January 24, 2005

EDITORIAL
Lease conversion plan demands modification

In its move to repeal a 1991 law on conversion of leasehold condominiums and apartments to fee simple, the Honolulu City Council should pay particular attention to those who already are in the process of converting.

A substantial number of apartment owners, relying on that 1991 law, have begun the process of conversion under the county ordinance.

The current proposal for repeal makes no accommodation for those already "in the pipeline."

It's true that apartment owners always have the option of converting to fee simple outside the county law, if the landowners are willing to sell. And many are.

But some, including a number of large trusts and some small family landowners, are not. That's where the 1991 law, which uses the city's powers of condemnation, comes into play.

The law has withstood legal challenge in state and federal courts. But strong lobbying by landowners and a diminishing number of apartment owners who might convert has led to its apparent demise.

Councilman Charles Djou failed in his attempt to get a "grandfather" exemption included in the proposed repeal when it was considered in committee.

He will likely make another attempt by proposing a floor amendment when the repeal measure is taken up for final reading on Wednesday.

There are easily several hundred apartment owners who might be caught short if the conversion law, known as Act 38, is repealed outright.

The process of "grandfathering" some of these in would not be easy. At what point would an apartment owner be seen as having some vested rights under the current law?

Is it when he first applies? Is it at the end of good-faith negotiations with the landowner? Is it when he applies for involuntary conversion under the city law?

These are fair questions. But ultimately, the council should recognize that a substantial number of people committed real time and real money in an effort they believed was backed by city law.

They deserve consideration. Some council members fear that these owners might even sue the city if they are not allowed to proceed with their lease-to-fee process.

So as a matter of legal prudence and as a gesture of simple fairness, the council should identify those apartment owners who are reasonably vested in the conversion process and allow them to proceed, even if the overall law is repealed.