Commenting on the plight of commercial and condominium lessees in Hawaii who face tremendous increases in renegotiated lease rents based upon greatly exaggerated land valuations, nationally known economist Anthony Downs stated in 1992, "The resulting uncertainty has a paralyzing effect on transactions regarding such properties. The lessee cannot refinance because lenders will not make loans on such properties; he cannot sell because the buyer cannot borrow to purchase them; and he cannot lease his improvements because the tenants do not know what their total costs will be, because the lessee does not know his rental costs."
The primary purpose of a legislative program which I and many others have supported this year is to ensure that appraisals of real property in Hawaii conform at all times with the nationally recognized Uniform Standards of Professional Appraisal Practice (USPAP) and thus reflect true and accurate "fair market value."
In Hawaii, USPAP has not been enforced. As a result, many of our citizens have suffered disastrous economic consequences. This is because taxes, lease rents, loan policies and other costs and charges are influenced by or derived from what are supposed to be "fair market value" calculations of land values.
If USPAP were enforced as the single standard of appraisal in Hawaii, none of these injustices could occur and many could be repaired.
It is not necessary at this time to expose the practices, conduct and motives of those who have contributed to and profited from the current practice of using a wide variety of appraisal methodologies.
The time has come to require that 1) USPAP govern from now on in the state of Hawaii and 2) a mechanism be provided for reconsideration, correction and recovery to those who have been hurt in the recent past.
Hawaii's appraiser regulatory program should be at least as good as every other state's, and the determination of "fair market value" for land should meet the standards of definition and procedure which are already set forth by law in HRS Chapters 10 and 171.
The Legislature stated in both HRS chapters that "...fair market value shall be determined...pursuant to appraisals performed in conformance with the Uniform Standards of Professional Appraisal Practice." This fair process, as set forth in existing law, holds the remedy that we now seek and that we wish to assure will be available to all.
The most important bills introduced in the Legislature this session, and which will be alive in 1998, will accomplish these three general goals: 1) require all appraisers in Hawaii to be licensed and to conform with USPAP, 2) require that "fair market value" be determined in conformance with USPAP and therefore that disagreement over land values be resolved by a process of appraisal and not by use of arbitration, and 3) provide all residential and commercial land lessees with equal protection while enabling the reconsideration and correction of past actions not undertaken pursuant to USPAP.
While the Legislature will not pass any of the needed bills this session, concurrent resolutions which request that the legislative auditor study and report on these matters prior to the next session are under consideration.
It is critical that these resolutions be passed. There is strong support of these resolutions from the community, but there also is strong opposition from landowners, primarily the Bishop Estate.
As a Kamehameha Schools alumnus, I would like to share my thoughts on the moral tradition for leasehold reform.
Malama pono kekahi i kekahi means "take good care of one another."
In the olden days -- before Western contact and before land was "owned" -- there existed a reciprocal relationship between the alii, who administered, and the people, who produced. This interdependent arrangement involved the chiefs, the people, the gods and the priests, each of whom was responsible for the satisfactory functioning of all things.
There are two Hawaiian concepts and one English term that need to be reconciled in the land-leasehold system if there is to be a happy and constructive resolution to present conflicts.
First, there is pono, meaning "goodness, excellence, well-being, prosperity, proper, right, just, fair, successful, should, ought, must, necessary."
Second, there is malama: "Take care of, care for, preserve, fidelity, loyalty."
Finally, there is fiduciary: "having a duty to act primarily for the benefit of another."
Those who perform in a fiduciary role for the Hawaiian alii trusts in the administration of land assets need to be reconnected with pono and malama. And the term "fiduciary" must embrace the very Hawaiian concept that all men and women upon whom the paradise sun rises and sets must be thought of as our family, and thus as "beneficiaries."