While residential landlords in Hawaii must manage a web of state-mandated disclosures, commercial landlords operate in an environment of caveat emptor (let the buyer/lessee beware). The state assumes commercial tenants will conduct their own rigorous due diligence before signing a lease.

General Excise Tax (GET) Transparency

Unlike most US states, Hawaii does not have a traditional sales tax. Instead, it imposes a General Excise Tax (GET) on all gross business income, which definitively includes commercial rental income.

The GET rate is 4%, plus a county surcharge (bringing it to 4.5% or 4.712% depending on the island). It is standard industry practice in Hawaii commercial real estate to pass this tax directly to the tenant.

While it is standard practice, the landlord must explicitly disclose and require the payment of the GET within the commercial lease agreement. If the lease merely states "Rent is $5,000/month" and does not specify that GET will be added as a separate line item, the landlord cannot legally force the tenant to pay the tax on top of the base rent; the landlord will have to absorb the tax cost from the $5,000.

Federal Disclosures: Lead-Based Paint

The most prominent required disclosure for commercial spaces stems from federal law.

If the commercial property was built prior to 1978, the landlord is federally obligated to disclose the presence of lead-based paint if:

1. The commercial building includes any residential living spaces (like an apartment above a retail shop).
2. The commercial space will be utilized as a "child-occupied facility" (such as a daycare center, preschool, or pediatric medical clinic).

If applicable, the landlord must provide the EPA-approved lead hazard pamphlet, disclose known hazards, and include a signed lead warning statement in the commercial lease.

Environmental and Zoning Disclosures

Commercial landlords must abide by the implied covenant of good faith and fair dealing. This means a landlord cannot actively commit fraud or intentionally conceal severe, latent defects that would destroy the tenant's ability to operate their business.

However, it is generally the tenant's burden to verify:

• Zoning Compliance: Whether the local municipality permits their specific type of business in that building.
• ADA Compliance: Whether the building meets the requirements of the Americans with Disabilities Act.
• Environmental Hazards: Sophisticated commercial tenants will almost always require a Phase I Environmental Site Assessment before signing a long-term lease to ensure they are not taking responsibility for contaminated soil left by a previous industrial tenant.

"As-Is" Leasing

To shift the burden of disclosure entirely to the tenant, Hawaii commercial landlords heavily manage "As-Is" clauses. By signing a lease with an "As-Is" provision, the tenant legally acknowledges that they have independently inspected the premises, accept its current condition, and agree that the landlord has made no warranties regarding the property's fitness for the tenant's intended business use.

Best Practices for Commercial Landlords

1. Be Honest About Material Facts: If you know the building's electrical grid cannot support heavy restaurant equipment, disclosing this upfront is preferential to an expensive lawsuit for misrepresentation when the tenant's kitchen fails on opening night.
2. Draft Clear GET Clauses: Have your attorney draft a flawless GET clause ensuring the tenant is responsible for the base rent, the GET, and any future increases in the county tax rate.
3. Require manage Due Diligence: Allow the tenant sufficient time to pull permits, inspect the HVAC, and survey the property before the lease commences, so they cannot claim they were surprised by the building's condition later.

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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