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The Honolulu Advertiser
Posted on: Tuesday, May 11, 2010

Judge may toss law on rents

By Jim Dooley
Advertiser Staff Writer

Chief Federal District Judge Susan Oki Mollway is likely to rule that a controversial state law is unconstitutional in the way it changes how rents are determined for tenants on Kalihi and Māpunapuna industrial property owned by a Massachusetts landlord.

Mollway said she will issue her ruling by the end of the month, and perhaps by the end of next week, but said in a written "inclination" that she is leaning toward striking down the law.

The measure, called Act 189, was passed by the Legislature last year and Gov. Linda Lingle allowed it to become law without her signature. The law was due to expire at the end of next month but the Legislature late last month voted to extend its effective date to June 30, 2013. That measure is now on the governor's desk.

The landowner, HRPT Properties Trust, attacked the law as unconstitutional in a federal court lawsuit.

Act 189 requires that language in HRPT leases that refers to "fair and reasonable" rent must be read to apply to both the landlord and its tenants.

More than 180 tenants lease properties from HRPT in the Māpunapuna and Kalihi Kai areas of O'ahu. HRPT bought the land in 2003 from the Damon Estate.

Some of the tenants have said that HRPT wants to double and triple current rents and has also sought automatic annual rent increases of 3 percent to 4 percent.

Some tenants claim that the proposed rent increases don't reflect recent drops in property values.

In court yesterday, HRPT attorney Cliff Sloan said Act 189 has caused "substantial impairment" of the company's legal rights.

"We're asking for a declaration that the act is unconstitutional ," Sloan said.

The measure was passed after "a small group of influential businesses" went to the Legislature to seek protection from an out-of-state" property owner, Sloan said.

The lawsuit names Lingle as a defendant, but Deputy Attorney General Girard Lau argued in court yesterday that Lingle should be dismissed from the complaint because Act 189 involves private parties and not the state government.

Mollway expressed reluctance to grant the request and said perhaps the Department of Commerce and Consumer Affairs, which licenses the real estate appraisers involved in the HRPT rent renegotiations, should be named as a party.

Before the hearing, Mollway released her preliminary thoughts on the issues in the lawsuit and said that her "inclination" is to "rule that Act 189 violates the Contract Clause of the United States Constitution ."

At the close of the hearing, Mollway said her final ruling would be issued in two or three weeks.

"It's a really interesting case to me," she told the parties.