USA – HAWAII Law and Practice Contributed by: Jon Pang, Lisa Broulik and Matthew Cohen, Case Lombardi, A Law Corporation
Some leases also require pollution liability insurance and business interruption insurance. 6.13 Restrictions on the Use of Real Estate Commercial leases almost universally include a “use” provision specifying the permitted uses of the leased premises. The landlord may also expressly restrict and prohibit certain uses of the premises. In addition, the state’s land classification and county level zoning laws regulate land use, and restrict and prohibit cer - tain uses based on the land’s designated classification and zoning. 6.14 Tenant’s Ability to Alter and Improve Real Estate Commercial leases may permit the tenant to alter or improve the demised premises. Typically, however, the lease provides that the tenant may not make any alterations or improvements to the premises without the landlord’s prior written consent, except for speci - fied alterations and improvements predetermined in the lease. Leases often require the tenant to: • submit plans and specifications for the landlord’s approval; • be responsible to process all applicable permit applications; • comply with all laws; and • prevent the filing of mechanics’ liens on the prop - erty. 6.15 Specific Regulations Hawaiʻi’s residential “Landlord-Tenant Code” regu - lates residential leases, addressing matters such as maximum security deposit limits, required disclo - sures, repair and maintenance obligations, and notice requirements. In contrast, commercial leases (of any kind, including industrial, office, retail, hotel) are large - ly not regulated by statute or other rules, except for applicable common law doctrines established through case law. 6.16 Effect of the Tenant’s Insolvency A tenant’s insolvency may be an event of default under the lease and may give the landlord the right to terminate the lease. However, if the tenant files for bankruptcy, the lease becomes subject to the federal Bankruptcy Code, in which case the landlord may be
prohibited from exercising its rights under the lease without seeking relief from the Bankruptcy Court or until the bankruptcy process is completed as required by the Bankruptcy Code. 6.17 Right to Occupy After Termination or Expiry of a Lease A tenant does not have an automatic right to occupy the leased premises after the expiration or termination of the commercial lease. If a tenant remains in pos - session of the premises after the lease terminates, the landlord may consent to the holdover, expressly or impliedly, such as by accepting rent payment, or the landlord may treat the tenant as a trespasser and pursue remedies. Commercial leases typically contain a “holding over” provision addressing a tenant’s continued occupancy after termination of a lease, which often increases the rent (eg, by 100%) and converts the lease to a month- to-month tenancy. The holdover provision incentivises tenants to timely surrender the premises at the end of the lease term, in order to avoid significant increases in rent. 6.18 Right to Assign a Leasehold Interest Commercial leases may be assigned or subleased unless the lease provides otherwise. However, leases typically bar a tenant from assigning or subletting its leasehold interest without the landlord’s prior consent. In cases where the landlord consents to an assign - ment, they will often require the tenant to pay the costs incurred by the landlord in connection with the assignment (eg, legal fees); most often, the original tenant remains liable under the lease notwithstanding the assignment or sublease. 6.19 Right to Terminate a Lease Commercial leases typically define specific events of default by the tenant that entitle the landlord to rem- edies, including termination of the lease. The most common examples of such defaults include the non - payment of rent and the tenant’s failure to use the premises in accordance with the permitted use provi - sions in the lease. However, even where the language in the lease provides for termination for any breach by the tenant, the landlord’s right to terminate is limited by Hawaiʻi common law principles, under which ter -
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