Wednesday, October 7, 1998

Lessees celebrate high court’s
decision on conversion law

By Gordon Y.K. Pang


When Helen Carroll and other lessees of the Kalia Towers first approached the landowners about selling them the fee interests three years ago, they were given a flat no.

The lessees' most recent offer was met with a "We're not ready yet," Carroll says.

"Now, we've got the law on our side."

Carroll was one of many condominium and cooperative lessees celebrating the U.S. Supreme Court's decision on Monday not to hear a challenge to the city's mandatory lease-to-fee conversion law.

Proponents of mandatory conversion hailed the decision as one that would bring equity and fair value to a segment of Oahu property owners.

Most banks in Hawaii won't give fixed mortgages for leasehold properties, Carroll said. "And if I want to sell my property -- people are scared to death of leasehold property."

The way the law works, 25 lessees or a majority of owner-occupants in a condominium can seek to have their landowner sell to them the fee interest.

It's patterned after the city's land use law pertaining to single-family homes that went into effect in 1984.

If a landowner refuses to sell or the two sides can't reach an agreement on price, the issue can be taken to the City Council, where condemnation proceedings could occur. The matter would then eventually be settled by a jury in state Circuit Court.

That's the process now occurring in the case between Kamehameha Schools Bishop Estate and more than 30 lessees at Kuapa Isle in Hawaii Kai.

The Rev. David Kennedy said he's been waiting 10 years to purchase the fee interest on his Kuapa Isle condominium at what he feels is a reasonable price.

Bishop Estate has offered to sell him the fee for $165,000. Kennedy said his own appraisers valued the fee at between $40,000 and $60,000.

"From the very beginning we've tried to seek a fair price," Kennedy said. "They refused to negotiate and come to the table. Now it's out of their hands."

Bishop Estate and members of the Small Landowners Association challenged the city law, arguing that it is a taking of private property for the benefit of select individuals, not the greater good.

Realtor Michael Pang, who has been giving advice to many of the lessees, predicted that most landowners will now try to settle rather than let the matter go to court.

"For lessors, it means you're going to have to sell eventually," Pang said. "You might as well do it voluntarily and negotiate your price because if you don't, the lessees will eventually force you to do it."

Proponents of mandatory conversion say there is no unfair taking since the purchase price will be based on independent appraisals.

"Bishop Estate has made more than $600 million in sales proceeds just from selling the lease fees in condominiums on the island of Oahu since 1991," said Robert Voege, president of the Hawaii Leaseholders Equity Coalition.

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