Posts tagged ‘Hawaii’
Summertime and hot days go hand in hand. Rest and relaxation beg to be added to the mix and after a long year, it is well-deserved. What better place to find much needed rest and relaxation than the beach, where one can play volleyball, then run to catch some waves. Many people want to get rest, away from the hustle and bustle, on a private property on a secluded part of a tropical island. But, then, they may eventually become restless and want to be active.
One of the most relaxing and charming places to go this summer is none other than Hawaii. So what is there to do in Hawaii besides sipping tropical drinks and relaxing on the shore?
Take for example, the charming town of Captain Cook on Hawaii’s Kona Coast. Here are some fun activities that we love in Captain Cook:
- Captain Cook is one of the most ideal locations to grow coffee, which is probably why Koa Coffee was named the best coffee by Forbes in 2001. If you’re in the area, tours of the plantation are available.
- Surfing and kayaking at Kealekakua Bay
- See some Dolphins at Hookena Beach
- Hike through Volcano National Park to discover hidden lava flows, cloud forests and see stunning views of the ocean.
Also, of course there is always just Sunbathing at the beach. All of these great activities are very accessible to the locals of the area, so why not pretend your one by renting out one of their homes? Give yourself a few more days of tropical Summer fun by taking advantage of this great deal at Kona Leilani
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:
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.
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.
But are they going about it the right way? Are they only after taxes or something more?
While Hawaii aims at ensuring it gets its taxes, we’ve been hearing from many owners who do pay their taxes on time and employ local Hawaiians to help them manage their rental business. They express fear of overhead costs associated with employing a property manager approved by the real estate commission. There has long been bad blood between individual owners and property management companies. One vacation rental owner shared her experience of hiring a prominent management company in Hawaii:
On almost ALL of my monthly revenue reports, they took more money than they were entitled to take. Instead of 45%, they would take 47% or 48%. When I questioned them, they always paid me back very quickly and apologized. However, never, ever was an error in my favor…always theirs. They were totally skimming off the top and I’ll bet they did it to all the owners and nobody bothered to double check their math. They would frequently upgrade angry guests who booked “parking lot view condos” to my oceanfront condo for $135/nt!! I was sick of getting ripped off by them and having my condo trashed by guests who couldn’t even afford the Motel 6! So I fired them. I don’t ever want to go back to them…ever!
Her next statement is even more telling:
The other management company I used, Luxury Kauai, didn’t bother to pay my taxes for an entire year! Guess who got stuck paying the interest and penalties?
This defeats the stated purpose of the Bill – for Hawaii to collect tax revenue accordingly.
Writing for Maui News, Adam Yanow, a vacation rental owner from California, expressed his frustration with management companies which he sees as the force behind SB2089. Fearing foreclosure, Adam writes:
This is just another attempt by rental managers to increase their profit margin at our and our guest’s expense…. I, for example, am at least 20 percent underwater on my mortgage already due to the recession. This bill will force me into foreclosure.
The Senate Committee set a 48 hour period to deliberate on the Bill with added amendments, which is set for tomorrow March 6th. Amendment 6 again asserts the preeminence of a middleman in the vacation rental business by requiring
advertisements for every transient accommodation located in the State to include the name and phone number of a local point of contact for each transient accommodation, and establishing fines for noncompliance.
This would interject a middleman and consequently increase overhead costs, effectively ending the practice of vacation rentals by owner if you are running the rental as a non-resident.
Amendment 7 comes closest to a compromise. It states,
Permitting nonresident owners who obtain an annual tax clearance … to be exempt from the mandatory employment of a licensed real estate broker or salesperson or condominium hotel operator proposed by this measure.
However, there is no clear understanding what it takes to qualify for the exemption. While this gesture is viewed as a possible workaround for those non-residents targeted by Bill 2089, the amendment raises many new questions, mainly, What are the costs – both financial and labor?
Many vacation rental owners feel there are already sufficient measures in place at the local level to address taxation. In the words of Senator Baker, these measures “strengthen enforcement of tax laws and enhance consumer protection in the State’s transient vacation rental market….”
It seems the only proponents of the bill are those who will directly benefit financially from the Bill’s passage:
the City and County of Honolulu Department of Planning and Permitting; Maui Hotel & Lodging Association; Condominium Rentals Hawaii; Poipu Beach Resort Association; West Hawaii Property Services, Inc.; Waikoloa Vacation Rental Management; and four individuals.
On the other hand, testimony in opposition came from
Hawaii Vacation Rental Owners Association; The Travel Group; Trading Places International; Hanalei Bay Resort; Makana Mai Ka Lani; Hot Spot Tax Services; Sunshine & Rainbows, LLC; Humiston and Company, CPAs; and numerous individuals.
An analysis of testimonies of those in favor of the measure and those opposed turned up interesting findings.
Total votes to support – 28
Total votes to oppose – 706
1 vote to defer from Mike McCartney – Pres & CEO Hawaii Tourism Authority
Among these votes, the vast majority of those supporting only voted without adding comments or documentation. Those opposed were very detailed and fact oriented.
Gregory Kugle, who has been representing the Hawaii Vacation Rental by Owners Association, authored a letter in opposition to the bill on constitutional grounds. In part, he states:
The Constitution prohibits discrimination against non-residents through the Equal Protection, Privileges and Immunities and Commerce Clauses…. The statute is unconstitutional if it is not necessary to further a compelling state interest. Under the Commerce Clause, the inquiry is whether the law regulates evenhandedly with only incidental effects on interstate commerce, which means different treatment of in-state and out-of-state economic interests. “If a restriction is discriminatory, it is virtually per se invalid.”
