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Council trying Leasehold condominium owners are hoping a bill introduced yesterday in the City Council will address a state Supreme Court ruling that disqualified several buildings from the city's lease-to-fee conversion law.
to fix lease law
A bill is introduced setting
conversion approval at 50 percent
of owner-occupantsBy Craig Gima
cgima@starbulletin.comThe Supreme Court ruled last week that the city cannot force condominium landowners to sell the fee interest to leaseholders unless a minimum of either 25 owner-occupant leaseholders or 50 percent of the owners of all condo units in a project agree to the action.
The city had been interpreting its own law to mean that only 50 percent of owner-occupants needed to agree to the lease-to-fee conversion process.
Councilman John Henry Felix said the bill he introduced yesterday would make it clear that the intent of the ordinance is to allow for the conversion process when 50 percent of owner-occupants, not all owners, agree. Felix's bill had the signatures of six of the nine Council members.
The bill would ensure "we're on the right track to realizing the full intent of the ordinance," Felix said.
But small landowners like Phyllis Zerbe, who owns the land under a housing project in Honolulu, support the court's interpretation of the law.
"If the landowner wanted to sell it, they would sell it. That's their choice. That should be the landowner's choice," Zerbe said. "... They (the city) haven't been following the law."
Leasehold condominium owners see it differently.
"It puts all of us leasehold owners at an extreme disadvantage," said Aimee Tang, president of the owners association at the Alika condominiums on Alexander Street.
There are 45 units in Tang's building, but less than half of them are owner-occupied, so unless the law is changed, the owners cannot qualify for leasehold conversion, she said.
"We need the law to be revised to give us the benefit of the doubt. Otherwise we are put under such stringent requirements that we couldn't meet it if we had to," Tang said.
Councilman Jon Yoshimura said he also is hopeful that a badly written law can be cleaned up.
"We've always had questions about the law and its interpretation," Yoshimura said. "Now we have a clear signal from the court that the law is ambiguous."
Not all Council members are gung-ho about the Felix bill.
Councilwoman Ann Kobayashi said she is not opposed to the concept of leasehold conversions. "But in a large development, I just don't know how, logistically and practically, it works out," she said, noting that a small number of owners could have a disproportionate say in the fate of a large condo project.
"It just seems kind of awkward," Kobayashi said.
Michael Pang, principal broker for Monarch Properties, who has helped many of the condominium owners going through the conversion process, said the average owner occupancy in buildings on Oahu is less than 30 percent.
Larger buildings may be able to get the minimum 25 owner-occupants to petition for conversion, but smaller buildings will not be able to qualify, he said.
By his calculation, developments going through the leasehold conversion process -- including the Inn on the Park, Waikiki Skytower, 1251 Heulu, Sky Tower, the Alika, Sunset Towers, Scandia, Foster Tower, Makiki Manor, 3003 Kalakaua, Admiral Thomas, Moorings and Kahala Beach condominiums -- have to resubmit petitions because they do not meet the 25 owner-occupant minimum.
Leasehold condominium owners at the Sunset Towers on Atkinson Drive were just about to make their final offer to the landowner this month after two years of going through the process. If the offer was not accepted, they could have gone to court to condemn the property and force a sale.
However, after the Supreme Court ruling last week, the meeting was postponed, said Henry Tonini, the treasurer of the Sunset Towers condominium association.
"It (the Supreme Court ruling) was a shock because we were on the verge of getting a resolution," Tonini said.
"All these people knew what they were getting into," said landowner Zerbe. "You mean to tell me, when they bought the lease, they didn't understand it?"
Zerbe said her land has been in her family for decades, and she would like to keep it that way.
"Small landowners are on fixed income," she said. "They (leasehold condominium owners) say they'd like to leave the property to their families. What about our families?"
The ordinance was passed in 1991 to help leasehold owner-occupants gain title to the land under their units. The ordinance says qualifying lessees can petition to have condemnation begin when a landowner either refuses to sell the fee interest or no purchase price can be negotiated. The city would condemn the land and turn over the fee interests to the eligible unit owners.
Kamehameha Schools challenged the city's conversion of the 194-unit Kahala Beach condominium project on a series of issues, including the minimum number of unit owners needed to trigger proceedings leading to condemnation.
In a written statement yesterday, Kamehameha Schools said it will continue to act to protect its rights as a property owner, but "it is important to note that the trust has been voluntarily selling its leased-fee interest in more than 95 percent of its residential land since 1991."
Martin Anderson, attorney for the Kahala Beach condominiums, said the number of owner-occupants dropped under the 25 owner-occupant minimum when one of the original petitioners died.
He said they will resubmit the paperwork with more than 25 condominium owners. He declined to speculate how long the process will take.
"We'll get it done properly," Anderson said.
Star-Bulletin reporter Gordon Y.K. Pang
contributed to this report.