Leased Fee Interest Right of First Refusal Law

There is a hearing on Wednesday, March 2, 2005 at 9:30 a.m. in room 229 on some bills of interest to community associations before the Senate Judiciary Committee before chair Sen. Colleen Hanabusa. The hearing notice discusses the following bills of interest to community associations:

SB 1336, SD1 This bill would reduce the right of first refusal that condominium associations and residential cooperatives have when the owner of the leased fee interest sells to a third-party. When the leased fee interest is owned by more than one owner, the bill would give a superior right of first refusal to one of the co-owners. What this means is if one of the co-owners wants to sell to the Association, the co-owner of the leased fee interest would have a superior right to purchase the share.

We have serious concerns about this bill. The right of first refusal law was intended to address the situation where a lessor is selling the leased fee interest. If there is going to be a sale, the legislature determined that it is fair that the association be able to purchase it at the same price. The intent was to permit the lessees to own their apartments in fee simple rather than being thrown on the street at the end of the lease. There is no similar interest for co-owners of lease feeefee interests. As a co-owner of real property, there was always the possibility that their other co-owners may chose to sell their interest to someone else, including the lessees or the Association.

Persons wishing to testify should submit 25 copies of their testimony, three-hole punched, to the committee clerk, Room 227, State Capitol, 24 hours prior to the hearing. Testimony may also be faxed if less than 5 pages in length, to the Senate Sergeant-At-Arms Office at 586-6659 or 1-800-586-6659 (toll free for neighbor islands), at least 24 hours prior to the hearing. When faxing, please indicate to whom the testimony is being submitted, the date and time of the hearing, and the required number of copies needed for submittal.