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12 mile Kalalau trail leads to the picturesque Napali beach. Does the Bill SB2089 bring you Aloha?

On March 6th, the Hawaii State Senate passed 372 Senate Bills during its session. Shouldn’t that feel as exhausting as hiking the 12 mile Kalalau trail along the Napali coast? Perhaps, but do all these bills lead us to an image as picturesque as the Napali beach?

According to individual vacation rental owners rebelling against Senate Bill 2089, this one will certainly not.

Senate Bill 2089 was forwarded from the Senate Committee to the House. The vote passing it forth was a lopsided 24 in favor, 1 opposed.

Senator Sam Slom, the lone dissenting vote, answered a supporter’s question of what he saw in the Bill that made him oppose it. Senator Slom offered a succinct response:

Dear Gordon,
Thank you for your email. I saw:
1) An unconstitutional bill

2) An unfair cost burden to out of state owners.
It is as simple as that.
Aloha, Sam

Yesterday, March 8th, SB 2089 passed its first hearing by the House and is scheduled for a second hearing on Monday, March 12th.

In the meantime, homeowners continue to band together – creating action groups and strategizing on how they can best have their voices heard.

They continue to submit testimony in opposition to the bills. Other homeowners contend that SB 2089 violates NAFTA. Still others have reached out to the American Civil Liberties Union for support. Attorney Gregory Kugle is arguing that SB 2089 discriminates against non-residents and is therefore unconstitutional, a view echoed by many scholars of constitutional law.

John Eckel, a principal organizer of the homeowners group, summed up his opposition in six points, ending with an appeal:

1. It will do significant damage to tourism and non-resident property owners.

2. It reduces visitors’ right of free choice to decide if they would like to rent directly from an owner or instead go through an agent.

3. It will reduce property values since it will make it less attractive to own property in the State of HI. This will result in lower property taxes.

4. It is unconstitutional since it discriminates against non-residents.

5. The Department of Taxation testified in 2007 that there was not a substantial non-compliance problem. There has not been any hard data submitted to suggest that situation has changed.

6. This appears to violate the provisions of NAFTA (North America Free Trade Act).

These are all substantial issues that must be considered and addressed before the bill should be approved. This will take time. Please do NOT rush this bill through. The damages will be very consequential both for the State of Hawaii and the non-resident property owners.

One of the difficulties faced by individual homeowners confronting this law has been awareness of its existence. Although they’ve been actively working to get word out, there are organizational challenges. The homeowners – though many are out-of-state and distanced from the legislative process, in different time-zones – the homeowners communicate with each other on-the-go. Many are organizing using the same media they use to promote their vacation homes: forums, blogs, social media, email and phone trees.

Reading their exchanges on public forums, the confusion and anger caused by these bills is palpable. Homeowners feel they’re being railroaded with not one but three separate bills that, if passed, will cost them dearly. One of the Bills – HB 1707 – has been deferred. Attention is now focused primarily on SB 2089, which would require the following:

Requires any nonresident owner who operates a transient accommodation located in the nonresident owner’s private residence to employ a real estate broker or salesperson. Requires any nonresident owner who operates a transient accommodation located in the nonresident owner’s private residence in a condominium hotel to employ a condominium hotel operator. Requires relevant information about owners of the transient accommodation to be provided to the department of taxation for enforcement purposes. Requires the counties to provide the department of taxation with relevant owner information about every transient accommodation permitted by the respective counties annually. Establishes fines for noncompliance. Provides an exemption from the mandatory employment of a licensed real estate broker or salesperson or condominium hotel operator in certain circumstances.

Homeowners feel that they’re being faced with multiple, unclear bills that will compromise their business. What’s worse – doubts persist over whether or not Senators read through or even counted testimony against SB 2089 before it was sent to the House. One homeowner posted the following:

A friend of mine spent some time reviewing all the testimony on the SB 2089 posted last week, and gave me permission to share with you all. It is rather interesting:

  • Total votes to support – 28
  • Total votes to oppose – 706

1 vote to defer from Mike McCartney – Pres & CEO Hawaii Tourism Authority

FYI – Vast majority of those supporting were just a vote. No comments or documentation. Those opposed were very detailed and fact oriented.