Citing what he calls a “fatal flaw” in the Bill, Kugle writes,
it impermissibly infringes on the four Counties’ home rule powers, each of which can differently define transient accommodations for purposes of their zoning laws. In addition, property owners are statutorily exempt from using a licensed realtor when renting their own property.
Despite all this, the Bill may still pass. If it does, we can expect to see drastic changes in the Hawaiian vacation rental space that may include foreclosures, sales, and even a possible impact on tourism. This, in turn, might cause a drop in revenue for the Aloha State.
Who would be willing to invest in real estate in Hawaii if private property owners are not given a choice of how to run their businesses?
Eliminating competition usually results in price fixing. Are tourists of the Aloha state ready to bite a drastic price increase?
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 email@example.com 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.
Think of it as it was before and after!
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?
No more Aloha in the Aloha state if you are a vacation rental owner outside the islands!
Sometimes you hear about a Bill being pushed that you can’t believe could really come into effect. It’s too farfetched, seems rather silly or you can’t see how that particular Bill would benefit anyone.
This was my reaction when we heard about the two Bills currently pending before Hawaii Legislature. The first Bill, SB 2089 states that any person, who is not a resident of Hawaii, yet rents their second home in Hawaii as a vacation rental accommodation must employ a property manager which has been approved by the real estate commission. The second, HB 1707, requires any non-resident owners of a property in Hawaii who rents their housing as a short-term rental must rent the property through a licensed real estate salesperson or broker who must collect all applicable taxes for the rental of the property.
Essentially this means anyone who does not live in Hawaii, yet owns a property within the state which they rent out on a short-term basis (less than 30 days) will be required to give up managing their own property. This new law will include all “non-resident” owners, regardless of whether they’ve followed the laws and paid their taxes. It will become illegal to manage the property independently, and the property must be rented through a realtor or property manager who will collect all your rental money for you.
Naturally property owners in Hawaii are less than thrilled. This new law will signal a huge financial loss to property owners who have to surrender often time up to 40% – 70% of their gross revenue. It’s not uncommon for Property Management companies operating in the state of Hawaii to set steep fees as high as 35-50% of rental income plus many other fees meaning homeowners only receive a small percentage of the money made from each rental period. Many property owners have already begun a petition to oppose the Bill, are writing to the House representatives and are trying to make the government see that there are other ways for the state of Hawaii to collect tax revenues. Click here to sign a petition and join the forces!
While some vacation owners are claiming this Bill is a result of the “war against vacation rental owners” which has been raging for a few years, many residents of Hawaii are against these Bills just as much as non-resident property owners. Many residents have raised concerns that they will be indirectly harmed as a result of these new laws, believing the property value of Hawaiian housing will plummet. With the projected financial loss non-resident owners will face, it is likely many will be forced to sell, and throwing the real estate market into turmoil.
It is interesting to note that the Hawaiian Association of Realtors and The Hawaiian Real Estate Commission have both spoken out against these Bills saying they are indeed overkill and that there are already laws in place regarding the collection of taxes.
One disgruntled property owner laid it out very clearly, saying the only people to benefit from this Bill will be the Property Rental Managers who will create a monopoly in the vacation rental market.
“If you are an investor, say a Hawaiian who lives on Oahu but has a vacation rental on Maui your rights as an owner are about to be abridged. If you are an investor from the US mainland or a foreign investor you also lose as it will now cost 30 to 45% more to have your rental property. If you are a Hawaiian developer and hope to sell your finished properties to investors, your offering now makes less sense to investors which will cost you sales, increase the time you take to sell your property and make you think twice about starting a project in the first place. If you own Hawaiian real estate you will also notice a further softening in your values as the removal of many investors from the equation will hurt all property values ( as if the last few years weren’t hard enough). If you are a Hawaiian tax payer these Bills will have very little upside but they will definitely hurt the economy. And lastly, if you are a consumer and the cost of a vacation rental has now increased you also suffer so you may shorten your stay or you may vacation elsewhere. Once again, who wins? Oh yes, the Rental Property Manager.”
So if this Bill is serving no one but the Rental Property Manager, how has it managed to get so much consideration? What will the short and long-term implications be? Are there any benefits to these laws?
If each non-resident property in Hawaii is being maintained by a property manager, this would give the advantage of homeowners knowing their vacation home is in good hands and being well maintained. The house manager will be able to meet the guests renting the property out, will be able to tend to broken cupboards and burst water pipes. You will be able to rest assured your guests and your property are being well looked after. As the property manager will be professionally trained in this line of work they may also be more responsible when it comes to cleanliness, standard of presentation and professional conduct. They will also have experience dealing with angry and possibly unreasonable guests.
However, it must be kept in mind that individual owners are generally more pro-active about their own business, however management companies have no preferences about renting your unit or the one next door. This generally means the vacation rental performance results suffer somewhat.
As a personal example here, I had my property under a property management company for four years. When I realised I was paying more in maintenance costs than I was making I knew something had to change. I took over managing the property personally and increased occupancy by 95%. I went from having the house occupied once every three months, to having it rented out every single weekend. On top of that I was much more aware of any damages or maintenance jobs that needed attention, whereas under the care of the management company, they managed to let “small mishaps” like holes in the walls slide.
My point here is that it should be a choice whether you hire a property manager to oversee your property or manage it yourself. If I had, by law, been forced to have my second home managed by a property manager, it would no longer have been financially viable to own a second home.
If you’ve purchased a rental property, rent it out as a vacation rental and pay your taxes as legally required shouldn’t you to free to manage your property as you see fit? Or should you have to employ a property manager to take control of your rental.
What is your opinion on these Bills? Do you think it will cause the real estate market to slump, or do you think it’s for the best of Hawaii’s tourism industry?