An alleged “lack of openness and transparency” in the oversight of appraisers who act as arbitrators led Hawaii lawmakers to enact legislation that took effect July 1 that requires arbitration awards, records of award and related supporting materials to be public records, Valuation Review reported.
According to materials filed with the state legislature, current state law requires appraisers acting as arbitrators to fully report the basis for an award and to certify compliance with the Uniform Standards of Professional Appraisal Practice when valuing properties and determining market value or market rent.
The bill requires licensed or certified real estate appraisers who are named or appointed in a submission agreement to appraise or arbitrate entered into after July 1 to record with the Bureau of Conveyances all arbitration awards; records of awards, if separately issued; and any supplementary, dissenting or explanatory opinions on awards within 90 days of the notification of the determination of the award to the parties. The law further specifies that no agreement between the parties or the appraisers acting as arbitrators may preclude or deny the requirement to record an award, the record of the award or any supplementary, dissenting or explanatory opinions. The law also clarifies that failure to comply with these provisions is a violation of real estate appraiser license or certification requirements.
Sponsors of HB 1830 noted that while Hawaii has relatively few commercial appraisers who specialize in this area, these individuals or firms are the exclusive determiners of the market value or market rents of leasehold property in the state, which results in members of the same profession gathering and selecting market data, presenting that data to arbitration panels as expert witnesses and then deciding the matter as appointed arbitrators, Valuation Review reported.
The lawmakers also had concerns about confidentiality clauses that have been incorporated into agreements that govern individual arbitration panels, arguing that inclusion of such clauses frustrates the legislature’s intent in enacting Act 227 (the state’s existing appraiser law) and works to the detriment of consumers because valuable market data is willfully withheld from public use.
“In the resetting of industrial and commercial leasehold rents, recordation of an arbitration award and access to the record of the award at the Bureau of Conveyances would ensure public access to data that is currently unavailable, despite the enactment of Act 227,” the legislators noted in materials filed with the state House of Representatives, Valuation Review reported. “For the leasehold market to function with openness and transparency, and to further protect consumers in the state of Hawaii, the legislature finds that arbitration awards and reports should be available to all interested participants in the market.”
HB 1830 aims to improve and protect the process by which real estate appraisers, when acting as arbitrators to determine fair market value, fair market rent or fair and reasonable rent of leasehold property, fully and publicly record arbitration awards along with the record of the arbitration award and any supplementary, dissenting or explanatory opinions. Ultimately, the lawmakers said, the new law will improve the economy and protect the interests of the people of Hawaii by making data available to the general public pertinent to industrial and commercial ground lease valuations and rents.
HB 1830 was introduced Jan. 17 by Reps. Richard H.K. Onishi (D-District 3), Mark M. Nakashima (D-District 1) and Scott K. Saiki (D-District 26).