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Legislation has been proposed in the Hawaii legislature (SB 563/HB 581) to give all COVID-19 impacted commercial tenants relief in the form of a rent moratorium eviction bill that also upends existing real estate leases throughout the state. This bill strongly resembles a bill the commercial real estate community successfully defeated in California in 2020.
The Hawaii Senate Committee on Commerce and Consumer Protection approved SB 563 on February 2, 2021, sending the bill to the Senate Judiciary Committee for a hearing. The Hawaii bill defines an “impacted commercial tenant” as one that operates primarily in Hawaii, occupies commercial real property pursuant to a lease, and meets one or more of the following: experienced a revenue decline of 20%, or closed, or a 15%+ decline in capacity due to COVID-19 public health restrictions.
The legislation allows withholding of rent for more than a year, removes existing legal remedies, and rights from, and gives one party to a contract the right to walk away from a valid lease. The one-sided proposal leaves the property owner, who is also facing challenging times, little or no remedy to fulfill his or her own financial obligations.
Just like the California bill mentioned above, ICSC believes substantively, SB 563/H.B. 581 is unconstitutional as it clearly violates the Contracts Clause of the U.S. Constitution. What is proposed effectively causes a “taking” requiring compensation. As strong as the threshold matter of constitutionality seems, it doesn’t preclude the legislature from advancing the bill and if it is enacted, it will be the job of the judicial system to interpret the law and make that ruling.
ICSC and other groups submitted testimony in opposition to the bill and will continue to update you on developments. For more information, please contact Betsy Laird, blaird@icsc.com.