A federal judge yesterday raised critical questions for the state over whether a state law enacted earlier this year harms the largest private owner of industrial land in Hawai'i, HRPT Properties Trust.

HRPT in August sued the state in federal court, challenging the constitutionality of the new law, through which the Legislature intended to give HRPT tenants more leverage in renegotiating rents.

Attorneys for the state and a tenants group responded to the suit by asking for a dismissal on several grounds, including an argument that the law only clarifies language in HRPT leases and doesn't substantially impair HRPT rental income.

HRPT had asked federal District Judge Susan Oki Mollway to rule in the company's favor and strike down the law, in part because it lacks a broad public purpose.

Mollway yesterday took arguments made by both sides under advisement and said she expects to issue a ruling before Christmas.

Though neither side obtained a quick victory, Mollway expressed doubt over the state's claim that the law doesn't substantially alter the terms of HRPT leases.

Under the law, an unusual phrase in HRPT Hawai'i leases referring to "fair and reasonable" rent must be construed as being fair and reasonable to the lessor and the lessee.

The law also mandates that the type and intensity of use on the property be considered when determining what's fair and reasonable.

More than 180 businesses lease land from HRPT in Mäpunapuna and Kalihi Kai on O'ahu.

As far as either the state or HRPT knows, the "fair and reasonable" language is unique to HRPT Hawai'i leases, which the Massachusetts-based company acquired from longtime local landowner Damon Estate.

HRPT believes the lease term "fair and reasonable" refers to fair market rent for the property driven by land value. Company leases provide for any disagreement on rent to be decided by an impartial panel of real estate appraisers who are free to interpret the lease language.

Clifford Sloan, an attorney with Washington, D.C.-based law firm Skadden Arps Slate Meagher & Flom LLP representing HRPT, told Mollway that the law has removed the ability for both the landlord and appraisers to interpret language in the lease.

Sloan called the law special-interest legislation that rewrites historical contracts to injure an unpopular out-of-state company.

HRPT filed its suit against Gov. Linda Lingle, who let a bill passed by the Legislature in May become the rent law in July without her signature.

The state and the tenants group, named Citizens For Fair Valuation, contend that the law attempts to remedy an unfair landlord-tenant relationship that affects the broader economy.