The class-action suit adjudicated recently in favor of residents of the Hoakalei and Ocean Pointe development in Ewa Beach raises troubling issues about land-use regulation in Hawaii.

A jury recently awarded $27 million to about 1,800 residents who were misled by Haseko Development, which sold homes to them with the explicit promise, repeated over many years, that the developments would include a marina with ocean access. And not just a marina, but a world-class boating destination, potentially hosting international yachting competitions.

Instead, the developer, which had convinced the state Land Use Commission to reclassify the development sites from agricultural to urban, decided to only build a landlocked lagoon, calling it a more “economically efficient” option. Haseko admitted the new plan wasn’t in compliance with the conditions of its development approval, and residents were sharply critical, but the company moved ahead anyway.

Though residents now appear likely to receive some justice, even a settlement of that size may not adequately compensate them for having purchased a home with the promise of a substantial amenity and getting a decidedly less valuable alternative. Without strong legal representation and a sympathetic jury, they may well have gotten nothing and simply had to live with the Tokyo-based developer’s broken promise.

Chair Committee water and land Senator Laura Thielen during recommendation hearing on appointees.  15 april 2015. photograph by Cory Lum/Civil Beat
Sen. Laura Thielen sponsored legislation last spring that would address the LUC’s enforcement deficiencies. It passed the Senate, but didn’t get a hearing in the House. Cory Lum/Civil Beat

That may not sound fair, yet it’s exactly the sort of scenario that the inadequate state laws authorizing the Land Use Commission not only make possible, but at some level, practically invite. Here’s why.

  • Commercial developers who seek land reclassification are required to have their project plans approved by the LUC in order to commence work. The LUC employs what most would agree is a rigorous process in vetting and either approving or denying their plans.
  • Developers who subsequently make substantial changes to their plans are required to bring them back before the LUC for further review. But if they don’t do that and in the meantime have “substantially commenced” work on the project, there’s nothing the LUC can do. It can’t even revoke the land classification and revert it back to its original status.
  • Counties, which are responsible for zoning rather than land classification, have no legal interest in state land-use agreements (and plenty of reasons to stay out of any state-developer conflicts), and so may offer little or no help in enforcement, leaving the LUC with no recourse in ensuring the integrity of approved development plans.

That’s certainly an attractive setup for developers. Are they exploiting it? Local attorney Michael Green, who represented the Ocean Pointe and Hoakalei homeowners, told KITV-4 that his legal team has “confidential memos from the president of the (Haseko) board of directors basically saying (he) was going to screw these people. It’s in the emails, and they talk about fooling the (Honolulu) City Council, how they’re going for the City Council on the zoning committee, the planning committee, to get the ability to build more condominiums.”

Market pressures offer some help. Few developers who seek to do further business in Hawaii want the word of mouth on their projects to include the idea that the developer doesn’t keep promises or takes advantage of homeowners.

Other developers have acted in better faith, agreeing to formally revise plans and seek approval for substantial changes. But the Haseko case makes one consider how plan changes might be handled in other high-profile developments.

D.R. Horton’s controversial Hoopili project, for instance, was approved by the LUC on the basis of a development plan that required Horton to set aside 250 acres for “urban agriculture” — a commitment that doesn’t appear in the rezoning agreement between the City and County of Honolulu and the developer.

There is no indication that Horton intends to do anything different with that land than what it has promised. But if it decided to jettison the urban agriculture idea, there’s very little the LUC could do about it.

Market pressures offer some help in ensuring developers keep their word. Few who seek to do further business in Hawaii want the word of mouth on their projects to include the idea that the developer doesn’t keep promises or takes advantage of homeowners. But as the case of Haseko proves, lawsuits and jury trials sometimes offer the only possibility of relief.

Bill Would Strengthen LUC

State Sen. Laura Thielen, who formerly oversaw the Land Use Commission as head of the state Department of Land and Natural Resources, understands this issue better than most, and introduced legislation last spring to address it. Her Senate Bill 511 passed the Senate, but foundered in the House.

She’s committed to reintroducing it for the 2016 session, and the Haseko jury verdict suggests 27 million new reasons for the House to, at minimum, provide the legislation the hearing it was denied last spring.

The measure already has support from the state offices of Environmental Quality, Hawaiian Affairs and Planning, as well as the LUC itself.

The only known opponent is the Land Use Research Foundation. LURF last made the news when developer lobbyist Carleton Ching’s association with the lobbying organization virtually sank his nomination to head DLNR.

LURF was widely criticized for opposing critical habitat designations and conservation areas and working against protections for native Hawaiian rights, historic preservation, and coastal zone management — criticisms from which Ching’s nomination couldn’t recover.

While Thielen is no longer chair of the Senate Water and Land Committee and can’t as easily move this legislation, that shouldn’t hinder its prospects in a body that already approved the measure this year. The ball would then be in the House’s court, and Gov. David Ige can help make sure this moves in the right direction by adding his voice to those of his appointees leading the offices already supporting this measure.

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