Hawaii NNN Lease Overview
A triple net lease in Hawaii places the bulk of property operating costs on the tenant: base rent, property taxes, building insurance, and maintenance or common area expenses all flow through to the tenant under the NNN structure. Hawaii's commercial market has some characteristics that set it apart from most other states. Limited land availability, especially on Oahu, keeps property values and operating costs high. Ground leases from major landholders like Kamehameha Schools are common in the retail and hospitality sectors, which adds a layer of complexity not present in most mainland NNN transactions.
One issue unique to Hawaii is the general excise tax. Hawaii taxes commercial rental income at the landlord level, and landlords almost universally pass that cost through to tenants. A well-drafted NNN lease addresses GET passthrough explicitly, including how the tax is calculated and billed. Property taxes are assessed at the county level and can vary significantly across Honolulu, Maui, Hawaii County, and Kauai. Tenants entering NNN deals in Hawaii should budget for GET in addition to their standard NNN obligations.
$36
Recording fee
$0.10-$1.25 per $100
Transfer tax
Required
Notarization
0
Witnesses required
Hawaii NNN Lease Requirements
Hawaii commercial leases are primarily governed by contract law. There is no separate commercial landlord-tenant statute comparable to the residential landlord-tenant code under HRS Chapter 521, so the written lease itself carries the full weight of defining rights and obligations. A Hawaii NNN lease must address the state's unique cost environment and tax structure to be practically enforceable.
Hawaii GET Passthrough Alert
Hawaii is one of the only states that taxes commercial rental income at the landlord level through the general excise tax. The standard rate is 4%, with an additional 0.5% on Oahu. If the lease is silent on GET, the landlord generally absorbs it. Most landlords include a GET passthrough clause requiring the tenant to pay this additional amount on top of base rent and other NNN charges.
Key NNN Lease Provisions for Hawaii
- GET Passthrough Clause: Define how the general excise tax is calculated, billed, and paid by the tenant
- Property Tax Obligations: Specify the tenant's pro-rata share and the county assessor whose bills apply
- CAM Definitions and Caps: List included and excluded CAM items and any annual cap on controllable expense increases
- Roof and Structure Clause: Clearly state which party is responsible for roof, foundation, and exterior structural repairs
- Audit Rights: Give the tenant the right to audit landlord expense records within a defined window after reconciliation
- Ground Lease Disclosure: If the building sits on a ground lease, disclose ground lease terms and expiration that could affect the tenant's occupancy
- Insurance Requirements: Specify required coverage amounts and whether tenant must name landlord as additional insured
How to Prepare a Hawaii NNN Lease
Putting together a Hawaii triple net lease requires attention to the state's tax environment and the specific property's cost history. Working through the following steps will help both landlords and tenants avoid the most common issues.
Gather Operating Cost History
Request at least two years of actual property tax bills, insurance certificates, and CAM expense reports from the landlord before negotiating NNN estimates. Hawaii's costs can vary significantly by island and property type.
Address the GET Passthrough
Decide whether the GET will be quoted as part of base rent or itemized separately. Document the current GET rate (4% statewide, 4.5% on Oahu) and include a provision for future rate changes. Confirm how GET is applied to both base rent and NNN expense reimbursements.
Define All NNN Expense Categories
List every expense the tenant will pay and every exclusion such as landlord-only capital costs, pre-existing violations, or management fee caps. In multi-tenant buildings, specify how costs are allocated across tenants and how vacancies are handled.
Negotiate Structural Responsibility and Caps
Given Hawaii's high repair costs, clearly assign roof, structural, and HVAC responsibilities. If the tenant is taking on structural obligations, negotiate a per-occurrence cap and verify the condition of major systems before signing.
Execute and Distribute the Lease
Both parties sign. Provide executed copies to all parties. If the lease term exceeds one year and either party wants it recorded with the Bureau of Conveyances as constructive notice, a memorandum of lease is the typical approach rather than recording the full document.
