In Hawaii, commercial landlords have immense freedom to structure and increase rent over the life of a tenancy, a standard that has remained largely consistent since Hawaii achieved statehood on 21 August 1959. While fixed-term leases are governed by their specific expiration dates, Hawaii Revised Statutes (HRS) § 666-2 mandates a specific notice period for periodic tenancies. The strict 45-day notice period mandated for month-to-month residential rent increases under the Residential Landlord-Tenant Code does not apply to commercial properties.

No Commercial Rent Control

The State of Hawaii does not impose any form of commercial rent control. A landlord can legally increase the base rent to whatever rate the market will bear once a commercial lease expires and is up for renegotiation. Because commercial tenancies are viewed as arm's-length transactions between sophisticated business entities, the courts generally enforce the specific rent escalation terms agreed upon in the written lease.

Rent Increases During a Fixed-Term Lease

During an active, fixed-term commercial lease, a landlord cannot increase the base rent unless a specific escalation provision was negotiated into the signed contract.

In Hawaii, commercial leases typically ensure steadily rising income through built-in escalation clauses. Common methods include:

1. Step-Up Escalations: Pre-determined fixed increases taking effect on the anniversary of the lease (e.g., "$10,000/month in Year 1, $10,500/month in Year 2").
2. Index-Tied Escalations (CPI): Rent increases are tied directly to the Honolulu Consumer Price Index or another inflation metric.
3. Percentage Leases: Extremely common in Oahu's high-traffic retail centers (like Waikiki), the landlord charges a lower base rent, plus a significant percentage of the tenant's gross sales over a certain "natural breakpoint."

Notice Periods for Increasing Rent

For commercial tenancies of an indefinite term (month-to-month), any modification of terms—including rent increases—requires at least 25 days' written notice preceding the end of the monthly period, pursuant to HRS § 666-2.

• During the Lease: If the lease contains a pre-scheduled step-up clause, the rent legally increases on that exact date. While sending a courtesy 30-day reminder is a best practice, failing to do so does not invalidate the increase.
• Month-to-Month Conversions: Contrary to residential law, Hawaii commercial statutes do not automatically mandate double rent for holdover tenants. Under HRS § 666-2, if a tenant remains in possession after the expiration of a periodic term without notice from either party, a valid and enforceable tenancy is created for one additional month or period under the original lease terms. Any "double rent" or "holdover premium" (e.g., 150% or 200% of base rent) must be explicitly negotiated and included as a contractual provision in the commercial lease agreement to be enforceable.
• Lease Renewals: The landlord negotiates the new rent rate as part of the new lease offer.

The General Excise Tax (GET) Factor

Unique to Hawaii is the General Excise Tax (GET), governed by HRS Chapter 237. Because GET is assessed on gross business income, virtually all commercial leases require the tenant to pay their base rent plus the GET.

The current effective rate is 4.5% (4% state base + 0.5% county surcharge for Oahu, Maui, Kauai, and Hawaii Island). To fully recover the tax (accounting for the "tax on the tax"), landlords typically "gross up" the charge to 4.712%, provided this pass-through is clearly disclosed in the written lease agreement. If the State or County raises its GET surcharge percentage during a lease term, the tenant's total monthly payment will effectively increase to cover the tax burden.

Operating Expense Increases (CAM)

Under highly utilized Triple-Net (NNN) leases, commercial tenants must also absorb the landlord's rising operating costs, primarily property taxes, building insurance, and Common Area Maintenance (CAM).

• Reconciliation: The landlord typically charges estimated CAM expenses monthly. At the end of the fiscal year, an audit is performed. If actual costs were higher than estimated, the tenant is billed for the difference (an effective rent increase for that month).

Best Practices for Commercial Landlords

• Automate CPI Calculations: If your lease utilizes a CPI-escalator, the math can be challenging. Use property management software to automatically calculate out these index increases on the correct anniversary dates.
• Track the GET: Ensure your accounting software automatically calculates the GET as a dynamic line item based on the property's zip code and the current 4.712% gross-up rate, rather than baking a flat tax amount into the base rent, to protect yourself if the county raises the tax rate under HRS Chapter 237.

How Landager Helps

Landager tracks lease terms, ensures timely notices, and maintains secure compliance records - making it easy to stay compliant with Hawaii regulations.

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