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The Honolulu Advertiser

Posted on: Thursday, January 27, 2005

Council votes 6-3 to repeal condo lease law

By Robbie Dingeman
Advertiser Staff Writer

The Honolulu City Council yesterday voted as expected to repeal the city's controversial condominium leasehold conversion law, with the majority saying that the decision came down to fairness.

How they voted

For repeal: Council Chairman Donovan Dela Cruz and council members Todd Apo, Romy Cachola, Nestor Garcia, Ann Kobayashi, Rod Tam.

Against: Charles Djou, Barbara Marshall, Gary Okino.Source: Advertiser archives

The 6-3 vote came after another day of emotional testimony from landowners and lessees and capped months of vigorous debate that ultimately turned on the same objection that landowners made when the law was passed in 1991.

Government should not be involved in taking land from one private property owner to give it to another, said Councilman Nestor Garcia, summing up the majority position of the council.

"The council needs to determine that the condemnation action benefits the larger public good or serves a few special interests," he said. "The question before us is fairness."

Repeal isn't official until Mayor Mufi Hannemann signs the bill, but he has indicated he will do so. Even if he does not, yesterday's vote gives proponents enough votes to override a veto.

Leasehold conversion laws

1967: The Hawai'i state Legislature approves mandatory leasehold conversion of single-family lots, intended to break up the concentration of land ownership by a few parties. The landmark legislation becomes known as the Hawai'i Land Reform Act of 1967. It passes over the vehement objections of Bishop Estate, now Kamehameha Schools, and other landowners.

1984: The U.S. Supreme Court rules the act constitutional.

1991: The City Council approves an ordinance known as Chapter 38, allowing the city to force landowners to sell qualified condominium owners the fee interest in land under their units. The ordinance is patterned after the Hawai'i Land Reform Act.

1998: The U.S. Supreme Court upholds Chapter 38 by rejecting a challenge from Bishop Estate.

2002: The Hawai'i Supreme Court affirms that the city lease-to-fee conversion program is valid and enforceable, but effectively reduces the number of lessees eligible for conversion.

2002: City Council chairman John DeSoto calls for repeal of Chapter 38, but does not have sufficient support from colleagues.

2004: City Council member Mike Gabbard introduces Bill 53 to repeal the condo leasehold conversion ordinance.

2005: The City Council passes Bill 53 by a 6-to-3 vote, which will repeal the mandatory conversion ordinance, and sends it to Mayor Mufi Hannemann for final approval.

Source: Advertiser archives

However, the stage is set for a continued legal fight. Two suits have been filed in anticipation of the vote. And because the council rejected an attempt to allow an exception for owners who have spent thousands of dollars and more than a decade trying to buy their property interest, at least one council member worried about the potential for additional lawsuits against the city.

That takes the issue far beyond the relatively narrow segment of the community affected by the vote and makes it a potential issue for every resident of O'ahu, said Councilman Charles Djou.

"All taxpayers face the potential of having to pay out," should the city lose such suits, Djou said.

The leasehold conversion law, known as Chapter 38, lets the city force landowners to sell to qualified condominium owners the fee interest in the land under their condo units.

More than 80 people testified yesterday. Supporters of repeal included small and large trusts — including Kamehameha Schools — arguing that the law unfairly took valuable land away from those who use the rents to benefit Hawaiian children.

The audience in the council chambers was dominated by supporters of repeal, many wearing T-shirts of support. Others carried signs that read "Ku I Ka Pono — Justice for Hawaiians."

After the vote, the crowd stood and sang a moving rendition of "Hawai'i Pono'i," now the state song and formerly the anthem of the nation of Hawai'i.

Opponents of the repeal measure were apartment owners and their attorneys, who said they fear they will be left homeless when their leases end if the landowners are not forced to sell the land interest to them and can instead raise the lease rent until the owners are forced to leave.

Council member Romy Cachola, a backer of the repeal, said the council had tried to reach compromise between the landowners and lessees but could find no consensus.

Waikiki resident Don Pomes owns an apartment in The Kalia. He said "the only way for us at The Kalia not to be evicted in a few short years" was the mandatory conversion law.

"Is it fair to evict 304 families simply because you can?" he asked.

Thomas Kaulukukui, chairman of the board of the Lili'uokalani Trust, was among those pushing for repeal. He said his trust helps 10,000 children each year partly by using income from lease rents and other investments. He said those lands provide about 15 percent of the trust's income.

Kaulukukui listened to homeowners talk about their fear of homelessness, but the former judge said he has not heard of any lessee being evicted.

"It's never happened as far as I know," he said.

Attorney James Mee, who represents both small and large landowners, said some lessees will find it "easier to negotiate" with landowners without the threat of forced conversion. But opponents said they fear that owners will have no cause to sell and can unfairly raise rents.

The Hale Coalition, which supports condominium conversion, expressed shock at the final version of the repeal bill.

"We think that's very unfair" that there was no exception for conversions already under way, said spokeswoman Jane Sugimura.

She said the coalition will "resume fund-raising and financially supporting the lawsuits that are likely to come as a result of the council's inappropriate actions to repeal Chapter 38 and not exempt those projects in its pipeline."

Djou, one of the minority who opposed repeal, worries about an estimated 100 to 150 condo owners partially through what had been the process of buying the fee-simple interest in the land under their properties. He believes that condo owners from several projects — Wailana, 411 Kaiolu, Discovery Bay, Camelot and Admiral Thomas — will sue the city over the reversal in policy.

More than 9,000 units in 127 buildings on O'ahu are on land that could be subject to conversion under Chapter 38, according to a report issued by a task force in April. An additional 13,000 leasehold units remain in 388 buildings that otherwise converted.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 535-2429.