In response, one user commented,

The legislators may be pinched for time, and aren’t giving the testimonies the time they should.

In reference to the State House passing 300 bills primarily aimed towards boosting the economy, another blogger wrote:

Any group of people that can pass 300 bills in what? a week? is not paying attention to what they are doing.

Why is Rentini so invested in these issues? This Bill hits close to home. Some of us run our own rentals in Hawaii via other states like NY and California, and we have friends – and clients – that do too. We support them as much as we support you.

Let’s hope the bill doesn’t pass. Either way, Rentini will stand behind homeowners. We are working on features to minimize the impact of the Bill shall it pass.

We would like to hear from you.

Why are you opposed to SB 2089? Are you a frequent visitor of the islands, or do you own a home there? Regardless of who you are we encourage you to submit your stories about dealing with individual owners versus management companies. We’ll publish your best stories and forward them to the journalists we know.

Let’s spread the word and fight this together!

Publish your stories as comments below.

Comments on: "SB 2089 Advances Through the House" (5)

  1. Below is an excerpt from my guests that stayed at Waipouli Beach Resort in 2007. Back then Outrigger had an exclusive contract with many property owners at the resort and secretly allowed real estate agents to access private units for sale tours and show units that were not for sale. You know how it goes? – “I can’t show you the unit that is for sale but i have a key from exactly the same condo that we can see right now!” The property management would even issue plastic keys to the agents without checking for guests’ checkin/checkout schedule.
    Now imagine you are visiting Hawaii for your 20th wedding anniversary, peacefully enjoy your breakfast with your long time life partner when a group of people led by a happy realtor open the door and … surprise!

    “Today we had someone knock on the door with a tour of people. He also asked if we were checking out. So you might want to check with the hotel and let them know we are here until Monday.”

  2. We only used a property mgt company for 2 weeks before deciding it wasnt for us. One of the first guests to book with us had a family emergency. They had paid the booking fee of $50 to the company, and then the company took their damage deposit when they cancelled shortly after they had booked – even though they had cancelled tons ahead of time and mgt company could easily re-book. This family had a true emergency – i felt they should get all their money back. I’ve only had two cancellations since i began 1.5 years ago, both i gave back their money as i was able to rebook. I have no “booking fee” and am happy to give back their deposit and their stay if i can rebook. I have no doubt that when the two guests, that had to cancel on me, rebook, it will be with me. Im 99.9% sure that family that had to rebook with the property manager wont use them again!

  3. Kapalua Owner said:

    I am writing this to provide some insight from an owner of 14 years of a Ridge Villa here in Kapalua. I have told these stories many times and though some seem hard to believe, trust me, they are all true. We have a very nice Villa that overlooks Oneloa Bay with views up and down the coastline and when it was managed by Kapalua Villas it had an occupancy rate of 80% or more almost every year.

    Our first trip out after we purchased it and spent a considerable amount of money updating the amenities and comforts of the unit we were surprised to find that many of the niceties we had left behind were missing. These included flatware, Henkle knives, wine glasses, pillows, etc. We replaced the items, talked to management about their disappearance and were assured they would keep a closer eye on our inventory.

    This cycle continued for many years and not only would a large number of items be missing, we would find things from other condos that didn’t belong. Small appliances would disappear and we would be charged for their replacement. Furniture would be broken or stained and we would be charged for their repair or replacement. At one point upon visiting our villa we discovered that their were 3 lamps missing (one from the end table in the living room and one from each of the night stands in the 2 bedrooms). It seemed unlikely that people visiting Kapalua were putting lamps in their suitcases.

    The chronic abuse and depreciation of our villa required us to come out every 3 or 4 years and recarpet, paint and replace furniture and small appliances as the Kapalua Villas would tell us that our unit had deteriorated and was not up to their standards to rent.

    We met on many occasion with the general manager of Kaplua Villas program to discuss these issues and were always assured that problems would be delt with and reparations made. The problem was that over a 10 year period we had 6 different general managers and each new one was unaware of past problems and held themselves out as the new solution.

    After discussions with neighboring owners and the project manager of The Ridge we were able to piece together a pattern of behavior of the housekeeping and maintenance staff. We found the following;

    1. When housekeeping would come in and find dirty appliances or large pans that required cleaning, they would frequently throw them away and have maintenance buy new ones claiming they were damaged. Cleaning them was just to much work.

