USA – HAWAII Law and Practice Contributed by: Jon Pang, Lisa Broulik and Matthew Cohen, Case Lombardi, A Law Corporation
6.5 Rent Variation Typically, rent will increase annually or at another specified interval, by a predetermined negotiated amount or by a fixed percentage rent increase. 6.6 Determination of New Rent Rent increases are commonly determined by a fixed percentage rent increase (or based on the Consum - er Price Index) that is predetermined at the time of entry into the lease, or are calculated according to the fair market rental value determined at the time of the increase. Commercial leases often provide that parties to the agreement must submit to arbitration if they cannot agree on the amount of rent increase. 6.7 Payment of VAT There is no value-added tax (or equivalent) payable on rent in Hawaiʻi. It is, however, common for commercial leases to require the tenant to pay to the landlord (as additional rent) the Hawaiʻi general excise tax amount imposed on the landlord in respect of the tenant’s rent payments. 6.8 Costs Payable by a Tenant at the Start of a Lease In addition to rent, most leases require tenants to pay a security deposit at the start of the lease term. The security deposit is typically equal to one month’s rent, though it may be higher depending on the tenant’s financial circumstances. Leases may also provide that the landlord will provide a tenant improvement allow - ance to the tenant at the beginning of the lease for the cost of improvement work. Typically, the tenant is responsible for the cost of improvement work exceed - ing the allowance provided by the landlord. In addition, any lease or sublease of real property with a full unexpired term of five years or more is subject to a conveyance tax; the responsibility to pay such taxes is nearly always allocated to the tenant by the terms of the lease. The conveyance tax on leases is calculated by applying the discounted current value of all lease rentals over the term (capitalised at 6%) to the applicable tax rate. 6.9 Payment of Maintenance and Repair Typically, for space leases, the landlord is responsi - ble for maintaining and repairing common areas used
by multiple tenants, such as parking lots, walkways and landscaped areas, and will apportion the costs among the tenants based on each tenant’s propor - tionate share of the total leaseable square footage of the property. For a ground lease, the tenant is typically responsible for all expenses related to maintaining and repairing the property. 6.10 Payment of Utilities and Telecommunications The leased premises are typically separately sub - metered, and tenants are billed for utilities and tele- communications based on submeter readings. If sub - metering is not available, charges may be determined based on the landlord’s estimate of usage. Utilities and telecommunications serving the common areas are generally apportioned among the tenants in pro - portion to each tenant’s share of the property’s total leasable square footage. 6.11 Payment of Property Taxes Hawaiʻi commercial leases commonly require tenants to pay their share of real property taxes in proportion to their share of the leased premises as it relates to the entire taxed parcel. Such taxes are usually paid by the landlord and charged to the tenant via additional rent under the lease. By contrast, ground leases typically require tenants to pay real property taxes assessed against the real property directly (ie, the real property tax bill is sent to the tenant). 6.12 Insurance Issues The lease terms largely govern insurance cover - age responsibilities between the tenant and land - lord. Common insurance coverages required to be obtained by tenants are: • commercial general liability insurance, covering claims for personal injury, bodily injury and prop - erty damages relating to the tenant’s use of the leased premises; • property insurance, insuring tenant improvements and personal property; • business automobile liability insurance; and • worker’s compensation insurance as required by Hawaiʻi law, if applicable.
787 CHAMBERS.COM
Powered by FlippingBook