USA – HAWAII Law and Practice Contributed by: Jon Pang, Lisa Broulik and Matthew Cohen, Case Lombardi, A Law Corporation
actions” near sensitive sites, which has significant implications for Hawaiʻi due to its high density of mili - tary installations and strategic air and maritime ports. Numerous Hawaiʻi facilities are specifically listed in 31 C.F.R. Part 802, Appendix A, including Joint Base Pearl Harbor-Hickam, Marine Corps Base Hawaiʻi (Kaneohe Bay), and the Pacific Missile Range Facility (Barking Sands) on Kauai. Because many properties on Oahu and near major neighbour-island ports fall within the “close proximity” (one mile) or “extended range” (100 miles) of these sensitive facilities, foreign persons – and the US contributors partnering with them – should conduct a thorough geographic analy - sis using the CFIUS Part 802 Geographic Reference Tool before committing to a transaction. Utilising this tool is essential to determine if a purchase, lease or concession grants a foreign person specific property rights in a protected zone, as failing to seek a volun - tary “safe harbour” clearance can leave a transaction subject to future mitigation or even a divestment order. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Acquisitions are commonly financed through acqui - sition and construction loans from banks and other financial institutions. Private equity participation in acquisitions and developments has grown in recent years. 3.2 Typical Security Created by Commercial Investors Commercial real estate loans are typically secured by mortgages on the real property being acquired or developed. Hawaiʻi is a lien theory state, where a security interest in the mortgaged property is granted to the lender and legal title remains with the borrower. If a borrower owns multiple real properties or develop - ments, the debt is commonly structured as a sepa - rate loan for each different property or project with a separate special purpose entity as the borrower. A borrower may also be required to provide a personal or corporate guaranty, particularly where the property is owned by a newly created single purpose entity. For commercial properties, lenders often also take secu -
rity interests in leases and rents and banks accounts for the operation of the property. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are generally no restrictions on foreign lender activity, although a foreign lender may be required to register to do business in Hawaiʻi, depending on the details and scope of its lending activities. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security The recording of a mortgage is subject to nominal recording fees, which are updated from time to time. No taxes or fees are currently required to enforce a security interest. Notary publics are authorised to charge and receive fees for their services. 3.5 Legal Requirements Before an Entity Can Give Valid Security Hawaiʻi does not have financial assistance rules that must be complied with before an entity can give valid security, but corporate governance requirements must be complied with to avoid fraudulent conveyances. Lenders may also require documentation of corporate approval authorising the transaction. A borrower must also have the requisite ownership rights in the collat - eral in order to grant a security interest in it. 3.6 Formalities When a Borrower Is in Default Enforcement of Security Interests The formalities of enforcing a security interest vary depending on whether the loan is secured by com - mercial or residential property; they are generally governed by the loan documents, and are statutorily and judicially enforced. Residential loans are subject to additional statutory notice requirements. As dis - cussed in 2.3 Effecting Lawful and Proper Transfer of Title , Hawaiʻi is a “pure race” state for Land Court system property and a “race-notice” state for Regular system property for establishing the priority of secu - rity interests in real property. In addition, mortgages encumbering Land Court system properties must be recorded with the Land Court in order to be effective. Judicial foreclosure is generally a lengthy process. From the initial notice of default to the closing of escrow following a public auction, the foreclosure pro -
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