Leasehold
condos convertA 1990 law has cut
the number in half
on Oahu, a study finds
The pros and cons of Honolulu's contentious leasehold condominium conversion law have been debated for years, but one thing's for certain: It's having its intended effect.
The number of leasehold condominiums on Oahu has been cut nearly in half to about 23,000 since the 1990 passage of the law known as Chapter 38, according to a panel set up to study the issue.
A report by the Leasehold Conversion Task Group said 17,723 leasehold condominium units have been converted to fee-simple since Chapter 38's inception. Oahu still has 23,193 leasehold condo units.
But whether those numbers represent good news or bad depends on who you speak to on the task group.
The group comprised representatives of both lessors and lessees and was set up by the City Council late last year to study ways of more fairly implementing the law. But its joint report discussed at a meeting of the council's Executive Matters Committee yesterday did little more than revive old polemics.
Chapter 38 proponents yesterday said the data meant the law has been effective in eliminating a property category that has been described as "pernicious" by the state Supreme Court.
"Every court that has looked at this has ruled that the law serves a public purpose and now we have some numbers to back that. People are now able to buy the homes they live in," said Jane Sugimura, a member of the lessees component of the task group.
The law allows condominium owner-occupant lessees to petition the city to use its condemnation powers to compel a landowner to sell the fee interests on their units at prices determined by a third party.
The leasehold system was originally set up in the 1960s to make some degree of home ownership available to a wider segment of the population. But the system was increasingly seen as antiquated since lessees who can't afford to buy their fee interest could lose their homes once their leases expire.
Opponents of Chapter 38 said the law violates free-market principles by forcing owners to sell and is eliminating a property niche that offered a lower-cost alternative.
"We should be looking at providing more housing options in this city. Not less," said Ben Kudo, an attorney and member of the lessor's team.
Kudo said the law was having a "chilling effect" on developers who may have wanted to develop leasehold condominiums in Honolulu.
The task group found that 18,624 condominium units were built on Oahu since January 1, 1991, but just 452 of those, or 2 percent, were leasehold.
Sugimura said the lessee representatives supported some tax relief for landowners who may be forced to sell the fee interest in their condo holdings and called for greater cooperation between both sides to ensure a "fairer" process in the future.
But the lessor's team and a stream of mostly small landowners who said they would be forced to sell family property held for decades came forward to urge repeal of Chapter 38.
Thomas Kaulukukui, chairman of the Queen Liliuokalani Trust -- which serves orphans and poor children and is a major landowner -- questioned whether Chapter 38's stated public purpose of boosting fee-simple homeownership outweighed the trust's work.
"Our land is the basis for the wealth by which these programs continue. If you take that away, it has a social impact because we serve the children," he said.
Council committee Chairman Romy Cachola asked members of the task group to look into conducting a survey to find out how many remaining lessors and lessees on Oahu were willing to undergo Chapter 38 conversion to gauge attitudes more accurately and to facilitate negotiations.