I noticed an AP story in yesterday’s Honolulu Advertiser regarding the outcome of an Inspector General’s investigation of the Western Pacific Fishery Management Council.

What was missing was a link to the report itself. Here it is. It’s always best to go directly to the primary documents and see what else is there.

Here’s a bit more information about the Date-Laau situation, where Iolani School has purchased 5.5 acres next door to the campus for future expansion. The problem is that the area includes nine cooperative apartment buildings and two rental apartment buildings with some 260 units in total with leases that expire in three years.

You may recall that homes and buildings on leased land were “normal” here in prior decades, but escalating lease rent prices and the specter of tens of thousands of people being thrown out of their homes as leases ended created a huge political problem. A state law was passed made it possible for single family home owners to organize and buy the fee interest in their properties. Later, in 1991, the city passed an ordinance providing a similar right to cooperative and condominium owners.

Cooperatives are an earlier type of legal ownership that was used here before the passage of Hawaii’s condominium law. With a condominium, you can purchase and hold title to a specific apartment. With a co-op, you purchase a share of the total co-op which gives you the right to occupy a particular apartment. There are other differences in management and control as well. After condominiums were authorized, they became the structure of choice but older cooperatives are scattered around the state.

The question for Date-Laau is whether a state law giving condominium and cooperative owners the “right of first refusal” if the landowner chooses to sell the property applies or should apply in this case.

Owners of those co-op apartments, about half of them owner-occupants, were not given that right of first refusal.

Here’s some critical background, provided by Mike Pang of Monarch Properties. His company was involved in a bid to purchase the fee interest in the area several years ago.

Back in 2002, the city’s condominium leasehold conversion ordinance was still in place, putting pressure on landowners to voluntarily negotiate with their lessees for sale of the fee interest.

The Date-Laau landowners, Lum Chang Tai, Inc., and Lum Yip Kee, Ltd. said they would not negotiate the sale of individual parcels, but would consider selling the property as a whole.

So the Date Laau Community Association was formed in 2002 as the entity to pursue purchase of the leased fee interest in the entire block. Eight of the building associations joined the association. Monarch Properties, which has handled many least-to-fee conversions, represented the association in negotiations.

The association and the landowners reached tentatives agreement on a deal with a sales price of about $16.5 million. The community association managed to line up bank financing for the deal and in 2005 notified the landowners that they were ready to proceed.

But in early 2005, the City Council, under pressure from Kamehameha Schools and facing protests by Native Hawaiians, repealed the city’s manadatory conversion law for condos and co-ops. Instead of signing off on the deal, the landowners pulled out of the negotiations and said they were no longer interested in selling the Date-Laau property.

The deal collapsed.

Fast forward to 2009.

Iolani and the former landowners are apparently relying on an exception written into 514C:

§514C-8 Exception. (a) This part shall not apply if the land under the condominium project or cooperative housing corporation subject to a leased fee interest is part of a larger tract of land and the lessor will not agree to sell the leased fee interest in the land in parts.

However, what this section is somewhat ambiguous, especially in a case such as this in which a single legal entity had already been created to pursue the purchase of the entire parcel and had been recognized by the landowner.

Is a legal challenge to enforce the right of first refusal possible? Perhaps, but it seems less than likely right now. Owners would have to take their case to court, a costly process for this community of modest means. One estimate I heard was that such a case could cost upwards of $100,000 in legal fees, since it would be hotly contested. Then, if successful, the co-op owners would then have to finance the overall purchase price.

It seems likely that Iolani’s purchase and reliance on this exception will go unchallenged, another unfortunate precedent for the thousands of other owners of leasehold condominiums and cooperatives.

And, as one resident of the area I spoke with put it:

“It’s very cut throat. Find a loophole and exploit it.

These don’t seem to be the kind of business ethics Iolani would want to be teaching their students.”

Whether there will be a legal challenge is an open question, but this is certainly not the last we’re going to hear from the Date-Laau controversy.

I’m still trying to work through a backlog of dogs. Here’s another short video, this time featuring Fisher and Shiloh, two wonderful black Labs who love their dog biscuits and really love romping in the ocean. Our arrival while they were playing in the water meant the best of both worlds! Click on the photo to view the short Quicktime video.