HRPT Properties Trust announced today that Chief Judge Susan Oki Mollway of the U.S. District Court in Hawaii ruled that a law intended to lower rents HRPT may charge for its industrial and commercial lands in Hawaii violates the U.S. Constitution and is unenforceable. HRPT is a real estate investment trust (REIT) that primarily owns and leases office buildings. HRPT leases several properties in Hawaii.
Act 189, was passed by the Hawaii legislature in 2009 and became effective without the governor's signature in July 2009. Through Act 189, the state legislature took the liberty of clarifying private contract provisions agreed to among private parties contained in long-term commercial and industrial ground leases. Among other things, the Act requires master lessees to limit any sublease rental amount negotiated or renewed during the period the lease rent is renegotiated with the master lessee to the lesser of a) the "fair and reasonable" amount determined according to the aforementioned requirements or b) the rental amount as calculated under the renegotiation or renewal provisions of the sublease.
According to HRPT's announcement, the Court ruling finds that Act 189 violates the U.S. Constitution's Contract Clause which prohibits most forms of state interference with contract rights, and the Equal Protection Clause because it singles out and targets HRPT for the benefit of its lessees and does not serve any legitimate general public purpose. For additional case information, see HRPT Properties Trust et al v. Lingle.
For additional postings related to constitutional issues and legislation, see Constitutional Challenges and Legislative Updates.