HB2733

SECTION 1. This Act addresses the State's housing shortage by:

(1) Providing an anti-speculation capital gains tax on real property to retain and support Hawaii's rental market;

(2) Allowing state housing tenants to share an apartment and allowing tenants of federally subsidized housing to qualify for certain benefits;

(3) Allowing a lessee under a long-term lease to purchase the fee interest in the land for single-family residential dwellings, condominiums, or cooperatives; and

(4) Directing the Hawaii public housing authority to expand certain eligibility requirements for the family self-sufficiency program and appropriating funds therefor.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

LANDLORD AND TENANT - HAWAII LAND LAW

§ -1 Definitions. As used in this chapter, unless the context requires otherwise:

"Fee simple owner" or "fee owner" means the person who owns the fee simple title to land that is leased, including a life tenant with a remainder over, vested or contingent, and a holder of a defeasible estate, and the holder's heirs, successors, legal representatives, and assigns.

"Lease" means a conveyance of land or an interest in land, by a fee simple owner as lessor, or by a lessee or sublessee as sublessor, to any person, in consideration of a return of rent or other recompense, for a term, measured from the initial date of the conveyance, of three or five years or more as provided in this chapter, including any periods for which the lease may be extended or renewed at the option of the lessee, for all leases executed after the effective date of this chapter.

"Lessee" means any person to whom land is leased or subleased for residential purposes, and that person's heirs, successors, legal representatives, and assigns.

"Redemption" means the option provided by this chapter to any land lessee to buy the fee-simple estate. Redemption includes all leases of residential real property including but not limited to residential apartment cooperatives or condominiums, if for a term of three years or more including extensions, renewals, or other lease period accumulating to any particular lessee or tenant.

The terms "lessor", "lessee", "fee simple owner", and "fee owner" include corporations, firms, associations, trusts, estates, and the State or counties. When more than one person is the lessor, lessee, fee simple owner, or legal and equitable owner of leased land, the terms apply to each, jointly and severally. The additional definitions of chapter 514A are adopted and made a part of the definitions provided in this section for all purposes to the extent that they do not conflict with the purposes of this chapter.

§ -2 Applicability. This chapter applies to all leased lands which are owned or held privately or owned by the State and its political subdivision, except Hawaiian home lands that are subject to article XII of the Constitution of the State of Hawaii and lands owned or held by the federal government. This chapter supersedes chapter 516, Hawaii Revised Statutes. This chapter is not meant to supersede or preclude any additional remedy at law available to lessees not specified herein. Where the definitions, rights, or the benefits of this chapter conflict with those of any other statute, the definitions, rights, or benefits of this chapter shall prevail.

§ -3 Redemption. All leases of residential real property, if for a term of three years or more including extensions, renewals, or any other lease period accumulating to any particular lessee or tenant may be terminated at the option of the lessee or tenant after notice of one month to the landowner, upon payment to the landowner of a sum equal to the capitalized value of the rent due under or reserved by the lease after the expiration of the minimum lease term specified above from the date of the lease, or any sublease as applicable thereof, at a rate of twelve per cent simple interest per year, and upon the payment to have the fee simple title to the property vest in the lessee or tenant.

§ -4 No estoppel or waiver. The rights granted to lessees by this chapter shall be effective, notwithstanding any provision in any lease or contract to the contrary. No lessee shall be estopped by any covenant, term, condition, or contract, however worded, from claiming the rights granted to the lessee by this chapter or to have waived that right. Any provision in any lease or contract that is contrary to the intent of the purpose of this chapter is void.

§ -5 Trusts and estates. The rights granted to lessees by this chapter shall be effective, notwithstanding any condition or provision to the contrary in any instrument creating any life tenancy, defeasible fee, estate, or trust, regardless of whether the tenancy, fee, estate, or trust was in effect prior to the effective date of this chapter or created thereafter; and the life tenant, holder, officer, or trustee of any tenancy, defeasible fee, estate, or trust may convey automatically renewable leases forever for ninety-nine years or more, and shall perform all acts required of the life existence or thereafter executed that shall be construed to be in conformity with the intent and purpose of this chapter.

No trustee, officer, or agent of a lessor or other legal or equitable owner, while acting pursuant to this chapter, shall be deemed to be acting in bad faith or to have committed a breach of trust.

§ -6 Discrimination. No person shall be denied the right to become a lessee of any real property because of the person's race, religion, sex, ancestry, political affiliation or opinions, or physical handicap.

§ -7 Free assignability. Except as otherwise provided in this chapter, a lessee may assign the lessee's lease at any time without the approval or consent of the lessor, and the assignee shall have the same rights and obligations under the lease as the original lessee; provided that no assignment shall be effective to transfer any interest in the lease unless the lessor has received:

(1) Either a true executed copy of the assignment or written notice thereof;

(2) A reasonable service charge, except in the case of an assignment by way of mortgage or assignment to, or by the Federal Housing Administration, the Department of Veterans Affairs, or the Federal National Mortgage Association, or a foreclosure of mortgage of assignment in lieu of foreclosure; and

(3) The written undertaking of the assignee to perform all obligations of the lessee under the lease which may be incorporated in the assignment.

No assignment shall release the assignor from liability under the lease unless the lessor consents in writing to the assignment. A consent to the assignment shall be deemed a consent to the release of the assignor from liability under the lease. The lessor shall not require payment of any money for the lessor's consent except the service charge nor withhold the consent unreasonably. Any person acquiring the leasehold estate in consideration of the extinguishment of a debt secured by mortgage of the lease or through foreclosure sale, judicial, or otherwise, shall perform the obligations imposed on the lessee by the lease only during the period the person has possession or ownership of the leasehold estate.

