A federal judge has upheld the repeal of the city's condominium leasehold conversion ordinance.

In a ruling released Wednesday, U.S. District Judge David Ezra said the City Council acted legally when it repealed the law, Chapter 38, in February.

But Ezra added the city should have allowed those who had already begun the process to continue. The two cases filed in federal court were unnecessary because the city could have allowed those already invested in the process to continue, he said.

"The fair and wise decision, from the perspective of the city, would have been to draft the repeal of Chapter 38 so as to allow those leaseholders ... who have begun in good faith the process of conversion to be grandfathered in," Ezra said.

City Council members had considered allowing those with pending lease-to-fee conversion applications to work toward approval after the repeal, but ultimately decided against it, city spokesman Bill Brennan said.

"I know that council members struggled with that part before going ahead," he said.

Ezra ruled on lawsuits brought by Kahala Beach Apartments and Discovery Bay Condominium, which argued the repeal of the lease-to-fee conversion ordinance was unconstitutional.

The leasehold ordinance used the city's powers to condemn the land beneath condominium buildings to help leasehold owner-occupants to buy it.

An attorney for lessees at Kahala Beach Apartments said his clients will meet soon to discuss their options.

A similar case in state court is pending before the Hawai'i Supreme Court.

The City Council in 1991 approved Chapter 38, which allowed the city to force landowners to sell qualified condominium owners the fee interest in land under their units. The ordinance was patterned after the Hawai'i Land Reform Act, which allowed leasehold conversion of single-family houselots.

The council voted on Jan. 26 to repeal Chapter 38.