E NHLC, what is a DHHL RWOTP lease? Is that a homestead lease?

By Henderson Huihui, NHLC Staff Attorney

In 2021, the Department of Hawaiian Home Lands (DHHL) began offering Hawaiʻi Island waitlisters and those with an Undivided Interest homestead lease a rent-with-option-to-purchase rental (“RWOTP”) agreement. After 15 years of renting a unit, the waitlister can purchase the unit and receive a 99-year homestead lease.

DHHL has plans to expand RWOTP offerings to other areas and islands. For some waitlisters, the RWOTP program may be their best pathway to a homestead award, as they may have had to turn down previous homestead lease offers for a turnkey house because they could not obtain financing.

The RWOTP program may provide those waitlisters with stable, rent- controlled housing and time to financially qualify for home ownership. For these future offerings, beneficiaries need to understand the requirements as well as the pros and cons of the program.

The RWOTP development uses state and federal programs to fund construction of the units.

These funds have certain restrictions on how the units may be rented. During their first year of renting, the waitlister’s combined income cannot exceed 60% of the Area Median Income (AMI) for their household size. After the first year, the waitlister must annually re-certify their income with the property manager. Additionally, the unit must meet federal affordability requirements for at least 15 years.

Waitlisters must understand that the RWOTP agreement is not a homestead lease.

Instead, it is an annual rental agreement that is renewed each year. Participants in this rental program stay on the waitlist. During the 15-year rental period, the waitlister does not accrue any equity in the home, nor does any rent paid go towards the purchase of the unit.

The process to cancel a RWOTP agreement differs from that of a homestead lease. Instead of being heard before the Hawaiian Homes Commission, the RWOTP agreement goes through the eviction process that regularly applies when landlords seek to evict tenants in District Court. If the rental lease is terminated, the waitlister is not entitled to any previously paid rent.

It’s also important for tenants in RWOTP leases to understand successorship. Because a homestead lease has not been awarded, if a tenant dies, their successor must be able to take over the waitlister’s spot on the waitlist, meaning that the successor must meet the 50% blood quantum requirement. Even if the successor can take over the waitlist spot, that does not guarantee that they will be able to take over the RWOTP agreement. To take over the RWOTP agreement, the successor must meet the income eligibility requirements for the RWOTP program.

As with any other rental, tenants in RWOTP housing may have concerns about the quality of property management and whether tenant concerns are adequately addressed.

DHHL is not the project developer, and DHHL does not manage these rentals. Instead, the rentals are developed and managed by private third-party companies. Therefore, waitlisters must manage any concerns or disputes regarding rent increases, responses to requests for maintenance, and wrongful lease termination, with the private property manager.

E Nīnau iā NHLC provides general information about the law. E Nīnau iā NHLC is not legal advice. You can contact NHLC about your legal needs by calling NHLC’s offices at 808-521-2302. You can also learn more about NHLC at nativehawaiianlegalcorp.org.