    2. Housekeeping and maintenance both would use the Villas here as personal warehouses for their own consumption. Items would move around between units and eventually disappear. Glasses, dishes, flatware, knives, and appliances would all become mysteriously damaged.

    3. As our unit had one of the nicer locations, we found that it was frequently used for parties by employees as neighbors would tell us about congregations of little white housekeeping golf carts at our unit and lights on long into the night. On several occasions while we were here the unit next door was used for rendezvous’ by staff employees in the middle of the night. We can only imagine what happened in our unit.

    In 2009 we had finally had enough. We took our villa away from the rental program, had it renovated and began listing it on VRBO. This gave us some important benefits that we didn’t have using a property manager.

    – We had control over who stayed in our unit. It was appointed to accommodate 4 people. Not 6 or 8 or more as a crash pad for spring break. I would spend time with prospective guests not only answering questions about Maui and Kapalua to help them maximize their stay, but also to develop a personal relationship and help us both to understand what to expect from each other.

    – We get a security deposit. Not a large one, but enough to remind people to take care of expensive amenities in our villa and as a result in 2 1/2 years, we have had one broken dish, a broken wine glass and one missing spoon. When we come out here now our second home is truly a second home.

    – We have a fully provisioned Villa. It isn’t hollowed out by housekeeping taking everything useful for the next guest. Condiments, spices, coffee (3 types), cooking supplies (we have a grommet kitchen and people appreciate it), ziplock bags, aluminum foil, dish towels, trash bags, etc, etc. When people come here they don’t have to spend several hundred dollars starting up a condo for a two week stay.

    – We have a full bar and wine chiller that we leave for peoples pleasure and mysteriously it gets used and replenished by the people who stay here. It’s nice to get off a long flight and arrive to a chilled glass of wine, a martini or marguerita with out spending a small fortune at Costco. Needless to say we could never do this under the management of a Kapalua Villas (or now Outrigger).

    – We have repeat guests. People come back here because they enjoyed themselves while they were here and they know what to expect the next time they come. They are not told they can have an Ocean front, Ocean View or Fairway View unit and get stuck in any of 150 units spread out all over the resort and just have to be lucky to find one they will enjoy.

    – We provide very high end linens, bedding and towels. Not the typical hotel fare that is handled in bulk. What we provide you would expect in a Four Seasons, not in a Best Western. There is a reason that Kapalua is not classed as a 5 star resort, but many of us provide 5 star accommodations.

    I could go on and on, but the point is that Property Managers, Resort operations and hotel operators are in the business to make money. That is their first order of business. Guest relations, dealing with owners and providing a high end experience are the cost of doing business and all business’ minimize cost whenever possible.

    The people that I know and guests I have had all tell me that the reason that they use VRBO is for the very reasons i have outlined above. They want control over their experience in Hawaii, as it is expensive to get here and enjoy what the islands have to offer. Ceding control of that experience to some Real Estate broker, PM, or other 3rd party will effect how people view coming here. If you think these pending legislative proposals won’t impact tourism here in it’s already fragile state, you have a very myopic and unrealistic point of view.

    Kapalua Owner

  4. My experience renting vacation condos from a property management firm in Maui was dismal – the staff communicating with me did not know if there was or was not internet in the available condos – it was quite clear they’d never seen on from the inside – and of course, when I arrived, there was no internet connection. The second time I rented from them, the condo was filthy and the the TV did not work, nor was it fixed during my stay. when I went to Maui in 2008. After that, I rented from owners directly, and the experience has been very good… the owners really know their place, can answer all the questions, and the pride of ownership showed in the places. Rental ageny… NEVER again!

  5. Bills SB2089 HB1707 HB1706 HB2078 all share the same idea. To force out-of-islander owners to hire Property Managers to manage at 25% to 50% commission. The State of Hawaii is telling investors to buy in Hawaii but don’t expect to make any money.

    Investors! Do your homework and read these bills carefully before you decide to invest in Hawaii.

    There’s a petition going around to raise awareness
    http://www.thepetitionsite.com/502/718/414/stop-property-management-lobbyists-from-taking-local-jobs/#13328034048991&action=udata&udata=false

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