(a) The annual renegotiated lease rent for the residential apartment of an owner-occupant may be adjusted by the department to an amount higher than the maximum applicable to that apartment. An administrative adjustment shall be made in accordance with this section and only for the circumstances of subsection (c) or (d).
(b) For the purposes of this section, the following definitions apply unless the context clearly indicates or requires a different meaning.
Administratively Adjusted Lease Rent. The annual renegotiated lease rent, as administratively adjusted.
Base Year. The last year of the fixed rent period.
Base Year Net Operating Income. The lessor’s net operating income from the apartment during the base year. If the lessor shows that the net operating income from the apartment during the base year was lower than normal because of extraordinary or unusual expenses, the department may adjust the base year net operating income to reflect an appropriate amount.
Fair Net Operating Income. Net operating income from the apartment, as adjusted for inflation, which is the same as the base year net operating income. Inflation shall be measured by the change in the consumer price index from the base year to the years for which the administrative adjustment is proposed.
Operating Expenses. Any one or more of the following:
(1) Common expenses assumed by the lessor and unpaid by apartment owners or other lessees of the condominium project;
(2) Expenses for services provided by the lessor which primarily benefit the apartment owners of the condominium project;
(3) Expenses for maintenance by the lessor of apartments or facilities of the condominium project;
(4) Real property taxes;
(5) Special or improvement district assessments imposed:
(A) By the State or city for the funding of public projects; and
(B) On the owner of the condominium project or land on which the condominium project is situated.
(6) Expenses for telephone, electricity, gas, water, sewer, or cable television services used by apartment owners;
(7) Expenses for rehabilitation or repair of apartments or other facilities of the condominium project; or
(8) Payments of debt service incurred for the construction of on-site or off-site improvements.
(A) “Off-site improvements” mean all physical improvements:
(i) Constructed or placed off the land on which the condominium project is situated; and
(ii) Which are to be used in common by occupants of all lands adjoining the improvements or by occupants of all lands for whose benefit the improvements have been constructed or placed; and
(B) “On-site improvements” mean all physical improvements:
(i) Constructed or placed on the land on which the condominium project is situated; and
(ii) Which are for the benefit of apartment owners and other lessees in the condominium project.
On-Site Improvements. Include but are not limited to dwelling units, garages, stairs, walkways, driveways, walls, trees, shrubs, landscaping, and pools.
Operating Expenses for the Apartment. Operating expenses which:
(1) Are paid directly for the residential apartment; or
(2) Represent the proportionate share of the operating expenses attributable to the residential apartment, when the operating expenses are not paid directly for the apartment.
Operating Income for the Apartment. Lease rent paid for the residential apartment.
Net Operating Income. Operating income from the apartment less operating expenses for the apartment.
(c) The annual renegotiated lease rent for the residential apartment of an owner-occupant may be administratively adjusted to an amount higher than the maximum applicable to that apartment if:
(1) The lessor paid operating expenses for the apartment during the base year;
(2) The lessor paid those operating expenses exclusively from lease rent proceeds and not from separate charges;
(3) In the years for which the adjustment is proposed, the lessor will continue to pay those operating expenses exclusively from lease rent proceeds; and
(4) The lessor’s net operating income from the apartment in the years for which the adjustment is proposed will be less than the lessor’s base year net operating income.
The administratively adjusted lease rent for the residential apartment shall be set to maintain a fair net operating income to the lessor. The administratively adjusted lease rent shall be valid for as long as the lessor continues to pay the operating expenses for the residential apartment. When the lessor discontinues payment of all or a portion of the operating expenses, the administratively adjusted lease rent shall be readjusted by the lessor to reflect the discontinuation.
An administratively adjusted lease rent under this subsection may be biennially adjusted pursuant to § 39-1.6. The department shall establish a method of calculating the biennial adjustment to maintain the lessor’s fair net operating income.
(d) The annual renegotiated lease rent for the residential apartment of an owner-occupant may be administratively adjusted to an amount higher than the maximum applicable to that apartment if:
(1) The lessor paid no operating expenses for the apartment during the last year of the fixed rent period;
(2) In the years for which the adjustment is proposed, the lessor will pay operating expenses for the apartment; and
(3) The lessor will pay those operating expenses exclusively from lease rent proceeds and not from separate charges.
The administratively adjusted lease rent for the residential apartment shall be set to allow the lessor to pass on the operating expenses to the apartment owner-occupant. The administratively adjusted lease rent shall be valid for as long as the lessor continues to pay the operating expenses for the residential apartment. When the lessor discontinues payment of all or a portion of the operating expenses, the administratively adjusted lease rent shall be readjusted by the lessor to reflect the discontinuation.
An administratively adjusted lease rent under this subsection may be biennially adjusted pursuant to § 39-1.6. The department shall establish a method of calculating the biennial adjustment to maintain the pass-on of the operating expenses.
(e) The lessor desiring an administrative adjustment of the annual renegotiated lease rent for a residential apartment shall petition the department. The petition shall specify the proposed adjusted lease rent and be accompanied by supporting data.
Upon receipt of a petition, the department:
(1) Shall review the proposed adjusted lease rent and supporting data;
(2) Shall give the lessor an opportunity to be heard;
(3) May conduct its own study of the lessor’s operating income and operating expenses or appraisal of the residential apartment or condominium project; and
(4) May request the lessor to provide additional data.
Within 90 days of the submission of the petition, the department shall approve, disapprove, or modify the proposed adjusted lease rent. Upon approval, disapproval, or modification, the department shall notify the lessor and owner-occupant of the residential apartment. From the effective date of the adjustment, the lessor may charge the administratively adjusted lease rent for the residential apartment.
If the department disapproves a proposed adjusted lease rent for the residential apartment, the lessor shall not charge a lease rent higher than the maximum lease rent applicable to that apartment.
If the department does not take action within the 90-day period, the proposed adjusted lease rent shall be deemed approved and effective on the 91st day following submission. The department shall notify the lessor and owner-occupant of the residential apartment.
(f) The department shall determine the cost incurred for each proceeding to adjust a lease rent. The lessor shall be charged for the cost incurred by the department for the proceeding; except that the lessor shall not be charged:
(1) For the cost of any study or appraisal undertaken by the department without the lessor’s permission;
(2) If the department took no action on the proposed adjustment within the 90-day period under subsection (e); or
(3) If the department waives the charge to prevent undue financial hardship on the lessor.
The department shall require the lessor to reimburse the department for the chargeable incurred costs, whether the proposed adjusted lease rent is approved, disapproved, or modified. All reimbursements received by the department shall be deposited into the general fund.
(g) The approval, disapproval, or modification or a proposed adjusted lease rent may be appealed by the lessor or apartment owner-occupant. An appeal shall be made in writing to the department within 30 days of the approval, disapproval, or modification.
An appeal shall not stay the administratively adjusted lease rent, as approved or modified by the department.
Upon the receipt of an appeal, the department shall refer the appeal to a hearing officer. The hearing officer shall:
(1) Hold an agency hearing in accordance with the contested case procedures of HRS Chapter 91; and
(2) Issue a decision and order confirming, modifying, or disapproving the department’s action.
The department may institute a civil action in any court of competent jurisdiction for the enforcement of a decision and order pursuant to this section.
(1990 Code, Ch. 39, Art. 1, § 39-1.7) (Added by Ord. 91-96)