Hawaii Adopts CRE Appraisal Law

Hawaii Senate Bill 975, which introduces new stipulations concerning the way in which leasehold land rent negotiations are determined, was passed into law on July 12. The bill was originally vetoed by former Gov. Linda Lingle, but current Gov. Neil Abercrombie let the bill through, as expected.

The new law stipulates that real estate appraisers working as arbitrators in ground rent negotiations must adhere to the rules outlined in the Uniform Standards of Professional Appraisal Practice. The law also calls for appraisers to provide full disclosure and explain how and why they determined the fair market value for the leased land.

The new law will have a major impact upon rent negotiations all across the state of Hawaii. Supporters of the law claim that it will make both rent negotiations and the arbitration process more transparent for owners. The law will have an immediate impact on Mapunapuna, a neighborhood within Honolulu, where roughly 80 businesses are up for renegotiation for their land next year.

Opposition to the legislation, including former Gov. Lingle, have asserted that it's an unnecessary law because real estate appraisers act more as arbitrators than appraisers and engage in alternative dispute resolutions. These appraisers argued that because they don't perform appraisals, they shouldn't be forced to adhere to the same regulations as other appraisers.