Hawaii NNN Lease Costs
The costs of negotiating and executing a Hawaii NNN lease include professional fees and, if you record a memorandum of lease, filing fees. Ongoing tenant obligations under a NNN structure typically include property taxes, building insurance, and CAM expenses in addition to base rent and GET.
| Cost Item | Typical Range |
|---|---|
| General Excise Tax (GET) on Rent | 4% statewide; 4.5% on Oahu (paid by tenant under passthrough clause) |
| Property Tax (pro-rata NNN share) | Varies by county and assessed value; can be substantial on Oahu |
| Building Insurance (pro-rata share) | Typically $0.10 to $0.30 per sq ft annually depending on property type |
| CAM Expenses (pro-rata share) | Varies; higher in Hawaii due to elevated labor and maintenance costs |
| Attorney Review (recommended) | $500 to $2,500 depending on lease complexity |
| Memorandum of Lease Recording (optional) | $36 base fee at Bureau of Conveyances |
Hawaii Tax Implications
Hawaii's transfer tax rate is $0.10-$1.25 per $100. Understanding the full tax picture is important for any real property transaction in Hawaii.
Gift transfers may require IRS Form 709 if the value exceeds the annual gift tax exclusion. Recipients may receive the transferor's cost basis, potentially resulting in capital gains tax upon future sale.
Property tax reassessment rules vary in Hawaii. Some transfers trigger reassessment while others are exempt. Contact the Hawaii tax assessor's office for guidance on your specific transaction.
Sample Hawaii NNN Lease
Preview of our Hawaii-specific template. Your document will include all fields required for recording in any Hawaii county.
TRIPLE NET (NNN) COMMERCIAL LEASE
STATE OF HAWAII
Legal Document
PARTY INFORMATION
Name: [Full Legal Name]
Address: [Hawaii Address]
County: [County]
PROPERTY DESCRIPTION
County: [County] State: Hawaii
Legal Description: [Per Recorded Plat]
Parcel No.: [APN]
Hawaii NNN Lease FAQ
Common questions about filing in Hawaii, including requirements, fees, and tax implications.
Official Hawaii Resources
Official state resources for verifying requirements and finding your local recording office.
Important Considerations
Before proceeding with your document, there are several important factors to consider. Each real estate transaction is unique, and understanding the specific requirements and implications of your situation will help ensure a smooth process.
Real estate laws and regulations are subject to change, and local requirements may differ from state-level rules. It is always advisable to verify current requirements with your local recording office before submitting any documents for recording.
If your transaction involves complex circumstances such as multiple parties, commercial properties, trusts, estates, or interstate elements, consulting with a licensed real estate attorney in your state is strongly recommended. An attorney can provide guidance specific to your situation and help you avoid potential legal issues.
Keep copies of all documents related to your real estate transaction in a safe place. Recorded documents become part of the public record, but having your own copies ensures you can reference the terms and conditions at any time. Digital copies stored securely are also recommended as a backup.
Professional Recommendation
While our templates are designed to be comprehensive and legally compliant, we recommend having your completed document reviewed by a licensed attorney before recording, especially for high-value transactions or complex situations. Many attorneys offer flat-fee document review services that provide peace of mind at a reasonable cost.
Related Documents
Depending on your situation, you may need additional documents alongside this one. Below are commonly related documents that are frequently used together in real estate transactions.
Important Considerations
Before proceeding with your document, there are several important factors to consider. Each real estate transaction is unique, and understanding the specific requirements and implications of your situation will help ensure a smooth and legally compliant process.
Real estate laws and regulations are subject to change, and local requirements may differ from state-level rules. It is always advisable to verify current requirements with your local recording office before submitting any documents for recording.
If your transaction involves complex circumstances such as multiple parties, commercial properties, trusts, estates, or interstate elements, consulting with a licensed real estate attorney is strongly recommended. An attorney can provide guidance specific to your situation and help you avoid potential legal issues.
Keep copies of all documents related to your real estate transaction in a safe place. Recorded documents become part of the public record, but having your own copies ensures you can reference the terms and conditions at any time. Digital copies stored securely are also recommended as a backup.
Professional Recommendation
While our templates are designed to be comprehensive and legally compliant, we recommend having your completed document reviewed by a licensed attorney before recording, especially for high-value transactions or complex situations. Many attorneys offer flat-fee document review services that provide peace of mind at a reasonable cost.
Related Documents
Depending on your situation, you may need additional documents alongside this one. Below are commonly related documents that are frequently used together in real estate transactions.
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