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A specter haunts vacation rentals by owner in the state of Hawaii. The problem is a pressing one.

In January of this year, two bills were introduced to the Hawaiian legislature that could effectively end the practice of vacation rentals by owner as we know it, and turn the industry in Hawaii on its head.

The first Bill, Senate Bill 2089 calls for any non-resident of Hawaii who rents out their vacation rental accommodation to employ a property manager who has been approved by the real estate commission. The second, House Bill 1707, requires that any non-resident property owner in Hawaii who rents their housing short-term must do so through a licensed real estate salesperson or broker. The middleman must then collect all applicable taxes for the rental of the property or the owner is penalized.

One proponent of the measure evidently sent an email to fellow Realtors and property managers celebrating the possibility of 1707’s passage. The email is telling:

I didn’t have time yesterday to provide written testimony but they passed the initial Bill with a complete affirmative vote from the House…The Bill will require all mainland owners who rent their homes or condos out to have a licensed Realtor on island …ie …Bayer …vinson… Berndt…this way the State can make sure everyone is paying their GET and TAT… yee hahhhhlll! But don’t tell anyone yet…let the Bill get passed! !…then we can get some $$$…unless they find a cheap Broker who will represent them for cheap…

But it was too early to celebrate a victory. Concerned homeowners mobilized and took action. At a public hearing on February 23, thanks in large part to the testimony from vacation rental owners that pay their taxes on time and employ local Hawaiians to maintain their homes, HB 1707 was “deferred”. A temporary victory for vacation rentals by owner in Hawaii, but it would be premature to start dancing the Hula just yet.

The ending of HB 1707 is not an outright win, as that first Bill – SB 2089 – still awaits its hearing. If proponents have it their way, on Tuesday, February 28th, SB 2089 would again interject a middleman into already established private rental businesses in Hawaii.

Tuesday’s hearing will again bring proponents of this bill out into the open, revealing the powerful Realtors interests that gave birth to these bills. Many vacation rental owners who would be adversely affected by this bill are not aware that it is out there. If owners do not push back, SB 2089 could pass.

To Submit testimony online, click here and hit the blue Submit Testimony button.

To ensure the CPN Committee receives the testimony it is essential to duplicate the message to cpntestimony@capitol.hawaii.gov by 10:00 am Hawaiian Time on Monday Feb 27.

Meanwhile, many are challenging the constitutionality of the bills. Attorneys and constitutional scholars point to the targeting of non-residents of Hawaii as blatantly discriminatory and unconstitutional. Gregory Kugle, representing the Hawaii Vacation Rental by Owners Association, authored a widely distributed letter in opposition to the bill on these grounds.

The technology of the Internet has made do-it-yourself solutions more popular than ever. It is no surprise that vacation rentals by owner has grown into such a huge industry, one that continues to threaten management companies that have traditionally acted as intermediaries, charging large sums of money and taking up to 50% commission plus other fees on rental transactions.

Individual owners have long complained that this arrangement is deeply unfavorable to them. With a simple Internet connection, many have taken the responsibility of management upon themselves.

SB 2089 can be viewed in this light. If it passes on Tuesday, the old way of business will enjoy a revival while the fate of vacation rentals by owner in Hawaii will likely take a nose-dive. Many homeowners familiar with the bill say that the stakes are too high and they will sell if it passes.

One homeowner I spoke with from California ended the conversation by saying:

I know most of the management companies on the East side of the Big Island, and I wouldn’t trust any of them with my house or my money. To me, this is the realtors wanting this legislation. I just don’t think it will work the way they think it will. Two realtors [I know of] (one of them a vacation rental property manager), has lost one home to foreclosure and the other one had to file for bankruptcy. My help on the island had her realtor’s license, but I think she let it expire. What I don’t get, is that I would have to give up the handling of the rent completely and it would go through a management company in Hawaii. I think I will sell before I do that.

If SB 2089 passes, it may be Hawaii that loses in the end.

A Hawaiian resort before bill SB2089

A Hawaiian resort before bill SB2089

Think of it as it was before and after!

A Hawaiian resort after bill SB2089

... and after bill SB2089

Do you own a property in Hawaii?

What is your position on SB 2089 and HB 1707 ?

What if every state adopts the same practice to force all out-of-state residents to employ a broker for running vacation rental business?

 

 

Does the SB 2089 sound unconstitutional to you?

Attorney’s letter to Senator Baker from Hawaii Vacation Rental Association

 

 

 

No more Aloha in the Aloha state if you are a vacation rental owner outside the islands!

Comments on: "Shh..don’t tell anyone yet…let the Bill get passed!!!" (9)

  1. Are there any states that have such a law? I don’t thinks so because it is unconstitutional.

    • vadimosya said:

      Well, in El Dorado County (Tahoe area) they require to have a local point of contact in case of emergency. Forcing homeowners to sign a deal with local businesses is unheard!

  2. Actually the real estate people on the Big Island at one of their monthly meetings recently were polled and the majority do not want this to pass. It is a few large property management companies doing the pushing IMHO to get more rental properties in their control.

    I have spoken with numerous agents that are friends of mine and this is the consensus I am getting.

    Cindy Evans, House of Representatives, shame on you!!!!!!!!

    • Any sane person would have the same reaction to this type of deal. It’s the same if the fed say – we double the prime rate tomorrow and all mortgage payers must accept the new rate. SB2089 is a great example of short term thinking without taking into account the most probable consequences.

  3. Pat Starkie said:

    Vadimosya: I live in California and do the bookings and reservations myself. I have on-island help, but it is not a property management company. I handle the money, pay the bills, collect the rents, pay the taxes, and pay my help. But forcing me to hire an on-island management company to handle all the money is NOT happening for me.

    • vadimosya said:

      @Pat – your words speak for all of us who are managing properties remotely. Forcing to use a middleman will result in a great disappointment amongst the vast majority of hawaii property owners

  4. vadimosya said:

    It is with great disappointment to inform you that Senate Bill 2089 has passed with some amendments yet to be disclosed.

    • 2/29/2012 S The committee(s) on CPN recommend(s) that the measure be PASSED, WITH AMENDMENTS. The votes in CPN were as follows: 4 Aye(s): Senator(s) Baker, Galuteria, Nishihara, Solomon; Aye(s) with reservations: none ; 0 No(es): none; and 3 Excused: Senator(s) Taniguchi, Green, Slom.

      It was approved by committee today 2/29/12. It has not been voted on by the full senate and passed as law. As soon as the Senate voting day opens up, and again testimony can be submitted, anyone who sees it let us know.

      This next vote since there will be time hopefully, fax/email.USPS so they get the testimony.

  5. That’s a very sad news and it gives me a lot of worries! Please consider joining a group on facebook that opposes the bill: http://www.facebook.com/groups/194035220703875/
    United we win!

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