Status on Leased Fee Interest Right of First Refusal Bill

On March 29, 2004, I reported on a House Judiciary Committee Hearing on a bill relating to the right of first refusal for leased fee interests. The committee passed out amended version of the bills and the bills will be going to conference committee.

SB 1336 HD1 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 if both co-owners are tax exempt under IRS Code §501(c)(3). 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 if both are tax exempt.

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 fee 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.


If you wish to make your comments known, you should contact Representative Ken Hiraki and Senator Ron Menor before the conference committee meets.