§ -8 Forfeiture. No forfeiture of the lessee's interest in a leasehold shall be declared by the lessor for the lessee's failure to pay the rent or otherwise to perform the lessee's obligations under the lease, unless the lessor has given written notification to the lessee of the default and given the lessee at least thirty days to correct the default.

§ -9 Penalty. Any person who violates this chapter shall be:

(1) Fined not more than $5,000 or the amount of the lease redemption price (whether ripe for redemption or not) whichever is higher, provided the fine is not less than $1,000;

(2) Imprisoned not more than one year; or

(3) Both.

The civil penalty may be enforced by any party to a real property lease by civil suit.

§ -10 No recovery on illegal documents. Any covenant or clause contained in any lease made by any person, association, firm, or corporation in violation of this chapter is declared to be illegal; provided that the illegal covenant or clause shall not affect the validity of the remainder of the lease.

§ -11 Zoning changes. A lessor, fee owner, or any legal or equitable owner that may be subject to this chapter, who applies for a change in zoning in the State shall notify all of the lessor's, fee owner's, or legal or equitable owner's lessees within three-fourths miles of the land proposed to be rezoned, of the application and its contents at least thirty days before filing the application before any zoning authority.

§ -12 Severability. If any part, section, sentence, clause, or phrase of this chapter, or its application to any person or transaction or other circumstances, is for any reason held to be unconstitutional or invalid, the remaining parts, sections, sentences, clauses, and phrases of this chapter, or the application of this chapter to other persons or transactions or circumstances, shall not be affected. The legislature hereby declares that it would have enacted this chapter and each part section, clause, or phrase thereof, irrespective of the fact that any one or more parts, sections, sentences, clauses, or phrases of this chapter, or its application to any person or transaction or to other circumstances, is declared unconstitutional or invalid.

§ -13 Lawful lease terms. Leases of real property dated after the enactment of this chapter are for a period of ninety- nine years if written for any period less than ninety-nine years, and are automatically renewable forever whether the lease so specifies or not."

SECTION 3. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Anti-speculation capital gains tax on real property. (a) In addition to the capital gains tax imposed under this chapter, there shall be an anti-speculation capital gains tax on the net capital gains realized by a seller of real property, less commissions, fees, and other charges, if any, related to the sale. The tax shall be as follows:

(1) If the real property was held by the seller for less than six months prior to the sale, the tax shall be sixty per cent of the capital gains tax owed;

(2) If the real property was held by the seller for six months but less than twelve months prior to the sale, the tax shall be thirty per cent of the capital gains tax owed; or

(3) If the real property was held by the seller for twelve months up to and including twenty-four months, the tax shall be fifteen per cent of the capital gains tax owed.

(b) This section shall not apply to real property sold to provide affordable rental housing for a period of not less than ten years to a resident earning less than one hundred forty per cent of the median Hawaii income, as determined by the department of taxation.

(c) The sale of unimproved real property shall not be subject to this section, but shall be determined under section 235-51(f).

(d) The department shall deposit all tax realizations pursuant to this section into the rental housing trust fund under section 201H-202.

(e) The department of taxation may adopt rules pursuant to chapter 91 to effectuate this section."

SECTION 4. Section 201H-202, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The following may be deposited into the fund: appropriations made by the legislature, private contributions, moneys derived from the anti-speculation capital gains taxes under section 235- , repayment of loans, interest, other returns, and moneys from other sources."

SECTION 5. Section 235-51, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) [If] Except as provided under section 235- , if a taxpayer has a net capital gain for any taxable year to which this subsection applies, then the tax imposed by this section shall not exceed the sum of:

(1) The tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:

(A) The taxable income reduced by the amount of net capital gain, or

(B) The amount of taxable income taxed at a rate below 7.25 per cent, plus

(2) A tax of 7.25 per cent of the amount of taxable income in excess of the amount determined under paragraph (1).

This subsection shall apply to individuals, estates, and trusts for taxable years beginning after December 31, 1986."

SECTION 6. Section 356D-155, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) For purposes of carrying out this part, the authority shall establish criteria and procedures for determining the eligibility of tenants and rental charges, including criteria and procedures with respect to periodic review of the tenant's income and periodic adjustment of rental charges[.]; provided that the authority shall not establish criteria that denies rent supplement benefits:

(1) Based on the number of persons sharing a bedroom in an apartment; or

(2) To tenants in housing subsidized by the federal Department of Housing and Urban Development.

The authority shall issue, upon the request of a housing owner, certificates as to the income of the individuals and families applying for admission to, or residing in, dwellings of that owner."

SECTION 7. The Hawaii public housing authority shall expand enrollment in the family self-sufficiency program by increasing income eligibility requirements for participants and expanding eligibility requirements to include tenants of Department of Housing and Urban Development housing.

The Hawaii public housing authority may adopt rules pursuant to chapter 91 to effectuate this section.

SECTION 8. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2008-2009 for the Hawaii public housing authority to expand enrollment in the family self-sufficiency program by increasing income eligibility requirements for participants and expanding eligibility requirements to include tenants of Department of Housing and Urban Development housing.

The sum appropriated shall be expended by the Hawaii public housing authority for the purposes of this Act.

SECTION 9. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect upon its approval; provided that:

(1) Section 8 shall take effect on July 1, 2008; and

(2) Sections 3, 4, and 5 shall apply to taxable years beginning after December 31, 2007.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2733
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII