Judge sides with city
in leasehold conversion suit

The city was within its rights when it repealed a condominium leasehold conversion ordinance in February, but should have allowed those who had already begun the process to continue, U.S. District Judge David Ezra wrote in a ruling released yesterday.

"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.

Lessees at Kahala Beach Apartments and Discovery Bay Condominium sued the city separately in February, alleging repeal of the lease-to-fee conversion ordinance was unconstitutional.

Yesterday, Ezra declined to take up either case, denying the plaintiffs' motions for summary judgment, and wrote that the city "acted within its legal limits" in repealing Chapter 38.

Earlier this year, Ezra also denied a preliminary injunction from the plaintiffs that would have forced the city to process lease-to-fee conversion applications while the lawsuits were pending.

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 plaintiffs will meet sometime this week to discuss their options.

"We're obviously disappointed," said Bob Fricke, with Goodsill Anderson Quinn & Stifel.

He also said that a similar case in state courts, which is on appeal before the Hawaii Supreme Court, is ongoing. It is unclear when a ruling in that case will be released.

An attorney for lessees at Discovery Bay Condominium did not return a call for comment.

In his ruling, Ezra said the cases were "sad" and "unnecessary" because the city could have allowed those already invested in the process to continue.

"The people of the City and County of Honolulu are ill-served by the avoidable waste of taxpayers' money that has resulted from this decision," he wrote.

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

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

Meanwhile, Councilmember Romy Cachola, chairman of the Executive Matters Committee, said Ezra's ruling "validates the Council's action" and shows "what we did was within the law."

He also said the City Council members tried, before repealing the ordinance, to extend options to lessees who had filed for conversion.

One proposal included allowing lease-to-fee conversions to occur if both the lessees and lessors of a condominium agreed. Another would have established a task force to look into specific cases.